Financial services firm Cantor Fitzgerald agreed to pay a $1.4 million penalty as part of a settlement with the Securities and Exchange Commission (SEC) addressing alleged reporting failures.
The lapses, some of which were uncovered by SEC examiners, occurred regarding Cantor’s failure to identify and report more than 100 customers as large traders as defined by Rule 13h-1 of the Exchange Act, the agency alleged in an administrative proceeding published Friday. The regulator also faulted the firm for failing to make required filings on its own behalf as a large trader.
The details: From at least August 2017 until May, Cantor failed to maintain records for persons it had reason to know met the criteria of a large trader, which Rule 13h-1 defines as “market participants that exercise investment discretion and effect transactions in a substantial amount of national market system securities,” the SEC said.
Cantor failed to identify more than 100 large trader accounts with significant daily and monthly trading activity because of not conducting required reviews, the SEC said. The firm determined this total after conducting an SEC-requested lookback.
Regarding its own status as a large trader, Cantor only once filed its required annual report from inception of Rule 13h-1 in October 2011 through March 2021, the SEC said. That filing came in November 2011.
It wasn’t until April 2019 that Cantor began filing quarterly reports as required under Rule 13h-1, following an SEC examination, the agency added.
Compliance considerations: Cantor failed to establish policies and procedures reasonably designed to monitor its recordkeeping and reporting responsibilities, according to the proceeding. The firm allegedly did not supervise two automated reports it generated regarding large trading activity.
Cantor updated its Rule 13h-1 policies and procedures in December 2022 and May, the SEC said, adding the firm “remediated its recordkeeping, reporting, and monitoring practices as related to Rule 13h-1 and implemented improved practices to ensure its compliance.”
A representative for Cantor did not respond to a request for comment. The firm neither admitted nor denied the SEC’s findings in reaching settlement.