Order execution only firm sanctioned for recommendations and record-keeping failures
Fortrade Canada has been sanctioned by the Canadian Investment Regulatory Organization following a hearing last month.
The regulator’s enforcement staff found that the order execution only firm had made recommendations to clients, which is prohibited for OEO firms under CIRO rules. The firm had also failed to set up a suitable supervisory system to ensure compliance and had not kept the required records to show its compliance with CIRO rules.
Fortrade accepted a settlement agreement and sanctions including a $2 million fine, $100,000 in costs, and the establishment of a US$6 million fund for payments to eligible clients (clients who held accounts during the period January 2020 to November 2022 and suffered a net loss) who make a claim.
It will also pay more than US$703,478 to clients with unresolved recommendation-related complaints received as of July 7, 2023. The firm received 17 complaints up to that date.
The firm is also required to keep recordings of all client calls, in Ontario, for seven years from the date of each call.
The sanctions relate to an investigation that discovered that Fortrade had made recommendations to clients via telephone calls and emails, contrary to Investment Dealer Rules (and the prior Dealer Member Rules) between December 2020 and July 2022. The clients were unsophisticated investors with no prior CFD trading experience, limited investing knowledge, incomes below $50K and liquid assets below $25K.
Temporary order
The investigation by enforcement staff began in September 2021 following complaints and in November 2022 an IIROC hearing committee granted a temporary order requiring Fortrade to comply with the rules applicable to OEO accounts, not to open new client accounts or seek deposits into existing funds, and to provide recordings and other communication records to enforcement staff.
During 2022 only some call recordings were provided to the regulator due to retention of only one week before deletion, meaning only a limited number were available for review.
The temporary order will remain in effect until Fortrade has satisfied the terms and notice has been provided to eligible clients in respect of their ability to make a claim.
