Canaccord says it’s close to settling U.S. compliance issues

The logo for Canaccord Genuity is shown in Toronto on March 8, 2023. Photo by THE CANADIAN PRESS/Staff

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Canaccord Genuity Group Inc. said it’s nearing a broad settlement with U.S. authorities stemming from compliance gaps at its non-core trading businesses in the country and has set aside a total of US$75 million to cover anticipated penalties.

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In its fiscal second quarter, the Canadian investment bank added US$55 million to provisions it has already taken in relation to the enforcement matter, according to a statement Thursday.

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Final details of the expected “unified resolution” with multiple unnamed regulators are contingent on the U.S. government reopening, Canaccord said, noting it’s likely to take several months to finalize.

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“We’ve made significant progress and ongoing investments to upgrade and transform our compliance infrastructure,” chief executive Dan Daviau said in an interview.

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In June 2023, Canaccord disclosed it was facing a regulatory probe tied to its wholesale market-making activities, noting at the time that it might have to pay a “significant penalty” to resolve it. The matter prevented the company from getting timely regulatory approvals for a proposed management take-private deal, which fell apart as a result.

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Earlier this year, two of Canaccord’s most senior U.S. compliance employees reached settlements with the Financial Industry Regulatory Authority, Wall Street’s self-funded watchdog, over allegations that they failed to properly supervise the surveillance of trading activities.

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FINRA penalties

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Diane Daly, the firm’s chief compliance officer from 2013 to 2023, agreed to pay a US$10,000 fine and has been suspended from acting in any principal capacity or as an anti-money-laundering compliance officer for a year. Nicholas Lorenzo, who was head of Canaccord’s trading compliance group, agreed to a fine of US$5,000 and a nine-month suspension from acting in any principal capacity. Both reached the settlements without admitting or denying FINRA’s allegations.

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In Daly’s case, the watchdog alleged that she failed to implement a reasonably designed AML program and that the compliance group under her purview escalated just 20 instances of potentially offside trading activity over a four-year period. The firm conducted a high volume of low-priced trades, so the small number of reports should have been a red flag that the group wasn’t effectively reviewing the trading activity, FINRA said.

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Lorenzo, now a compliance officer at Cantor Fitzgerald, was accused of delegating supervisory activities to subordinates without ensuring the jobs were actually being done. He also assigned surveillance reports to various group members without documenting that in writing, the regulator alleged, leading to confusion about who was responsible for what.

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Separately, Andy Viles stepped down as chief legal officer of the firm in July and is no longer registered with FINRA.

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Daly’s lawyer declined to comment. Lorenzo and a lawyer who represented him in the FINRA matter, as well as Viles, didn’t immediately reply to messages seeking comment.