The Ontario Securities Commission (OSC) has fined and ordered disgorgement against Cyprus-based eToro (Europe) Ltd. after the firm admitted it violated securities laws by trading without registration and distributing securities without a prospectus or exemptions, the commission announced Thursday.
An OSC hearing panel approved a settlement in which eToro agreed to pay a $550,000 fine, disgorge almost US$1.8 million and a pay $25,000 in costs. The firm admitted to operating about 2,500 accounts for investors in Ontario, which allowed them to trade contracts for difference (CFDs).
According to the settlement, OSC staff repeatedly raised concerns with the firm, first in 2010, and again in 2011 and 2015, and received assurances that eToro tstaff were aware they were not to accept trades of CFDs from investors in Ontario. In fact, eToro staff were not screening out Canadian investors, and the company had no meaningful controls or policies to prevent Canadians from trading on the eToro platform.
The company has closed all of its accounts with Ontario investors, and taken real action to prevent further violations by blocking its website to Canadian IP addresses, revising its online account application process and adopting a written policy against accepting Canadian investors, the settlement notes. The company also agreed to take additional steps to guard against trading by Canadians by Oct. 31.
In approving the settlement, the OSC panel said the disgorgement represents all of the revenues generated by the firm from Ontario investors, depriving it of benefiting from the violations. The panel viewed the proposed fine as reasonable, given previous cases involving registration violations.
“In our view, the sanctions proposed by the parties take into consideration the seriousness of the misconduct. The settlement is reasonable and its approval is in the public interest,” the panel stated.