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CFTC Orders The Bank of Nova Scotia to Pay $50 Million for Swap Dealer Compliance and Supervision Failures and False Statements

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Washington, D.C. — The Commodity Futures Trading Commission issued an order today filing and settling charges against The Bank of Nova Scotia (BNS), a provisionally registered swap dealer, for swap dealer compliance failures, failing to supervise its swap dealer activities diligently, and making false or misleading statements to CFTC staff during the course of the Division of Enforcement’s investigation. The order finds that the violations occurred over a seven-year period.

The order requires BNS to pay a $50 million civil monetary penalty and to cease and desist from any further violations of the Commodity Exchange Act and CFTC regulations, as charged. The order also requires BNS to remediate the compliance failures and retain an outside monitor for a three-year term. The monitor will report to the Division of Enforcement and the Division of Swap Dealer and Intermediary Oversight on BNS’s remediation and its compliance with the Commodity Exchange Act and CFTC regulations.

As set forth in the order, BNS acknowledges that the Commission has sufficient grounds to commence proceedings to suspend or revoke BNS’s registration status based on the findings in the order. The order provides that the Commission will defer commencing such proceedings unless BNS fails to fulfill its obligations, as prescribed in its undertakings, regarding registration, remediation, and the monitor.

Case Background

The order finds, specifically, that at various times from at least December 31, 2012 to the present, BNS failed to comply with swap dealer business conduct standards requirements for pre-trade mid-market marks (PTMMMs) by providing counterparties with PTMMMs that were inaccurate, untimely, or both, or failing to provide PTMMMs entirely. The order finds that this conduct had the effect of concealing BNS’s full markup from its swaps counterparties.

The order further finds that BNS’s counterparty onboarding process, PTMMM and audio recordkeeping, and chief compliance officer reporting failed to comply with the Commodity Exchange Act and CFTC regulations, and that BNS failed to supervise its swap dealer activities diligently. The order also finds that BNS made false or misleading statements to Commission staff during the course of its investigation concerning: (i) whether it had preserved certain audio recordings; and (ii) who supervised its New York base metals desk in late 2017. According to the order, each of these false or misleading statements impeded the Division of Enforcement’s ability to investigate BNS’s compliance failures.

The CFTC thanks and acknowledges the assistance of the National Futures Association. Pamela Geraghty, Andree Goldsmith, Elise Bruntel, Amanda Olear, and Joshua B. Sterling of the Division of Swap Dealer and Intermediary Oversight assisted with this matter.

The Division of Enforcement staff members responsible for this case are John Buffington, Alejandra de Urioste, Peter Janowski, Trevor Kokal, Candice Aloisi, Lenel Hickson, Jr., and Manal Sultan.

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Regulator Information

Abbreviation: CFTC
Jurisdiction: USA

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