Echelon Partners failed to guard against clients’ potentially-suspicious trading in U.S. OTC markets.
According to Investment Executive, investment dealer Echelon Wealth Partners Inc. (now known as Ventum Financial Corp.) is being sanctioned in a settlement with the Canadian Investment Regulatory Organization (CIRO) over gatekeeping failures involving suspicious trading on behalf of several foreign brokers.
According to the settlement, between July 2018 and June 2022, Echelon operated accounts on behalf of four foreign broker-dealers — which engaged in over $100-million worth of trading in U.S. over-the-counter securities — without conducting proper due diligence on the identity of brokers and their clients.
“Echelon permitted the account openings and trading activity without identifying or establishing an appropriate system of controls, compliance, and supervision,” the settlement said.
During the time in question, the foreign brokers sold over $100-million worth of stock, which generated $4.9 million in commissions for the firm, the settlement noted. It added that the firm didn’t adequately manage the risks associated with this activity, which hadn’t previously been a big source of business.
To resolve the allegations, the firm agreed to disgorge $1.7 million, pay a fine of $500,000 and pay costs of $100,000, along with adopting remedial measures recommended by a compliance consultant to bolster its gatekeeping and oversight practices.
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