Washington, D.C. – The Commodity Futures Trading Commission (CFTC) has levied a $4 million penalty against The Toronto Dominion Bank (TD Bank) for failing to adequately supervise its electronic communications surveillance system. The enforcement action, announced today, stems from a five-year period where TD Bank neglected to monitor communications from hundreds of its swap dealer personnel.
According to the CFTC order, the bank’s oversight failures began in 2016 when a vendor change impacted the automated process for ingesting messages from its electronic messaging platform into the surveillance tool. While initially addressed with a temporary manual update process, TD Bank ceased even the manual updates by January 2018. This resulted in messages from newly created accounts—those established after January 2018—going unmonitored.
The CFTC found that TD Bank implemented no supervisory checks to ensure the manual process was being followed or to detect its eventual abandonment. Furthermore, when the bank attempted to reinstate the automated process in October 2019, it failed to adequately test the system, leaving a second technical issue unaddressed. Consequently, the bank continued to fail to surveil communications from new accounts until March 2023.
“Communications surveillance is a critical component of an effective system of supervision,” stated Ian McGinley, Director of Enforcement at the CFTC. “This order and the significant monetary penalty reflect that swap dealers must not only have robust systems to detect and prevent market abuse and other misconduct, they must also vigilantly oversee and monitor those systems to ensure they are working.”
TD Bank admits to the facts outlined in the order and acknowledges that its conduct violated the Commodity Exchange Act and related CFTC regulations. In addition to the $4 million penalty, the bank is required to cease and desist from further violations of the CFTC’s supervision requirements and adhere to specific conditions and undertakings detailed in the order.
The investigation highlighted a systemic lack of oversight, revealing that TD Bank’s internal monitoring was insufficient to identify and correct critical failures in its surveillance system, potentially leaving it vulnerable to market manipulation and other illicit activities.
Source: CFTC.gov
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