Canaccord Genuity Corp. must pay a fine of $750,000 to the Investment Industry Regulatory Organization of Canada (IIROC) for failing to properly supervise registered representatives and to adopt appropriate procedures for identifying accredited investors.

According to the settlement agreement, between 2005 and 2010, a number of advisors in Canaccord’s Montreal and British Columbia branches engaged in excessive trading, sold inappropriate investments to clients, failed to follow proper guidelines for a high-risk options strategy and facilitated manipulative or suspicious trading in client accounts.

As well, Canaccord staff did not properly scrutinize over-the-counter trades made in a company later identified in a “pump and dump” scheme by the Securities and Exchange Commission (SEC). During this time, neither branch managers nor head office staff properly supervised the activities of these advisors.

Furthermore, in 2009 and 2010 IIROC contacted Canaccord stating the firm did not have proper procedures in place to ensure clients purchasing private placements qualified as accredited investors (those with $1,000,000 or more in assets). In 2010, Canaccord informed IIROC of its intentions to have advisors update their new client applications forms (NCAF) and that it was considering sanctions against reps that failed to do so. The following year, IIROC indicated that these policies were insufficient and so Canaccord made a compliance staff member responsible for ensuring clients purchasing private placements met accredited investor status.

Despite Canaccord’s ongoing discussions with IIROC during this time, 71 clients in Whitehorse, Yukon purchased private placements without meeting the minimum standards of accredited investors status between June 2010 and January 2011.

As a result of IIROC’s investigation, the branch managers and advisors involved in the investigations at the Montreal, Kelowna, B.C. and Prince George, B.C. offices no longer work with Canaccord. As well, Canaccord spent roughly $1,000,000 to implement new electronic supervisory system to supplement its current supervisory practices.

In addition to the fine, Canaccord must also disgorge $310,000 in commissions and pay $50,000 in costs.

Canaccord Genuity is the capital markets division of Canaccord Genuity Group Inc. (TSX:CF)