Two trading platform subsidiaries of financial data and technology company Bloomberg L.P. have agreed to pay more than $3 million in disgorgement and penalties to settle Ontario Securities Commission allegations they operated in Canada without authorization, and failed to provide candid, accurate and complete information to regulators.
At a hearing Friday morning, a three-member panel of commissioners chaired by OSC vice-chair Wendy Berman approved the negotiated settlement, which included disgorging more than $600,000 in fees earned on the trades.
Lawrence Ritchie, a lawyer for Bloomberg Trading Facility Ltd. and Bloomberg Trading Facility B.V., said the companies “had a good faith intent” when operating in Canadian markets, and added that the unauthorized fixed-income trading took place as a result of “a gap in their internal controls.”
He added that the firms had “taken concrete remediation measures” since discovering the problem, and had co-operated with regulators.
In a 13-page statement of allegations made public ahead of Friday’s hearing, the OSC accused the two “sophisticated” subsidiaries of failing to obtain permission or exemption to operate a marketplace in the province, as required by law.
The companies, neither of which has a physical presence in Ontario, were also alleged to have filed applications to the regulator seeking exemptions from the requirement to be recognized as an exchange “that contained inaccurate and incomplete information” because they “did not disclose the fact that Ontario participants had already been onboarded … (and) had already engaged in fixed-income securities transactions.”
The trading on the platforms involved institutional investors and took place in 2017 and 2018, both before and after the Bloomberg firms were granted interim exemption orders with conditions attached, according to the statement of allegations.
Over the 15-month period, 11 Ontario participants conducted fixed income trading on one multilateral trading facility in the amount of US$228.5 billion, according to the OSC. Two participants on the other platform conducted fixed income trading of roughly US$4.4 billion.
None of the allegations involved the fixed-income investors.
“Bloomberg welcomes the opportunity to put this matter behind it,” Ritchie said.
As part of the settlement, the two subsidiaries admitted that before they sought or obtained recognition or an exemption order from the OSC, they carried on business as exchanges by providing institutional Ontario users with access to trade fixed income securities and swaps.
They also admitted that the applications they filed with the commission requesting exemptions contained inaccurate and incomplete information because neither disclosed that Ontario users had already been brought on and engaged in trading on their respective multilateral trading facilities.
After one of the firms obtained an exemption order, it failed to prevent fixed income trading on its trading facility, which was contrary to the order’s terms and conditions, and failed to disclose this activity in quarterly reports to staff of the OSC.
“These are two sophisticated corporations, conducting business on a global scale, that failed to comply with Ontario securities laws,” said Jeff Kehoe, director of the enforcement branch of the OSC.
“These entities must be vigilant in monitoring compliance of their activities with securities laws and have an obligation to report accurately to regulators,” he added, noting that this expectation “applies to every entity carrying on business in Ontario.”
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