What CIRO does with Market Conduct Complaints

Have you ever wondered what happens when there is a complaint about potential misconduct in the capital markets?

When a complaint is made about a potential violation of the Universal Market Integrity Rules (UMIR), that complaint is referred to the Canadian Investment Regulatory Organization’s (CIRO) Trading Review and Analysis team, or TR&A.

Referrals come from a number of different sources – through CIRO’s surveillance team, our complaints and inquiries team or from compliance reviews of our Dealer Members’s trading activities. Referrals also come from other regulators, such as provincial and territorial securities regulatory authorities or through public complaints. Public complaints often originate from investors of a publicly traded company, or the issuer, itself.

From Trading Review & Analysis to Enforcement

TR&A’s role is to conduct preliminary reviews of the complaint to determine if improper trading may have occurred and whether a company is potentially breaching the trading rules. If the CIRO TR&A team concludes that there is sufficient evidence of a rule violation, where there is a potential breach of CIRO rules, they will refer the case to CIRO’s Enforcement team. Cases are also referred to other regulatory agencies if there appears to be a breach of securities law or corporate law, such as insider trading or fraud.

The status of any ongoing review is kept confidential, and CIRO is prohibited from disclosing any information related to a review. Confidentiality protects the integrity of our review process and ensures fairness, especially for those who may be the subject of a review that does not result in an enforcement investigation or sanction.

The status of any ongoing review is kept confidential, and CIRO is prohibited from disclosing any information related to a review.

This confidentiality is maintained unless a statement of allegation has been published by CIRO’s Enforcement team and an enforcement action is being pursued. Through the TR&A process, issues are reviewed using supplemental data that is not publicly available and TR&A teams may seek further information from the applicable CIRO Dealer Members.

Our strong relationships with other regulators and global organizations and law enforcement agencies allow us to extend our reviews across jurisdictions, providing a broader perspective. All relevant review documentation is recorded and maintained by CIRO for future reference.

Each matter brought to CIRO by a complainant is taken seriously and we appreciate the effort required to bring these matters forward. While not every complaint received by CIRO results in regulatory action being taken, all complaints received are assessed and fully reviewed when appropriate.

If you have concerns about potential misconduct in the capital markets, we encourage you to report them. Your vigilance helps us maintain fair and transparent markets for all participants. Visit our How to Make a Complaint page to learn more about the process and how you can help uphold market integrity.

CIRO's Market Complaint Process

 
  1. Complaint is made
  2. Referred to CIRO’s Trade Review and Analysis team (TR&A)
  3. Preliminary investigation conducted

  4. Case is closed

    OR

    Case sent to CIRO Enforcement or other agencies based on the violation

Case Study: Balancing the Books and the Depository

Recently, allegations have been made that certain CIRO Dealer Members may have significant imbalances between the number of shares held on the CIRO Dealers Member’s books and the number of shares held at the depositories (i.e. The Canadian Depository for Securities (CDS) and The Depository Trust & Clearing Corporation (DTCC). The initial conclusions drawn by the complainant were based on the information available to them, which is not as full and complete as what CIRO has access to. The complaint is based only on shares held at CDS and did not consider shares held by the CIRO Dealer Members at DTCC which led to incorrect conclusions.

For these reviews, TR&A obtained all relevant information, including data showing the number of shares held at DTCC (in addition to those held at CDS) and the applicable CIRO Dealer Member’s stock record reports, which provide detail of all client holdings. With this additional information, the number of shares held on the CIRO Dealers Member’s books and records fully reconciled with the shares held at the depositories (CDS and DTCC), indicating that there was no imbalance between the CIRO Dealer Member’s client holdings and the number of shares held at the depositories. The initial conclusions drawn by the complainants, based on incomplete or missing information were without merit. These cases were closed with no further action taken. The results of these closed matters would remain confidential and would not be shared publicly for the reasons discussed earlier.