On August 14, 2019 the SEC settled with Canaccord Genuity over violations of Rule 15C2-11. The firm agreed to change its deficient procedures and pay a civil monetary penalty of $250,000. Read the order (pdf).
Violations of 15c2-11 are at issue in the recent SEC lawsuit against broker and market maker Spartan Securities. Also, the SEC recently proposed changing rule 15c2-11 to make it harder for firms that are not current on filing financials to be quoted by brokers.
Excerpts from the settlement:
Canaccord delegated to a compliance associate the responsibility to obtain and review the information required by Rule 15c2-11 and to fill out and sign the Form 211s, including placing the electronic signature of the designated principal on the filings. The compliance associate had no trading experience and no formal training to conduct the review required by the rule, such as training related to the analysis of financial statements
and other information.
the compliance associate generally placed the electronic signature of the designated principal on Canaccord’s Form 211 filings without having a reasonable basis to believe that the representations were accurate. In
addition, the compliance associate generally understood that the firm’s designated principal had not actually examined the form prior to its submission.
While Rule 15c2-11 files were maintained within the compliance department by the compliance associate, the files could not be independently accessed by the traders or the firm’s designated principal without requesting them from the compliance department. During the relevant period, the traders who intended to make a market in the security rarely, if ever, obtained or reviewed the required information contemplated under the Rule and Canaccord’s policies and procedures, and the firm’s designated principal rarely, if ever, reviewed or signed the Form 211s
In an unrelated action on 21 October 2019, Canaccord Genuity agreed to an Acceptance, Waiver, and Consent (AWC) with FINRA (pdf) for violations of Regulation SHO in its market making of OTC stocks.
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