RBC and TD pay more than $24 million for FX compliance failingsBy The IJ Staff | September 03 2019 11:30AM
The Ontario Securities Commission (OSC) approved on Aug. 30 settlement agreements with RBC and TD related to compliance failures in the banks' foreign exchange (FX) trading businesses.
These failures allowed RBC and TD FX traders to share confidential customer information in chatrooms with FX traders at competitor firms. From 2011 to 2013, OSC Staff identified hundreds of instances in which RBC and TD FX traders disclosed confidential transaction details, such as trade sizes, timing, price, or stop-loss levels.
"These are serious failings by two of the biggest, most sophisticated and well-resourced financial institutions in Canada," said Jeff Kehoe, Director of Enforcement. "RBC and TD had the ability and means to properly monitor use of technology with known compliance risks in their FX trading, yet for more than three years, they failed to adequately do so. As a result, traders were free to engage in self-serving behaviour that put the banks' economic interests ahead of their customers, other market participants and the integrity of the capital markets."
As part of its settlement with the OSC, RBC has agreed to a voluntary payment of $13.552 million to advance the Commission's mandate of protecting investors, plus a further $800,000 towards the costs of staff's investigation. TD has agreed to a voluntary payment of $9.3 million to the Commission, plus $800,000 for staff's investigation.
In addition to making the payments, both institutions have agreed to conduct audits of the compliance frameworks for their FX businesses.
OSC will conduct a review of derivatives dealers
Following these settlement agreements, the OSC will conduct a review of the largest derivatives dealers in Ontario's compliance oversight for FX trading. OSC staff are asking derivative dealers in Ontario to assess whether they have sufficient controls to manage the risks faced by their FX trading businesses.
"We expect derivative dealers in Ontario to take immediate action to assess their FX oversight program and confirm their compliance with the Global FX Code of Conduct," said Kevin Fine, Director of Derivatives at the OSC. "Any dealers that identify problems with their compliance systems should promptly self-report to the OSC."