Bank of Nova Scotia has reached settlement agreements with the U.S. Department of Justice and the Commodity Futures Trading Commission over charges of metals market manipulation.
Under the terms of the agreements, Scotiabank will pay an aggregate fine of US$127.5 million to the DOJ and CFTC, including US$17 million to the CFTC for misleading the regulator in its initial investigation. The bank was also ordered to retain an independent compliance monitor.
“Entities seeking to cooperate with the CFTC, like all others that interact with the Commission, must tell the truth,” CFTC enforcement director James McDonald said in a release.
“When entities are not completely truthful, they will be penalized.”
The fines and enforcement actions stem from an investigation into Scotia’s metals trading division. American authorities said that on thousands of occasions between January 2008 and July 2016, four Scotiabank traders placed orders to buy and sell precious metals contracts with the intent to cancel those orders in an attempt to manipulate prices. The traders were based in New York, London and Hong Kong, according to the U.S. Department of Justice.
Such activity is referred to as “spoofing” and can manipulate prices by creating a false perception of the supply and demand picture surrounding a commodity.
The order comes about two years after Scotia was originally sanctioned for metals spoofing. The bank was hit with a US$800,000 fine for activity from June 2013 through June 2016. The CFTC said that over the course of that prior investigation, Scotiabank made numerous false or misleading statements when faced with material questions.
Scotia announced plans earlier this year to wind down the metals division and set aside $232 million to cover the cost of the wind-down and potential penalties from U.S. authorities.