Canaccord settles with SEC, Finra over AML failings

Executive Summary

• Canaccord Genuity Group Inc. has announced the final settlement of previously disclosed U.S. regulatory enforcement matters with the SEC, FINRA, and FinCEN.
• The total settlement amount is $80.0 million (U.S.), with $5.0 million suspended pending a satisfactory suspicious activity reporting look-back review.
• The company expects a net financial impact of $75.0 million (U.S.), which has been fully accrued, resulting in no material impact on its continuing financial position or results of operations.

Key Details

• Settlement Amounts: Total settlement is $80.0 million (U.S.) / $109.4 million (Canadian).
• Suspended Funds: $5.0 million (U.S.) / $6.8 million (Canadian) is suspended pending the delivery of a satisfactory suspicious activity reporting look-back review under the FinCEN consent order.
• Net Financial Impact: Expected impact is $75.0 million (U.S.) / $102.6 million (Canadian).
• Accounting Treatment: The full expected financial impact has been previously accrued; no additional material impact on financial position or operations is expected.
• Regulatory Bodies: Settlements reached with the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and Financial Crimes Enforcement Network (FinCEN).
• Compliance Transformation: Over the past three years, the company undertook a comprehensive compliance framework transformation, including:
  • Substantial investment in compliance transformation.
  • Wholesale change in compliance leadership and increased supervisory personnel.
  • Updated surveillance reports and new surveillance tools.
  • Revised processes for suspicious activity identification, investigation, and reporting.
  • Retention of third-party consultants for a comprehensive Anti-Money-Laundering (AML) program review.
  • Implementation of new supervision and review protocols.
• Scope of Enforcement: Matters related to non-core trading businesses in U.S. operations.
• Unaffected Operations: Core U.S. investment banking, M&A, advisory, equity underwriting, private placement, and equity research businesses were not implicated and remain fully active.

Notable Quotes

• "The board is satisfied that these regulatory matters are now resolved and that the underlying conduct is in our past... Since these matters came to light, we have overseen a wholesale change in compliance leadership and oversight, working closely with management to enhance the culture of compliance, while engaging constructively with regulators." — Michael Auerbach, Lead Independent Director