A hearing panel of the Investment Industry Regulatory Organization of Canada (IIROC) has sanctioned CIBC World Markets Inc., fining the company $150,000 and assessing investigation costs in the amount of $15,000 for trading supervision failures.
IIROC states that between September 2019 and July 2020 the firm failed to comply with its trading supervision obligations to detect and prevent the entry of any order by a direct electronic access client (DEA client) that interfered with fair and orderly markets. The same client had previously been the subject of a gatekeeper report.
“The respondent has an obligation to adopt, document and maintain a system of risk management and supervisory controls, policies and procedures reasonably designed, in accordance with prudent business practices, to ensure the management of financial, regulatory and other risks associated with the use by its DEA client of an automated order system,” they write. “In the circumstances, the respondent had an obligation to make appropriate enquiries to satisfy order entry activity by the same DEA client through a different trader did not raise the same concerns that resulted in the filing of the initial gatekeeper report.”
They add that providing direct access does not relieve firms of their obligation to supervise trading activities. “The respondent retains a supervisory obligation to examine each order entered on a marketplace by way of direct electronic access and where circumstances warrant, make appropriate inquiries of clients to ensure orders do not interfere with a fair and orderly market.”
