“Between August 2013 and February 2016, three Scotiabank compliance officers possessed information regarding unlawful trading by one of the traders … but failed to prevent further unlawful conduct by this same trader.”
Department of Justice
(CMR) The Bank of Nova Scotia has agreed to pay more than $127 million in fines to settle both civil and criminal allegations in three separate agreements it reached with the U.S. Justice Department and the U.S. Commodity Futures Trading Commission (CFTC) on Wednesday.
The fines are for failing to detect and stop traders from making fake trades designed to manipulate prices for over a decade. The bank has agreed to a deferred prosecution agreement (DPA) to settle separate probes by the two agencies.
The agreement comes after Scotiabank agrees that it participated in a massive price manipulation scheme. The settlements are from thousands of manipulative orders for precious metals futures contracts placed on the U.S. exchanges over eight years by four traders at the bank.
The CFTC agreement settles two separate enforcement orders against Scotiabank including price manipulation scheme (spoofing) and the bank’s conduct as a swaps dealer. Spoofing is where investors are tricked into buying and selling at artificially high or low prices.
One agreement has them paying over $60.4 million in criminal penalties, disgorgement and victim compensation to the Department of Justice. The other two will be paid to the CFTC in the form of two monetary penalties of $42 million and $17 million respectively.
Scotiabank was already forced to pay $800,00 in 2018 for the matter but the CFTC claims the company false statements during their investigation which is now resulting in another $77.4 million in payments.
The settlements also include claims that Scotiabank made false statements and incomplete disclosure about alleged price manipulation by its traders in a previous investigation by the derivatives market regulator.
Under the agreements, the bank will be required to have an independent compliance monitor for a three year period and it covers future claims about conduct as a swap dealer as well. Scotiabank has also agreed to continue to co-operate with any ongoing investigations and prosecutions and to modify its compliance program.
The individual traders will be sentenced at a later date for their role.