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by Mike Caswell

Toronto's Red Cloud Securities Inc. has agreed to pay $726,306 for violations stemming from dozens of off-book transactions. The Canadian Investment Regulatory Organization (formerly IIROC) claims that Red Cloud facilitated the sale of private placements to retail clients when it had not been approved to have retail clients. Red Cloud carried out the private placements for over one year, and did so without keeping proper records of the activity, CIRO says.

The sanctions for Red Cloud are contained in a settlement agreement that CIRO released on Monday, July 24. The firm's penalties include disgorgement of $611,306 in commissions and other fees, plus a $100,000 fine and payment of $15,000 in CIRO's costs. In agreeing to pay the money, Red Cloud has admitted to the violations, at least for the purposes of settling the matter.

The case arose from private placements that took place after Red Cloud became a dealer member on Jan. 30, 2020. At the time, Red Cloud was limited to servicing institutional clients. (Before a firm can take on retail clients, it must obtain approval from CIRO and must have employees with the required registration.)

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