Cormark Securities, Virtu ITG Canada agree to pay $1M in total to settle SEC charges
The United States Securities and Exchange Commission (SEC) announced on Monday the settlement of charges against Cormark Securities Inc. and ITG Canada Corp., now known as Virtu ITG Canada Corp. The two Canadian-based broker dealers are charged with providing incorrect order-marking information that caused an executing broker’s repeated violations of Regulation SHO.
According to the SEC’s order, from August 2016 through October 2017, Cormark and ITG Canada caused more than 200 sale orders from a single hedge fund, representing total sales of more than $660 million, to be mismarked as “long”. This is in violation of Rule 200(g) of Regulation SHO.
The SEC’s order also finds that Cormark and ITG Canada provided incorrect order-marking information to the hedge fund’s executing broker, causing that broker to mismark the hedge fund’s sales as “long.” The order further alleges that it was not reasonable for Cormark or ITG Canada to rely on its customer’s assurances that the orders were properly marked “long” because both brokers were on notice of the customer’s repeated failures to deliver the securities by the settlement date.
According to the order, as the hedge fund’s sale orders were, in fact, short sales, Cormark’s and ITG Canada’s incorrect order-marking information also caused the executing broker to violate Rule 203(b)(1) of Regulation SHO by failing to borrow or locate the shares prior to effecting those short sales.
Without admitting or denying the findings, Cormark and ITG Canada each agreed to cease and desist from committing or causing any violations and any future violations of Rules 200(g) and 203(b)(1) of Regulation SHO. In addition, Cormark agreed to pay a penalty of $800,000, and ITG Canada agreed to pay a penalty of $200,000.