Continuing a year of scandal and turmoil for the group, TD Securities has been charged by the Securities and Exchange Commission for spoofing the US Treasury cash securities market and failing to supervise the head of desk responsible.
The commission stated that between April 2018 and May 2019, a TD Securities trader entered orders on one side of the market that he did not intend to execute in order to obtain more favourable execution prices on his ‘real’ orders, on the other side of the market. The fake orders were then cancelled. Hundreds of trades were made in this way, the commission said, all of which generated profit for the company.
Not only did TD Securities not have the right controls in place to deal with this issue, the commission observed, but the trader – head of the US Treasuries desk at the time – was not scrutinised following warnings from others of potentially irregular trading activity.
This is the latest of many scandals to hit TD Group this year, following a US Department of Justice probe investigating money laundering through TD Bank and a total of US$109 million in fines over recordkeeping and communication monitoring violations. These factors contributed to the departure of CEO Bharat Masrani, who will be replaced by Raymond Chun in April 2025.
READ MORE: TD’s Masrani steps down amid regulatory turmoil; Chun named successor
Mark Cave, associate director in the SEC’s division of enforcement, said: “Manipulative and deceptive trading undermines the integrity of our markets. Broker-dealers and other firms cannot ignore their employees’ manipulative conduct and must take meaningful steps to detect and prevent it. Today’s action results from our continuing commitment to combating illicit trading.”
TD Securities has consented to the entry of the order, and has been issued a cease and desist order from future antifraud provision violations and ordered to pay a US$6.5 million civil penalty.
As part of a related matter, the firm has entered into a deferred prosecution agreement with the US Department of Justice to pay a more than $US15 million monetary sanction. The SEC will receive US$400,000 of this by disgorgement, in addition to pre judgement interest. A further US$6 million fine is to be paid to the Financial Industry Regulatory Authority (FINRA) to resolve related charges.
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