Canaccord Genuity Corp. is being sanctioned by the Canadian Investment Regulatory Organization (CIRO) after the firm admitted it failed to comply with its trading supervision obligations when it gave Jitney Trade Inc. clients access to its direct electronic access (DEA), following Canaccord Genuity Group’s acquisition of Jitney in June 2018.
“Canaccord admitted that from January 2017 to March 2021, it failed to comply with its trading supervision obligations,” the regulator announced in a statement about the settlement agreement it reached with Canaccord in December 2023.
The admission comes after Canaccord gave access to Jitney’s former clients in December 2019. Under Universal Market Integrity Rules (UMIR), the regulator says “a participant is not relieved from its obligations under UMIR pertaining to the supervision of trading activities by its DEA clients. Under UMIR, such participant retains full responsibility for any order entered by a DEA client and must adequately address the additional risks posed by orders entered by DEA clients to the marketplaces,” the CIRO settlement agreement states.
From January 2017 until December 2019 two clients executed 14,484 “wash trades,” those which involved no change in the beneficial or economic ownership of the shares being traded. “While Jitney had certain tools in place to monitor wash trades executed by its DEA clients, those tools included a gap which resulted in the failure to detect and prevent such activity on one marketplace,” the agreement states. Over 10,000 trades were executed during the period without being detected.
In November 2019 Canaccord began providing DEA access to Jitney clients. Between December 2019 and March 2021, the same two clients executed 5,546 wash trades by exploiting a similar gap. Although some systems allowed Canaccord to monitor and query alerts related to the account, the firm was found to have not provided any written explanation of the reviews actually performed in connection with the account or the factors considered in dismissing them.
In the settlement agreement Canaccord agrees to pay a fine in the amount of $475,000 and costs in the amount of $25,000.