The US Commodity Futures Trading Commission has issued three Orders filing and settling charges against Bank of Nova Scotia for spoofing in precious metals futures, making false statements to US regulators and for compliance and oversight failures. The bank has been fined a total of $127.4 million.
The first two orders require Scotia to pay a total of $77.4 million to settle a CFTC enforcement action arising from manipulative and deceptive conduct that spanned more than eight years and involved thousands of occasions of attempted manipulation and spoofing in gold and silver futures contracts. The bank was originally penalised $800,000 in 2018 for the spoofing activities, which the bank reported and dismissed a member of staff for, in the gold and silver futures markets, but CFTC says multiple statements the company made to its staff during the course of that investigation – on which the Commission predicated its findings and sanctions – were later proven to be false.
The charges resolved in the latest orders address those false statements and the true scope and nature of Scotia’s wrongdoing that those false statements concealed, CFTC says, adding this includes a record-setting $17 million penalty for making false and misleading statements to CFTC staff during the CFTC’s initial spoofing investigation and a record-setting penalty of $42 million for spoofing and attempted manipulation. The bank is also required to pay $6,622,190 in restitution and $11,828,912 in disgorgement, and to retain an independent monitor.
“These record-setting penalties reflect not only our commitment to being tough on those who break the rules, but also the tremendous strides the agency has made in data analytics,” says CFTC chair Heath Tarbert. “Our ability to go through the electronic order book and look across markets has enabled the CFTC to not only spot misconduct, but also to uncover false and misleading statements. Over the last year, we have ushered in a new era of enforcement at the CFTC. Wrongdoers now have increasingly fewer ways to conceal their misconduct and face an even more unified front from civil and criminal authorities.”
CFTC Division of Enforcement director James McDonald, adds, “Entities seeking to cooperate with the CFTC, like all others that interact with the Commission, must tell the truth. We now have the tools, including through the development of our data-analytics program, to better test and verify the information we receive. When entities are not completely truthful, they will be penalised.”
CFTC’s Division of Swap Dealer and Intermediary Oversight director Joshua Sterling, says, “[Bank of Nova Scotia’s] compliance and supervision violations highlight the need for all swap dealers to have the right tone at the top – plus appropriate programs and incentives in place – to instill a meaningful culture of compliance among their personnel. The CFTC will continue to apply rigorous oversight to all registrants, and firms will be referred to enforcement whenever there is a strong indication that our rules may have been broken.”