Ontario’s Capital Markets Tribunal has found that Oasis World Trading Inc. engaged in “spoofing,” but dismissed allegations of wash trading against the day trading platform and two of its executives. The tribunal panel also found the firm lacked adequate systems to supervise its traders and gave trading access to unauthorized people.
The tribunal considered four main allegations the Ontario Securities Commission (OSC) brought against the firm, its founder and CEO, Zhen (Steven) Pang, and its chief compliance and operations officer, Rikesh Modi. In addition to alleged failures in trading supervision and allowing unauthorized trading access to Oasis traders, the OSC alleged that between 2018 and 2020, “Oasis and its traders engaged in extensive and repeated manipulative trading on Canadian and foreign stock markets.” It also alleged the firm had traded securities without being registered to do so.
According to the tribunal’s decision, Oasis provides a “gateway” for more than 600 active traders based in more than 50 independent trading offices in China to interact with the capital markets in Canada and Australia, but has no direct relationship with them.
The tribunal found that Oasis traders repeatedly engaged in spoofing, where orders are placed to create a false impression about demand to buy or sell a security, and then cancelled. In its decision, dated July 21, it found that of 643 alleged instances of the practice, Oasis and its principals were liable for 568. Those instances either involved the same Oasis trader on both sides of a trade, or involved traders from the same office, the tribunal said.
“Oasis, Pang and Modi knew or ought to have known that this trading would create a misleading appearance of trading activity or an artificial price,” it said, especially in light of a previous 2015 settlement with the OSC regarding spoofing allegations.
At the same time, the panel said the OSC failed to prove the firm and its principals liable for wash trading, where the same person or company is both the buyer and seller of a security, again creating a false impression of market activity.
Instead, it found that responsibility for trade supervision concerning wash trades was on JitneyTrade Inc., an investment dealer and Oasis’s executing broker, and Canaccord Genuity Group Inc., which acquired JitneyTrade in June 2018. That finding was based on their “responsibility for the unique technological interface with the exchanges and specific responsibility assigned to the participant dealer under [the Universal Market Integrity Rules],” the tribunal said. Oasis was a direct electronic access client of JitneyTrade and its account was transferred to Canaccord in November 2019.
“[T]he respondents lacked the requisite intent for us to make a finding of market manipulation related to wash trading,” the tribunal said.
Oasis’ compliance system was designed by an independent compliance monitor who was approved by the OSC as part of the 2015 settlement between Oasis and Pang with the regulator. As part of that agreement, Oasis and Pang admitted they had failed to adequately monitor trading activities and ensure the firm had an adequate compliance structure to identify and prevent manipulative trading.
In the current enforcement proceeding, the tribunal panel rejected the respondents’ view that the structure’s third-party design necessarily meant it could not be found inadequate.
Instead, it found that Oasis was responsible for but failed to establish and maintain an adequate trade supervision system and an adequate culture of compliance, evidenced by “repeated spoofing practices across multiple trading offices.”
It dismissed allegations of unregistered trading, as the firm operated under an exemption available to it, and said the OSC did not prove Oasis was required to be registered.
However, while the tribunal concluded that Oasis is not a registrant, and therefore found it did not breach requirements to “establish and maintain adequate systems of control and supervision,” it did engage in “conduct contrary to the public interest” by failing to do so.
The panel did not make a similar finding against Pang and Modi.
“While Pang and Modi are the only directors and officers of Oasis, we did not hear submissions on the appropriateness of allocating responsibility for inadequate compliance to the individual respondents in addition to Oasis,” the tribunal’s decision said.
The decision follows another hearing in January, when the tribunal refused to stay the enforcement proceeding after Oasis and its principals alleged that the OSC repeatedly breached its disclosure obligations to them. In that matter, the tribunal panel found disclosure issues, but concluded they weren’t severe enough to justify a stay.
A hearing will be scheduled for the tribunal to decide on sanctions and costs.