RBC, TD in the FX Regulatory Firing Line

The Ontario Securities Commission is to hold a hearing at which it will be decided whether to accept settlement offers from the Royal Bank of Canada and TD Bank over the banks’ alleged insufficient controls over and failure to adequately supervise their FX businesses.

The hearing will be heard tomorrow (August 30) in Toronto and relate to allegations the banks’ staff inappropriately shared customer information via chatrooms and that the banks did not comply with Canadian legislation regarding market manipulation and fraud prohibitions due their to failure to establish and maintain an adequate compliance system that addressed the conduct issues.

While there is little new in the allegations against the banks’ FX teams, one small quirk is that, for once, the charges explicitly do not relate to activity around the London 4pm WMR Benchmark Fix. It is also noticeable that the OSC alleges that bank senior management were made aware or raised the issue of inappropriate information sharing two years before the practice was formally banned and months before the issue came to the public notice.

The charges note that while the issue around chatroom activity was made public in 2013, senior members of staff at both banks had raised the issue in 2012, including one RBS managing director observing that the issue had been raised at a recent Bank of England FX Joint Standing Committee meeting.

In evidence, the OSC follows what has now become a standard approach of regulators in publishing selected chats and although it is not specifically said, several are between traders at TD and RBC and involved the revealing of stop loss orders as well as option barriers.

While this is the first action taken against TD, RBC has been in the firing line before, agreeing to pay fines in the US and Brazil for similar conduct. The bank was also on the end of a successful whistleblower claimby former FX trader John Banerjee in 2018, which, although it said it would defend the charges it actually settled just days before the hearing was due to take place.

Colin Lambert

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