Canaccord Genuity Inc. fka Canaccord Adams, Inc. (CRD #1020, Boston, Massachusetts) recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $40,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that, as an active participant in the U.S. Private Investment in Private Equity (PIPE) market, it failed to have in place reasonable information barrier procedures with respect to its PIPE business. The findings stated that the firm failed to have a reasonable system in place to track employees who were brought “over the wall” on specific PIPE transactions, and while the firm had a procedure in place requiring the maintenance of a “wall-crossing log,” it did not maintain such a log. The findings also stated that the firm stored information about over-the-wall employees in a computer file that was not readily accessible to persons with responsibilities to monitor trading and review emails of employees brought over the wall on investment banking matters. The findings also included that the firm failed to maintain a specific log of employee transactions in securities on the firm’s grey list and/or restricted list, and the firm was unable to provide documentation evidencing that it had investigated employee trading in grey list securities to determine whether employees had misused material, non-public information.
FINRA found that the firm failed to have a reasonable system in place to monitor the flow of information concerning PIPE transactions to potential investors, and while the firm’s procedures required sales persons to obtain verbal agreements from potential investors to keep information concerning PIPE transactions confidential and refrain from trading on such information, the firm did not reasonably ensure that the procedure was followed or document that such verbal agreements were obtained. FINRA also found that the information that was maintained concerning the disclosure of information on PIPE transactions was not used for supervisory or compliance purposes. In addition, FINRA determined that the firm’s system for review of email correspondence was unreasonable; while the firm’s procedures required the review of a sample of email communications, the sample included mail boxes for users no longer employed at the firm and permitted Compliance Department employees, at their discretion, to mark emails as reviewed based solely on a review of the sender’s name, recipient’s name and subject line of an email; stated differently, the firm permitted “bulk review” of emails without any written guidelines informing compliance staff of the parameters for such review. Moreover, FINRA determined that the firm also utilized an internal chat room system that allowed members of its business units, including but not limited to, the investment banking and research departments, to communicate and/or review each other’s communications. Furthermore, FINRA found that the firm did not have in place any written procedures relevant to monitoring internal communications between its business units on the internal chat room system and could not document that it actively monitored such communication.
This information which is publicly available on FINRA’s website has been provided by The White Law Group, LLC.
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