The Irish unit of Cantor Fitzgerald, the US investment group previously run by Donald Trump’s new commerce secretary, has been fined €452,790 by the Central Bank for failing on a number of occasions to report suspicious stock transactions to regulators.
Cantor Fitzgerald Ireland breached regulations by failing to put effective governance arrangements in place to detect and report suspicious transactions or orders that may indicate market abuse, the Central Bank said in a statement on Thursday.
The firm also failed to consistently escalate suspicious transactions internally for a period of more than six years between March 2017 and June 2023. Cantor has admitted to the breach, it said.
The Central Bank determined the appropriate fine to be €646,840, but applied a 30 per cent discount as the firm agreed to settle the matter.
“We are pleased to have resolved this matter with the Central Bank of Ireland related to issues which were fully remediated by June 2023,” a Cantor Fitzgerald spokesman said.
Investment firms are required by law to submit a suspicious transactions and orders report (STOR) to the watchdog when they have a “reasonable suspicion” of wrongdoing.
“Market abuse includes insider dealing, unlawful disclosure of inside information and market manipulation. It erodes confidence in the integrity of markets and has the potential to increase the cost of trading, distort the playing field and undermine fair competition, to the detriment of both investors and firms looking to securities markets to raise necessary funding,” said Colm Kincaid, director of enforcement at the Central Bank.
The long-time head of the wider Cantor Fitzgerald Group, Howard Lutnick, was confirmed last week as the Mr Trump’s secretary of commerce. He stepped down as chairman and chief executive of the US-based group as a result, having led the business for four decades and rebuilt it after losing 658 of its 960 New York-based employees in the terrorist attacks on September 11th, 2001.
Cantor’s Irish unit was led by Ronan Reid between 2012 and late 2023, follow the US group’s acquisition of Dolmen Stockbrokers, which he previously headed up. He was succeeded by Gerard Casey.
The Central Bank said that its investigation identified six sample occasions of particular concern spanning from September 2017 to May 2022 where Cantor’s trade surveillance system detected potentially suspicious transactions and assessed whether Cantor should report them. On each occasion, Cantor was “reckless” in failing to submit a STOR to the Central Bank, it said.
The investigation also found that a STOR Committee that Cantor Fitzgerald had set up in 2012 had applied “unsound rationales and criteria” in assessing orders and trades.
This committee, which it was not obliged under Irish market abuse law to set up, often set a higher threshold for what amounted to suspicious order or trade than that of “reasonable suspicion” when deciding on whether to submit STORs.
“The firm attached importance to extraneous factors that influenced the firm into deciding against reporting to the Central Bank, such as where the client had not been the subject of a previous STOR Committee review or where the client bought two other stocks on the same day, despite the presence of other factors which gave rise to a reasonable suspicion,” the Central Bank said.
“The STOR Committee also demonstrated unsound reasoning into deciding against reporting to the Central Bank, such as concluding that the client would have invested a higher amount if he possessed inside information.”
Cantor also took into consideration whether there was a link between a client and public company – either a friendship or professional relationship where inside information could be passed on – when making certain decisions on whether to submit a STOR, the Central Bank said.
“However, on other occasions where potential client-issuer links were identified, those connections were dismissed in favour of not submitting STORs,” it added.
