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Scotiabank to pay more than $120 million over metals-market manipulation probe and swap dealing

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The CFTC said its orders require Scotiabank to pay fines for “spoofing,” which is bidding or offering with the intent to cancel before the trade is carried out, as well as for making false statements and for swap-related compliance and supervision violations. Scotiabank’s agreement with the DOJ defers prosecution of the lender on one charge of wire fraud and one charge of attempted price manipulation.

According to the deferred prosecution agreement, the trading in question caused other market participants to lose approximately US$6.6 million, as well as “significant harm to the integrity” of key U.S. commodities markets. The DOJ also said Scotiabank’s compliance function “failed to detect or prevent” the problematic trades, although it added the lender has made considerable investments in its compliance division.

Scotiabank had previously set aside $232 million in connection with the investigations and its decision to wind down its metals business. The bank is also being required to retain an independent compliance monitor.

“At Scotiabank, we understand that in order to maintain the trust of our stakeholders, we must adhere to trading-related regulatory requirements and compliance policies,” the bank said ina release. “We are committed to adhering to these standards.”

The CFTC said it had penalized the bank US$800,000 in 2018 for spoofing in the gold and silver futures markets, but statements the lender made to the regulator’s staff at the time were later proven false.

“Entities seeking to cooperate with the CFTC, like all others that interact with the Commission, must tell the truth,” the regulator’s enforcement-division director, James McDonald, said in a release. “When entities are not completely truthful, they will be penalized.”

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