The Toronto-Dominion Bank

FCA action

fines

2

in fines

£7.49m

most recent

December 2009

• Fined £7m on 17 December 2009

  On 15 December 2009, the FSA imposed a financial penalty on Toronto Dominion Bank (London Branch) (Toronto Dominion) of £7,000,000 (discounted from £10,000,000 for early settlement) in respect of breaches of Principles 2 and 3 of the FSA's Principles for Businesses which occurred between July 2006 and June 2008. The breaches arose from a number of serious failings in the systems and controls concerning trading book pricing and marking within the Credit Products Group (CPG) business of Toronto Dominion. Toronto Dominion breached Principle 2 by failing to effectively use its existing systems and controls over what was a complex business dealing in sophisticated and often illiquid financial products. As well as failing to use its existing systems and controls, it failed to escalate appropriately issues that may have led to earlier detection of the pricing issues. As a result, Toronto Dominion failed to price certain positions held by a trader accurately and failed to prevent or detect these pricing issues in a timely manner. Toronto Dominion breached Principle 3 by failing to ensure clear segregation of roles and responsibilities, appropriate management reporting, as well as adequate product knowledge or experience of back office staff.

• Fined £490,000 on 16 November 2007

  On 16 November 2007, the FSA imposed a financial penalty of £490,000 on Toronto Dominion Bank (London branch) (TD Bank) in respect of breaches of the requirements of Principle 3 of the FSA's Principles for Businesses to take reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems. These breaches occurred from at least the beginning of 2005 until 9 March 2007. The FSA took this action as a result of systems and controls breakdowns which facilitated a senior fixed income trader at TD Bank to mismark his positions and book fictitious trades thus disguising a net total loss of CAD $8.8 million. There were three particular failings in the Firm's systems and controls and these were: 1. Absence of systems and controls ensuring independent price verification was performed on the trader's book; 2. Failure to implement effective trade break escalation procedures for the business on the trader's book; and 3. Lack of effective trading supervision. The FSA considers these failings to be very serious, particularly because the mismarking of positions and the entering of fictitious trades were unsophisticated techniques for disguising losses and would have been straightforward to detect had the Firm taken reasonable care to ensure that the proper systems and controls were in place. The FSA recognises that TD Bank brought the trader's conduct to the attention of the FSA as soon as practicable after learning of it and immediately commissioned an internal audit investigation into the systems and controls breakdowns which had occurred. TD Bank responded to the findings of this internal audit investigation by implementing a comprehensive range of remedial actions. TD Bank agreed to settle at the earliest opportunity and this meant that it received the maximum level of discount under the FSA's discount scheme, being 30%.