Rule 13h-1(a)(7) defines large traders to include market participants whose transactions in national market system (NMS) securities equal or exceed two million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month. Rule 13h-1 requires entities and individuals, whose transactions in NMS securities meet or exceed those thresholds to self-identify to the SEC on Form 13H.
According to the SEC order, Cantor failed to file Form 13H, as required. From October 2011 through March 2021, Cantor filed only an initial Form 13H, in November 2011, “and did not file any subsequent required annual Forms 13H until March 2021,” the SEC said in the order. Cantor made this filing after receiving an additional inquiry from the SEC’s examination staff.
When Cantor began filing annual Forms 13H, it “repeatedly failed to include multiple affiliates of Cantor as large traders” and “did not correct this error until approximately May 12, 2023,” the SEC said.
In June 2019, “Cantor informed the Commission’s examination staff that it would establish additional monitoring policies and procedures to comply with Rule 13h-1,” but a follow up review in March 2021 found that Cantor “still had not established the monitoring procedures,” the SEC said.
Cantor also violated Rule 13h by failing to conduct daily and monthly reviews of large trader activity throughout the relevant period. Cantor failed to identify over 100 large-trader accounts and failed to maintain required records for those accounts, the SEC said.
These lapses were discovered after “Cantor conducted a multiyear lookback review for accounts,” the SEC said. Due to these failures, Cantor also “failed to report the required information for unidentified large traders when requested by the Commission,” the SEC said.
From a compliance standpoint, “Cantor failed to establish policies and procedures reasonably designed to meet the monitoring safe harbor in Rule 13h-1(f) concerning its recordkeeping and reporting responsibilities,” the SEC said.
Cantor has since updated its policies and procedures concerning Rule 13h-1. “In addition, Cantor has remediated its record keeping, reporting and monitoring practices as related to Rule 13h-1 and implemented improved practices to ensure its compliance,” the SEC said. Cantor neither admitted nor denied the SEC’s findings in reaching settlement. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.