Canaccord Genuity Group Inc. CF-T is selling its U.S. wholesale market-making division to Cantor Fitzgerald, the independent Canadian investment bank announced Tuesday, nearly two years after it warned of a potentially “significant penalty” related to that business.
In a statement, Canaccord chief executive officer Jeff Barlow said that the sale “sharpens our focus and allows us to streamline our U.S. business.” Financial terms were not disclosed.
In June, 2023, Canaccord disclosed in an annual regulatory filing that it was facing an investigation into its U.S. wholesale market-making operations and would probably incur a significant penalty.
Canaccord and Cantor both declined to comment on whether the transaction announced on Tuesday is related to that investigation. As recently as Feb. 5, Canaccord’s regulatory filings said the investigation was still continuing.
“The company is involved in an enforcement matter and potential enforcement matters arising from reviews of the company’s wholesale market-making and trading activities in the United States, including the company’s Bank Secrecy Act/anti-money laundering compliance program,” Canaccord said in a management discussion and analysis document filed alongside its third-quarter results.
“Although it is unknown at this time whether the underlying enforcement matter or potential enforcement matters will be resolved in the ordinary course or what the impact of any such resolution will be, it is probable that the company will incur a significant penalty and will incur additional ongoing operating costs related to its business.”
The document said it was “unknown” whether the issue will ultimately have a “material adverse impact” on Canaccord’s business.
Canaccord disclosed the regulatory investigation in 2023, barely two weeks after a group of more than 50 members of the investment bank’s management team was forced to abandon a $1.13-billion plan to take the company private.
Market-making involves quoting both bids and offers (known as asks) of particular securities, effectively serving as a facilitator of investment transactions. Market makers profit from the difference between bid and ask prices, which is known as a bid-ask spread.
Canaccord’s U.S. market-making business specializes in over-the-counter securities, including global equities and American depositary receipts. ADRs are issued by American banks and allow U.S. investors to buy non-U.S. stocks in U.S. dollars.
The Canaccord market-making team led by John Gillespie and John Leitch, who have both been with the company for more than 15 years, will join Cantor when the transaction closes in late 2025. That team will report directly to Cantor co-CEO Pascal Bandelier.