CIRO settles with dealer over capital shortfalls

In a settlement with the the Canadian Investment Regulatory Organization (CIRO), investment dealer Pollitt & Co. Inc. admitted to running into capital issues in 2020, among other violations.

A CIRO hearing panel approved a settlement with the Toronto-based firm, which admitted to failing to keep its risk-adjusted capital in positive territory in 2020 and not immediately reporting shortfalls to the self-regulatory organization.

According to the settlement, the issues were uncovered in a compliance review that found “two capital deficiencies related to bought deal underwriting commitments, a lack of sufficient internal controls, and significant reporting issues.”

The capital deficiencies were due in part to the firm’s “failure to have appropriate procedures or internal controls to ensure that it had the capital capacity to enter into underwritings and to monitor unsold positions, payable balances, and the required margin from the commitment date to the closing date,” the settlement said.

The firm also admitted to internal control and books and records weaknesses, and failing to report all debt transactions between September 2018 and November 2022.

Several of the compliance shortcomings had previously been identified in SRO reviews, but the firm “failed to correct” them despite the SRO’s recommendations, the settlement noted.

A number of deficiencies noted during the 2020 field exam were “ongoing or had been repeated” in 2022, it added.

To settle the allegations, Pollitt & Co. agreed to pay a fine of $175,000 and $15,000 in costs.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.