Banks second fine for systems and controls failings
The Financial Services Authority (FSA) fined the London branch of Toronto Dominion Bank £7m for repeated systems and controls failings around the pricing of sophisticated financial products.
The fine forced the bank to make a negative adjustment of CAD$96m in July 2008.
This is the bank’s second fine for systems and controls failings and the fourth largest levied by the FSA.
The breaches relate to pricing issues that were uncovered on a proprietary trader’s books within Toronto Dominion’s Credit Products Group. Amongst other failings the FSA found that Toronto Dominion failed to follow their established procedures in ensuring the trader’s books were independently verified, and did not have adequate controls in place which could have detected the pricing issues.
In November 2007 Toronto Dominion was fined £490,000 when a fixed income trader, Simon Brignall, attributed false values to his trading positions and created fictitious trades to hide significant losses on his book.
Margaret Cole, FSA director of enforcement and financial crime, said: “This is one of our largest fines and it underlines the seriousness with which the FSA views repeat offences. When we uncover failings in a firm we expect them to put it right immediately and to take special care to ensure it does not happen again. Toronto Dominion clearly failed to apply proper controls in this area despite its previous sanction and repeat offenders need to know that they will face severe consequences.
“It is important that firms trading in sophisticated and often illiquid financial products have robust controls in place, particularly in times of increased market volatility. Where a firm doesn’t do this the FSA will take action.”
Toronto Dominion cooperated fully with the FSA and agreed to settle at an early stage of the FSA's investigation. Without the discount the fine would have been £10m.
Toronto Dominion’s senior management promptly commissioned a thorough review of the matter, as well as a wider review of its systems and controls framework and business strategies.