Friday, November 16, 2007

UK Regulator Fines TD Bank Over Rogue Trader

  
Reuters, 16 November 2007

Toronto-Dominion Bank has been fined 490,000 pounds (C$998,000) after one of its traders attempted to hide losses on his trading book, Britain's financial regulator said on Friday.

The Financial Services Authority (FSA) said former TD Bank employee Simon Brignall, who was a senior fixed income trader, resigned in March and revealed to TD he had been attributing false values to his trading positions for almost two years.

Brignall did this to hide significant losses on his trading book and he also entered a number of fictitious trades during the two weeks leading up to his resignation, the FSA said.

The FSA fined TD Bank for not identifying, through its own systems and controls, either the extent of the mispricing of the trades or the fictitious trades.

The loss caused by Brignall was $8.8-million, which was borne by TD Bank, the FSA said. No client or third party suffered a loss and Brignall made no personal gain.

The FSA said it had banned Brignall from carrying out regulated activities.

TD Bank informed the FSA as soon as practicable of the problems, had cooperated fully and has taken steps to address the systems and controls failings, the regulator said.
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Canadian Press, 16 November 2007

Britain's Financial Services Authority has fined the London office of Toronto-Dominion Bank 490,000 pounds for failing to control a rogue bond trader who cost the bank C$8.8 million.

The bank's fine is worth about C$980,000 at current exchange rates, and the trader, Simon Richard Brignall, was banned from the capital markets "on the grounds that he is not a fit and proper person" after his activities between the start of 2005 and last March.

The $8.8-million loss caused by Brignall was borne by TD with no pain to clients or outside parties, and the FSA said Brignall made no personal gain.

Brignall, a senior fixed-income trader, resigned March 9 and revealed to TD that he had been booking false values on his trading positions for almost two years to hide losses. Just before his resignation, he had also entered a number of fictitious trades.

"TD Bank did not identify, through its own systems and controls, either the extent of the mispricing of the trades or the fictitious trades," the FSA stated Friday.

It found an absence of independent price verification, ineffective trading supervision and a failure of procedures to resolve mismatches between trading data in its system and information received from counterparties.

The bank informed the FSA quickly of the misconduct and co-operated fully and "has also taken a number of steps to address the systems and controls failings," the authority said.

By settling quickly, TD qualified for a 30 per cent discount on the penalty under the FSA's procedures, which reduced the fine from 700,000 pounds.

The FSA commented that "at the time of the misconduct, Mr. Brignall was under significant pressure in his personal life."
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