TORONTO, July 24, 2023 /CNW/ - On July 12, 2023, a hearing panel of the Investment Dealer Division of the Canadian Investment Regulatory Organization (CIRO) accepted a settlement agreement, with sanctions, between Enforcement Staff and Red Cloud Securities Inc. (Red Cloud).
Red Cloud admitted that they continued to service retail clients although not approved to do so, that the Know-Your-Client (KYC) documentation they used did not meet CIRO requirements and that they failed to establish and maintain an adequate system of controls and supervision.
Specifically, Red Cloud admitted to the following:
a) Between February 2020 and August 2021, Red Cloud permitted persons to act on behalf of the Dealer Member without proper approval, contrary to Dealer Member Rule 18.2;
b) Between February 2020 and August 2021, Red Cloud failed to process all of its activity related to the sale of securities to retail clients through private placements on its books and records, contrary to Dealer Member Rules 17.2 and 200.2; and
c) Between February 2020 and August 2021, Red Cloud failed to establish and maintain a system of controls and supervision that was adequate to ensure that clients were qualified to purchase securities offered pursuant to prospectus exempt distributions, contrary to Dealer Member Rules 38.1, 1300.2, and 2500 (II).
Pursuant to the settlement agreement, the respondent agreed to the following sanctions:
a) disgorgement in the amount of $611,306.18; and
b) a fine in the amount of $100,000.
Red Cloud also agreed to pay costs in the amount of $15,000.
The Settlement Agreement is available at:
Red Cloud Securities Inc. – Settlement Agreement
The hearing panel's decision will be made available at www.iiroc.ca.
All information about disciplinary proceedings relating to current and former member firms and individual registrants is available in the Enforcement section of the IIROC website for investment dealer disciplinary proceedings and the MFDA website for mutual fund dealer disciplinary proceedings.
Background information regarding the qualifications and disciplinary history, if any, of advisors currently employed by CIRO-regulated firms (Investment Dealer Division) is available free of charge through the AdvisorReport service. Information on how to make investment dealer, advisor or marketplace-related complaints is available by calling 1-877-442-4322.
CIRO investigates possible misconduct by its member firms and individual registrants. It can bring disciplinary proceedings which may result in sanctions including fines, suspensions, permanent bars, expulsion from membership, or termination of rights and privileges for individuals and firms.
Canadian Investment Regulatory Organization (CIRO) is the national self-regulatory organization that oversees all investment dealers, mutual fund dealers and trading activity on Canada's debt and equity marketplaces. CIRO is carrying on the regulatory functions of the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), and is committed to the protection of investors, providing efficient and consistent regulation, and building Canadians' trust in financial regulation and the people managing their investments. For more information, visit www.ciro.ca.
SOURCE Canadian Investment Regulatory Organization (CIRO)
Julia Mackenzie, Manager, Public Affairs - Acting, [email protected], 416-786-1650
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