The Investment Industry Regulatory Organization of Canada (IIROC) has fined BMO Nesbitt Burns $50,000 for allowing a registered representative to use a non-compliant order-execution procedure.
The representative worked at a Calgary branch of the firm. The settlement agreement, dated Oct. 4, says that, between September 2014 and March 2016, the firm approved and permitted an order-execution procedure that resulted in some retail client orders that were less than 50 standard trading units (5,000 shares priced at $1 or more) accumulating over a one-hour period before they were entered on a marketplace.
The procedure was contrary to the order-exposure rule, the agreement said.
The rule requires that all client orders for 50 standard trading units or less be immediately entered on a marketplace that displays order information in a consolidated market display. The rule’s intent is to support price discovery by adding liquidity in the displayed markets, the agreement said.
The agreement said the firm inadvertently failed to comply with the rule in question when it allowed the rep to use a certain trading policy in a manner that attempted to achieve a better order fill.
No client harm was alleged as a result of the non-compliant procedure.
In each example where an order wasn’t immediately entered, the average price fills that each client received after participating in the order execution were “potentially better” than the price each client could have received if the order was immediately entered and filled, the agreement said.
In addition to the fine, the firm must pay costs of $5,000, and has agreed to amend its use of its policy to ensure compliance, the agreement said.
For full details, read the settlement agreement.