Toronto-based Stifel Nicolaus Canada Inc. has agreed to pay the Canadian Investment Regulatory Organization (CIRO) a $475,000 fine for sharing potentially confidential information with clients.
“Stifel Nicolaus Canada Inc. admitted that it failed to enforce a system to supervise the activities of its employees regarding the receipt and containment of confidential information,” CIRO said in a release.
In 2020, two of Stifel’s managing directors separately shared information with representatives of hedge fund clients. The information was potentially confidential and concerned proposed bought-deal block trade transactions for public issuers.
The settlement agreement states the hedge fund clients used the information to enter short sell transactions with other dealers. Stifel was not, however, aware of the short sales.
The first hedge fund earned potential profit of almost $377,000 from two sets of short sales, the agreement said. The second hedge fund earned potential profit of about $97,000 from its short sale.
Stifel did not alert its compliance department to the communications between the Stifel employees and its hedge fund clients, and “[b]y failing to do so, Stifel failed to determine whether any necessary corrective action(s) were required,” the settlement agreement said.
Stifel was fined $475,000 for failing to enforce a supervisory system regarding confidential information, and it agreed to pay $25,000 in costs.
CIRO noted that Stifel has no prior regulatory enforcement record and that it co-operated with the investigation.