A major US banking institution, TD Bank, is facing a substantial fine from a group of regulators, including the Department of Justice (DOJ), for criminal charges related to defrauding the Treasury market. The DOJ has announced that TD Bank’s registered broker-dealer, TD Securities, has agreed to a deferred prosecution agreement (DPA) after being charged with wire fraud for market manipulation.
The charges stem from allegations that a former employee at TD Securities, Jeyakumar Nadarajah, engaged in a spoofing manipulation scheme between April 2018 and May 2019. Spoofing is an illegal trading practice that involves placing orders with the intention of canceling them to create a false perception of demand or supply in the market. Nadarajah allegedly used this technique to manipulate bond prices in the secondary market before executing actual trades.
As part of the DPA, TD Securities has agreed to pay a total of $15.5 million in criminal monetary penalty and forfeiture, with $4.7 million allocated to compensate market participants affected by the bank’s actions. The Securities and Exchange Commission (SEC) has also charged TD Securities with violating securities laws and failing to supervise Nadarajah, resulting in a payment of $400,000 in disgorgement and $6.5 million in civil penalty.
In addition to the fines imposed by the DOJ and SEC, TD Securities will also pay a $6 million fine to the Financial Industry Regulatory Authority (FINRA) to settle similar charges. This series of penalties comes as a significant blow to TD Bank, which is currently ranked as the 10th-largest commercial bank in the US with over $370.332 billion in consolidated assets as of June 30th, 2024.
The case highlights the importance of maintaining integrity and transparency in financial markets to uphold public confidence and protect investors from fraudulent practices. The repercussions faced by TD Bank serve as a warning to other financial institutions about the severe consequences of engaging in illegal trading activities.