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The Canadian Investment Regulatory Organization (CIRO) has published its 2023-2024 Enforcement Report, reaffirming its dedication to protecting investors, enhancing industry standards, and maintaining market integrity through fair and effective enforcement actions. The report features selected case highlights that exemplify CIRO’s efforts in safeguarding investors and promoting confidence in Canada’s capital markets.
Fortrade Canada Fined for Prohibited Recommendations
One notable case involved Fortrade Canada, which was fined $2 million CAD for making prohibited recommendations for contracts for difference (CFDs) to unsophisticated retail clients. As an order execution-only dealer, Fortrade violated regulations by providing recommendations, failed to maintain a proper supervisory system, and did not retain necessary records. In November 2022, Fortrade agreed to settle the proposed proceeding, consenting to pay $703,479 USD to clients who complained and establishing a $6 million USD fund for clients with net losses. The firm has since implemented remedial measures to prevent future issues. The hearing panel underscored the importance of returning funds to affected clients in their decision to accept the settlement.
BMO Nesbitt Burns Penalized for Supervisory Failures
Another significant case involved BMO Nesbitt Burns, which was fined $1.5 million and ordered to disgorge $146,876 for failing to implement a proper supervisory system regarding the high-risk trading strategy of its registered representative, Yujie Liu. Liu's strategy involved clients investing and borrowing to invest in preferred shares by short selling Government of Canada bonds. BMO failed to detect suitability issues promptly and ensure Liu and supervisors adhered to policies regarding client account suitability. The hearing panel said that the fine serves as a strong deterrent to BMO, Liu, and the industry. BMO has since taken steps to rectify these supervisory failures and prevent future issues.
Commitment to Fair and Efficient Capital Markets
The cases highlighted in this year’s report represent CIRO’s ongoing commitment to protecting investors from unfair, improper, or fraudulent practices by Dealer Members. By fostering fair and efficient capital markets and promoting market integrity, CIRO aims to enhance public confidence in Canada’s capital markets. The organization’s enforcement actions are designed to be fair, timely, and effective, ensuring that industry participants adhere to high standards of conduct.
