SEC Institutes Proceedings Against Canaccord Genuity LLC for Failing to File SARs

1 UNITED ST ATES OF AMERI CA Befo re the SECURITI ES AND E XCHANGE COM MISSION SECURITI ES EXCH ANGE ACT OF 1 934 Relea se No. 104935 / March 6, 2026 ADMINIST RATIVE PROCEE DING File No. 3- 22609 In th e Mat ter o f Canaccord Genuity LLC, Respo ndent. ORDER I NSTITUT ING ADMINIST RATIVE AND CE ASE - AND - DESIST PROCEEDI NGS PURSUANT TO SECTIO NS 15(b) AND 2 1C OF THE SECURITI ES EXCH ANGE ACT OF 1 934, MAKING FIN DINGS, AND IMPOS ING REMEDI AL SANCT IONS AN D A CEASE - AND - DESIST ORDER I. The Securities and Exchange Commiss ion (“Com mission”) deems i t appro priate and in th e public interest that public administrative and cease - and - desist proceedings be, and hereby are, instituted pursu ant to Secti ons 15(b) and 21C of the Securiti es Exchange Act of 1934 (“Ex change Act”) ag ains t Canac cord Genui ty L LC (“Respond ent” or “ C anacc ord”). II. In anticipation o f the insti tution of thes e proceedings, Respondent has submitted an O ffer of Settlement (“ Offer”) which th e Commission has determined to accept. Sol ely for the purpos e of these proceedings and any other pr oceedings brou ght by or on b ehalf of the Commission, or t o which the Commissio n is a party, and without admitting or d enying the findi ngs herein, except as to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are admitted, a nd except t o th e exten t adm itted to in Section s II and III of the Consent Order Imposing Civil Money Penalty in the matter of Canaccord Genuity LLC, No. 202 6- 01, issued by the Unit ed States Dep artm ent o f the Tre asury, Fin anci al Cri mes Enfor cem ent Net work (“ FinC EN”), Respondent cons ents to the entry of this Orde r Instituting Administ rative an d Cease - and - Desist Proceedings Pursu ant to S ections 15(b) and 21C of the S ecurities Ex change Act of 1934, M aking Findings, and Imposing Remedial Sanctions and a Cease - and - Desist Orde r (“Or der”), as set fort h below. III. On the basis of this O rder and R espondent’s Off er, the Commission finds that:

2 Summary This m atter con cerns Canaccord ’s failure to file certain susp iciou s act ivity repo rts (“ SARs”), as required by Sect ion 17(a) of the E xchange A ct an d Rule 17a - 8 thereunder, in connection wit h its equity trading bus inesses from February 2019 through March 2022 (the “ R el evant P eri od”). During the Relevant Period, Canacco rd was a market maker and executing broker in exchang e -listed and over-the-counter (“OTC”) securities, annually rank ing among the top four market p articipa nts by notional value of trades execut ed in OTC s ecuriti es pri ce d under $5 per share. C anacco rd, a s a regi stered brok er - dea ler, i s require d to fi le SARs wi th FinCEN whe n it knows, suspe cts, or ha s re ason to su spect tha t any transac tion occurr ing by, a t, or thr ough Canaccord involves, a mong othe r things, fraud, or that h as no b usiness or app arent lawfu l purpose. During the Relevan t Period, Canaccord failed to ma inta in an anti - money laun dering (“AML”) surveillance program that was reasonably des igned to detect, i nvest i gate, a nd report suspiciou s activi ty wit hin its equi ty trading b usiness. At the time, Canaccord’s AML surveilla nce r elied in large part on the review of trading a ctivity flagged as potentia lly suspic ious by internal AML exception r eports. S ome of Canaccord’s AML excepti on repor t s — which flagged th ousands of poten tially suspicio us trade s — went co mpletely unreviewed f or mon ths or year s at a time. As a result, during the Relevan t Period Canaccord failed to file approximat ely 150 SARs pertaining to its equity tr ading ac tivity. Respo ndent Canaccord is a Del aware limited liability company and registered broke r - dealer headquartere d in New Yor k, New York. It has been registered with the Commis sion as a broker - dealer since 2004. Background 1. The BSA and impl ementing r egulations promulgat ed by FinCEN r equire a broker - dealer to fil e a SAR to report any trans action (or p attern of transa ctions of w hich the trans action is a part) conduct ed or attempt ed by, at, or throug h the b roker - dealer involving or aggregating to at least $5,000 in fu nds or ot her assets that the broker - dealer knows, suspects, o r has reaso n to suspect: (1) invol ves funds deri ved from illeg al activity or is i ntended or conducted to hid e or disguise funds or assets deriv ed from illegal activity as p art of a pl an to violate or evade any Federal law or regulation or to avoid any transa ction reporting requirement; (2) is design ed to evade any requir ements of the BS A or its im plementing r egulations; (3) h as no busin ess or apparent lawful purpose o r is not the sort in which t he particular cus tomer would norm ally be expect ed to eng age, and the b roker - dealer knows o f no reasonable expl anation fo r the transaction after examining th e availa ble facts; or (4) involves use o f the broker - dealer to facilitate criminal activity. 31 C. F.R. § 1023.320(a)(2) (“SAR Rule ”). 2. To be liable for failing to file a SAR, a b roker - dealer must know, suspect, or have reason to suspect that a transaction falls into one of the four categories of suspicious activity in the SAR Rule. The Financial Industr y Regulatory A uthority (“ FINRA”) and FinCEN ha ve

3 longstanding regul atory gui dance highlighting red flags relat ed to penny sto ck transactions. See FinCEN’s The SAR Activity Review Trends Tips & Issues, Issue 15, “In f ocus: Th e Secu riti es and Futures Industry” (May 2009); FINRA’s Updated Small Firm Template Anti - Money Laundering (AML) P rogram (up dated Sept. 20 20). In May 201 9, FINRA issue d Regulat ory Notice 19 - 18, which included a compilation of p reviously identifi ed red flags an d provided additional exampl es of red flags pote ntially indicativ e of suspiciou s acti vity, including examples of manipulative trading of micr ocap secu ri ties and penny sto ck s. FINRA Reg ulatory Notic e 19 - 18 (May 6, 2 019). FINRA h as cautio ned m em ber fi rms t hat it s ex amp les of red fl ags are n ot ex haus tiv e and t hat o ther situations may arise that require further investigation. Id.; see also FINRA Regulatory Noti ce 21 - 03 (Feb. 10, 2021). 3. The BSA and its implementi ng regulations requi re the filing of a SAR no lat er than 30 calendar days a fter the date of the brok er - dealer’s initial detection o f facts that may constitute a basis for filing a SAR. If no susp ect is identi fied on the d ate of su ch initial detection, a broker - dealer may delay fili ng a SAR for an additional 30 calend ar days to identi fy a suspect, but in no case sh all repo rting be d elay ed m ore th an 60 cal endar d ays after the dat e of s uch in iti al det ecti on. 31 C.F.R. § 1023.320 (b). 4. E xchange Act Rule 17a -8, which was promulg ated under Section 17 (a) of the Exch ange A ct, requires broker - dealers registered with the Commission to comply with the reporting, reco rdkeeping, and record retentio n requirements o f the BSA. Th e failure to fil e SARs as required by th e SAR Rule is a violation o f Section 17(a) of the Exch ange Act and Rul e 17a -8 ther eunder. See SEC v. Al pine Sec. Cor p., 308 F. S upp. 3d 775, 7 98 – 800 (S.D.N.Y. 201 8), aff’d, 982 F.3d 68 (2d Cir. 2020), cer t. d enied, 142 S. Ct. 461 (2021). Facts A. Canacco rd’s OTC Trading Activity 5. Among other lines of busi ness, during the Releva nt Period Canaccord serve d as a market m aker and executing br oker in e xchange - listed and OTC securities. As a market maker, Canaccord p rimarily receive d order flow from and e x ecute d tra des on behalf o f lar ge retail br oker - dealers. Canaccord also h as an institutiona l tradi ng desk that executes tra des on behalf of bro ker - dealers, money manage rs, hedge funds, a nd other financial institutions. 6. During the Relev ant Period, Canaccord was an active part icipant i n the OTC market. I n 2022, for example, Canaccord exec uted approxi mately 10.4 mil l ion trade s in OTC secur itie s. B. Canacco rd’s AML Pro gram 7. During the Relevan t Period, Canaccord failed to ado pt and imple ment reas onably designed AML po licies a nd procedures to surve il its equity tr ading act ivity, whic h resulte d in the firm’s f ailur e to file SARs as required by the SAR Rule. 8. Under Canacc ord’s polici es and procedures, which included AML p olicie s and procedures generally a pplicable to the f irm (“AML Po licies and P rocedures ”) and written

4 supervisory proc edures to guide the rev iew of the fi rm ’s trad ing activity (“WSPs”), the AML Compli ance Officer (“AMLCO”) was resp onsible for determining whether a SAR filing was required fo ll owing t he ide ntifica tion and escalation by othe r compliance per sonnel of potential ly su spic io us trading act ivit y. The c ompliance group r esponsible for monitoring Canacc ord’s equity trading activity — and escala ting poten tially susp icious acti vity for SAR consi deration — was the Trading Complia nce Group (“T rading Com pliance”). 9. As detailed in the WSPs, Trading Co mpliance ’s mo nitoring e fforts re lied in large part on the review o f exce pt ion repor ts meant to ide ntify “p atterns of potential mark et manipulation” based on c ertain red flags relevant to the fir m’s equity trading activi ty. During the Relevant P eriod, th es e AML exce ption reports identified potential ly suspicious tra ding activity based on red fl ags that inc l uded, amon g other things, “ Markin g the Close,” “Ma rking the O pen,” “Pump and Dum p,” “Excessive Cancels,” “Was h Sales,” “Low Pri ce,” and “Low Volume.” 10. Trading Complia nce r elie d on the AML exc eption reports to mon itor and investiga te suspicious tra ding activity and, when necessary, es calate that activity to the AMLCO f or S AR considera t ion. U ntil at le ast late 2021, however, these reports often excluded significan t portio ns of Canaccord’ s tr ading activit y or were otherwise deficien t. 11. For exampl e, t he M ark ing t he O pen report did not identify key aspec ts of the poten tially suspicio us activity — e.g., the prior day’s clos i ng price, time of trad e, purchase/sale, or percent of market volume (pre - m arket or other) — and the W SPs did not provide any review guidance be yond an instru ction to examine “the totalit y of the circ umstance s.” The M arking the C lose r eport had n o pricing infor mation, and the WSPs only ca lled for the review of a sample of 15% of trades meeting the reports’ crite ria, provid i ng no expl anation as to how t he sample should be selected or why the other 85% of flagged trade s sh ould go unr eviewed. 12. The se deficiencies in C anaccord’s AML exception report s were exacerbated by deficient perfor m ance by ce rtain supervi sory personne l. For example, t he AMLCO, who was ultimate ly respon sible for imp lementing Canaccord’s AML program and fili ng SARs, d id n ot conduct reasonable s upervis ion of Trading Compl iance or its trad e surveillance efforts. 13. During the Relevan t Period, c ertain of Canaccord’s AML exception reports went unreview ed for m ont hs o r years at a ti me. For exa mple, Canaccord’s Low Volume report for it s market making busine ss went complete ly unreviewed from June 2019 through March 2022. The report, as stated in the WSPs, was “intended to capture instances in which the firm’s activity in a low volume security represents a significant percentage of the total market volume” in order to “prevent potential instances of stock manipulation as low p riced s ecuriti es have h ist orically been a vehic le used to commit such activ ities.” Thousands of trades identified by this report went uninvestigated by Canaccord during the 34 months in which the report was not review ed. 14. For Canaccord’s mar ket making business, o ther exce pt ion report s identified thousands of tr ad es that also wen t un i nvestiga ted during p ortions of the Re levant Period: the Low Price report wen t unreviewed f rom May 2019 thro ugh December 2021; the Marking t he Ope n an d Marking t he Close reports went unre viewed f or seven mon ths during 2021; an d th e Pum p and Dump report went unreviewed in September 2019 and May 2020. For t he fi rm’s insti tutio nal

5 business, the Low P rice re port went unreview ed for at least 20 months betwee n February 2019 and December 20 2 1 and the Low Vol ume report went u nreviewed from Dec ember 2021 through March 2022. 15. In 2021, Ca naccord determined not only that some of the excep tion report re views required u nder its AML Policie s and Procedur es and WSPs were n ot being per formed, but that certain em pl oyee s had fal sified documenta tion of their purpor ted reviews. As Canaccord the n reported to FIN RA, s ome of those falsifi ed documents were created and produced in response to a FINR A inquiry. Can accord further d etermined at th at time that the AML exception reports were themse lves inadequate. C. Canacco rd’s Fai lure to Fil e SARs 16. During the Relevan t Perio d, Canac cord faile d to inv estigate or report p otential ly suspicious tra nsactions tha t i ncluded the following t ypes of trading activi ty: a. S pikes i n trading v olume a nd price in a thinly trade d or low - priced security with purchase an d sale patter n s indic a tive of pump and dump scheme s; b. A single or sm all number of trader s compr is ing a significant porti on of tr ading volume in a thinly traded or low - priced security; and c. Signific ant trad ing in a t hinly tra ded or low - priced sec urity leading up to and/or following a C ommis sion trading suspe nsion. 17. As a resu lt of the above, a nd based on a lookba ck that was underta ken by Canaccord, the firm’ s failur e to investi gate certa in suspic ious trad ing activity resulted in its fa ilure to file approximatel y 1 50 SARs from Fe bruary 2019 t hrough Mar ch 2022. Violations 18. As a result of the conduct described above, Canac cord willfully 1 violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. Canacco rd’s Rem edial Efforts 19. In determining to accept the Offer, the Commission considered remedial acts undertaken by Canaccord. These include an increase in AML compliance staffing, updated AML exception reports, revise d processes for SAR consideration and filing, retention of third-party consultants to conduct a comprehensive review of the firm’s AML compliance program, new 1 “W illfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act, “‘means no more than that the person char g ed with the duty knows what he is doing.’” W onsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that the actor “also be aware that he is violating one of the Rules or Acts.” T ager v. SEC, 344 F.2d 5, 8 (2d Ci r. 1965).

6 supervision and review protocols, and new trade surveillance tools. As noted above, Canaccord has also complet ed a lookback into suspicious act ivity it failed to investigate and re po rt during the Rel evant P eriod. IV. In view of the foregoing, the Commission deems it appropriate, and in the public interes t, t o impose the sanction s agreed to in Responden t C anac cord’s Offer. According ly, pursuan t to Sections 15(b) and 21C of the Exc hange Act, it is hereby ORDERED that: A. Respondent cease and des ist from commit t ing or ca using any violat ions and any future viola tions of Sectio n 17(a) of the Exc hange Act and Rule 17a - 8 thereunde r. A. R espondent is censur ed. C. Respondent s hall, w ithin 14 days of the entry of this Orde r, pay a civil money penalty in t he amoun t of $20,000,000 to the S ecuri t ies and Exc hange Commis sion for transfer t o the general fund of the United States Trea sury, subj ect t o Exchange Act Sec tion 21F(g)(3). I f timely payment is not made, additional inte rest shall accrue pursuant to 3 1 U.S.C. § 3 717. P ayment mus t be made in one of the foll owing ways: (1) Respondent may tra nsmit payment e lectronica lly to the Commissio n, which w ill provide detaile d ACH transfer/Fe dwire instructions upon request; (2) Respondent m ay make direct paymen t from a ba nk account v i a Pay.go v through the SEC website a t http://ww w.sec.gov/about/of fices/ofm.htm; or (3) Respondent m ay pay by certified c heck, bank cash ier’s check, or U nited States postal mone y order, ma de payable to t he Secur ities and Exchange Commission and hand - de livered or maile d t o: Enterprise Services C enter Accounts Receivable B ranch HQ Bldg., Ro om 181, AMZ - 341 6500 South MacArthur B oulevard Oklahoma C i ty, OK 7 3169 Payments by c heck or mone y order must be acc ompanied by a cover letter identify ing Can accord as a Respondent in these proc eedings and ident ifying t he file number of t hese proceedings. A copy of the cover l etter a nd check or money or der must be s ent to Th omas P. Smith, Jr., Associate Directo r, Division of E nforcement, Securities an d Exchange Com mission, New York Regional Office, 10 0 Pearl Street, Suite 20 - 100, New York, NY 10004.

7 D. Amounts ordered to be pa i d as civi l money penal tie s pursuant to th is Order shall be treated as penalt i es paid to the govern m ent for a ll purposes, inc luding all tax purposes. To preserve the deterren t effect of the civil penalty, Res pondent agrees tha t, in any Related Investor A ction, it shall not a rgue that it is entitled to, nor shall i t benefit by, off set or reducti on of any award of compensatory damages by the a mount of any par t of Respondent’ s payment of a civil penalty in t his action (a “Penalty Of fset”). If the court in an y Related I nvestor Action grant s such a Penalty Offset, Respondent agrees that it sha ll, within 30 days after entry of a final order gr anting the Pena lty Offset, notif y the Commission’ s counsel in thi s action and pa y the amount of the P enalty Offset to the Securit ies and Exchange Commission. Such a payment shall not be deem ed an additional civil penalty and shall not be d eemed to change the amount of the c ivil penalty im posed in this proceeding. For purposes of th is paragraph, a “ R el ated Investor Actio n” means a private damages action broug ht against Responden t by or on beha lf of one or more inves tors ba sed on substantial l y the same fa cts as alleged i n t he Or der inst i tuted b y the Commission in this proceeding. By the Commission. Vanessa A. Count ryman Secretary