Bank brokerages agree to pay $500,000 penalties for breaking trading rules
TORONTO — Investment firms owned by three of Canada’s biggest banks have each agreed to pay a half-million-dollar penalty to settle charges of improperly trading shares.
The Investment Industry Regulatory Organization of Canada or IIROC says a hearing panel has accepted a settlement whereby RBC Dominion Securities, Scotia Capital Inc. and TD Securities Inc. will each pay a $500,000 penalty — plus costs of $10,000 each — to settle charges they traded in a security by means other than the entry of an order on a marketplace.
In an agreed statement, IIROC says the three Canadian firms chose to join lead underwriter Goldman Sachs & Co. LLC in May 2018 to help Royal Dutch Shell sell 97.6 million shares in Canadian Natural Resources Ltd.
Goldman Sachs was to acquire the shares under U.S. securities law on a “bought deal basis,” which meant the shares would be sold at a specified discount from the closing market price. Each member of the underwriting consortium agreed to market one quarter of the shares, with Goldman Sachs responsible for settling the trades and making the required U.S. regulatory disclosures.
However, Goldman Sachs discovered it was not in a position to deliver the shares to certain Canadian institutions which did not have accounts or required currency conversion and instead forwarded those shares to the three Canadian firms to settle the trades with their clients.
IIROC says those trades should have been entered in a marketplace unless they were covered by an exemption, thus violating a measure designed to increase visibility in the marketplace. It said the largely technical violation didn’t cause any harm to clients.
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