Online trading platform TradeZero Canada Securities ULC settled allegations that it breached securities rules during its first months of operation by failing to properly oversee trading activity and client communications.
A hearing panel of the Canadian Investment Regulatory Organization (CIRO) approved a proposed settlement with TradeZero Canada, which agreed to pay a $175,000 fine and $15,000 in costs to resolve allegations that it breached the self-regulatory organization’s rules.
According to the settlement, the Toronto-based firm — which provides trade execution in U.S. equities and options to retail investors — admitted to violating CIRO’s rules between March 2022 and January 2023 by failing to carry out adequate supervision of clients’ trading, not adequately reviewing client communications, and failing to provide clients with relationship disclosure information when they opened accounts.
The firm launched operations in Canada in March 2022. CIRO’s first compliance review of the firm, delivered in fall 2023, uncovered the alleged violations and referred the case to enforcement.
“While there is some evidence of supervision of trading activity … TradeZero failed to conduct adequate daily and monthly supervision of trading activity, contrary to its own policies and procedures,” the settlement noted. It also said the firm failed to maintain an adequate audit trail or records for the supervisory activity it did undertake.
Although the firm had a system for supervising client communications by monitoring live chat software that recorded interactions with clients, CIRO alleged the amount of monitoring “indicate[d] insufficient supervisory review of client communication.”
Finally, the SRO alleged the firm failed to provide relationship disclosure information to thousands of clients.
Since the compliance review, TradeZero has hired a regulatory consultant and revised its policies and procedures manual to strengthen supervision. It also automated the delivery of required relationship disclosure documents to clients and hired a new “ultimate designated person” and a new chief compliance officer to implement its new supervisory practices, the settlement said.
The settlement noted none of these violations resulted in client losses or complaints. As part of CIRO’s compliance review, TradeZero reviewed trading activity and client communication dating back to its launch in Canada, and that review found no concerns.
“There was no harm to TradeZero clients identified, and TradeZero has not received any client complaints in relation to the supervision failures,” the settlement said.