On August 19, the Commodity Futures Trading Commission (CFTC) issued three orders filing and settling charges against The Bank of Nova Scotia (BNS). The orders resolve two separate enforcement actions, one involving charges of spoofing and making false statements and the other involving swap dealer compliance, supervision violations, and additional false statements. BNS is to pay $127.4 million in disgorgement and penalties.
The first enforcement action stems from BNS’s manipulative and deceptive conduct spanning more than eight years and involving thousands of occasions of attempted manipulation and spoofing in gold and silver futures contracts. The CFTC previously penalized BNS $800,000 for spoofing in gold and silver markets in 2018. However, the BNS’s statements during that investigation have proven to be false and concealed the true extent of their spoofing. The CFTC has levied two record-setting penalties against BNS: a $17 million penalty for making false and misleading statements and a penalty of $42 million for spoofing and attempted manipulation. Additionally, BNS is to pay $6,622,190 in restitution and $11,828,912 in disgorgement and retain an independent monitor.
The second enforcement action stems from swap dealer business conduct, compliance, and supervision failures, and false or misleading statements that occurred over a seven years. The CFTC found that “for tens of thousands of swaps, BNS: (i) failed to provide timely and accurate pre-trade mid-market marks, which had the effect of concealing BNS’s full markup from counterparties; (ii) violated various requirements relating to BNS’s counterparty onboarding process, recordkeeping, chief compliance officer reporting, and supervision; and (iii) made false or misleading statements to CFTC staff concerning its audio retention and supervision.”
“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. 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,” said CFTC Chairman Heath P. Tarbert. “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.”
On August 21, the CFTC posted two Notices of Covered Actions in reference to the BNS case. These notices are a signal that eligible individuals should now apply for whistleblower awards for the case. CFTC whistleblowers who provide the agency with original information that leads to a successful enforcement action are entitled to a whistleblower award. The monetary amount of CFTC whistleblower awards ranges from 10-30% of all funds recouped by the government in the relevant enforcement action.
Read the CFTC press release: CFTC Orders The Bank of Nova Scotia to Pay $127.4 Million for Spoofing, False Statements, Compliance and Supervision Violations | CFTC
Read the two Notices of Covered Actions: