Bank of Nova Scotia (TSX:BNS) is being fined for metals market manipulation.
The fine comes after the Canadian bank reached settlement agreements with the U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) over charges of metals market manipulation.
Under the terms of the agreements, Scotiabank will pay an aggregate fine of $127.5 million U.S., including $17 million U.S. to the CFTC for misleading the regulator in its initial investigation. The bank was also ordered to retain an independent compliance monitor.
The fines stem from an investigation into Bank of Nova Scotia’s metals trading division. American authorities said that on thousands of occasions between January 2008 and July 2016, four Scotiabank traders placed orders to buy and sell precious metals contracts with the intent to cancel those orders and manipulate prices. The traders were based in New York, London and Hong Kong, according to the DOJ.
Such activity is referred to as "spoofing" and can manipulate prices by creating a false perception of the supply and demand picture surrounding a commodity. The latest fines come two years after Bank of Nova Scotia was originally sanctioned for metals spoofing. The bank was hit with a $800,000 U.S. fine for market manipulation from June 2013 through June 2016.
The Bank of Nova Scotia announced plans earlier this year to wind down its metals division and set aside $232 million U.S. to cover the cost of the wind-down and potential penalties from U.S. regulators.
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