File No. 3-20182
Dec. 21, 2020
File No. 3-20181
SEC CHARGES TWO CANADIAN BROKER-DEALERS WITH CAUSING VIOLATIONS OF REGULATION SHO
December 21, 2020 - The Securities and Exchange Commission today announced settled charges against Cormark Securities Inc. and ITG Canada Corp., n/k/a Virtu ITG Canada Corp., two Canadian-based broker dealers, for providing incorrect order-marking information that caused an executing broker's repeated violations of Regulation SHO.
According to the SEC's order, from August 2016 through October 2017, Cormark and ITG Canada caused more than 200 sale orders from a single hedge fund, representing total sales of more than $660 million, to be mismarked as "long" in violation of Rule 200(g) of Regulation SHO. The SEC's order finds that Cormark and ITG Canada provided incorrect order-marking information to the hedge fund's executing broker, causing that broker to mismark the hedge fund's sales as "long." The order further finds that it was not reasonable for Cormark or ITG Canada to rely on its customer's assurances that the orders were properly marked "long" because both brokers were on notice of the customer's repeated failures to deliver the securities by the settlement date. According to the order, as the hedge fund's sale orders were, in fact, short sales, Cormark's and ITG Canada's incorrect order-marking information also caused the executing broker to violate Rule 203(b)(1) of Regulation SHO by failing to borrow or locate the shares prior to effecting those short sales.
The SEC's order finds that Cormark and ITG Canada caused the executing broker's violations of Rules 200(g) and 203(b)(1) of Regulation SHO of the Securities Exchange Act of 1934. Without admitting or denying the findings, Cormark and ITG Canada each agreed to cease and desist from committing or causing any violations and any future violations of Rules 200(g) and 203(b)(1) of Regulation SHO. In addition, Cormark agreed to pay a penalty of $800,000, and ITG Canada agreed to pay a penalty of $200,000.
The SEC's investigation, which is continuing, is led by Matt Reilly, Emily Shea, and Michael Brennan, with assistance from Sarah Heaton Concannon, and is supervised by Kevin Guerrero and Jennifer Leete. Market specialists Leigh Barrett, Kevin Gershfeld, and Brian Shute of the SEC Enforcement Division's Office of Investigative and Market Analytics also provided assistance. The SEC appreciates the assistance of the Ontario Securities Commission.