Broker-dealer fined $6.5M for alleged US Treasury market 'spoofing'

Broker-dealer fined $6.5M for alleged US Treasury market 'spoofing'
Criminal charges are ongoing related to the allegations.
OCT 01, 2024

A US subsidiary of a major Canadian bank has been charged by the Securities and Exchange Commission with using an alleged illicit trading strategy in the US Treasury cash securities market.

The agency says that between April 2018 and May 2019 the former head of TD Securities (US) LLC’s US Treasuries trading desk entered orders on one side of the market that he had no intention of executing, in order to gain better executive prices on genuine orders he was entering on the other side of the market.

The practice is known as spoofing and includes the cancelation of the non-bona-fide orders after the bona fide ones were filed.

The SEC Order finds that the trader should have been better supervised and further charged TD Securities US with failing to take action to scrutinize him even after warnings of his irregular activity were made known.

“Manipulative and deceptive trading undermines the integrity of our markets,” said Mark Cave, Associate Director in the SEC’s Division of Enforcement. “Broker-dealers and other firms cannot ignore their employees’ manipulative conduct and must take meaningful steps to detect and prevent it. Today’s action results from our continuing commitment to combating illicit trading.”

TD Securities US agreed that it had violated anti-fraud provisions of the federal securities laws and that it had failed in its supervision of the trader.

The SEC ordered the firm to cease and desist in its violation of the rules, to pay a $400,000 disgorgement, and a $6.5 million civil penalty. This follows the agreed settlement between the firm and Finra to pay $6 million to resolve related charges.

CRIMINAL CHARGES

TD Securities US also entered into an agreement this week with the Justice Department to resolve related criminal charges concerning a scheme to defraud that involved hundreds of episodes of unlawful trading in the secondary (cash) market for US Treasuries.

The former head of the TD Securities desk that was responsible for trading US Treasuries, Jeyakumar Nadarajah, was indicted on Nov. 7, 2023, in the District of New Jersey connection with this scheme and is awaiting trial. The charges have not been proven in court.

“TD Securities placed hundreds of orders to buy and sell US Treasuries that it never intended to execute, in order to deceive market participants and manipulate prices by creating the false appearance of supply and demand,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Such efforts to profit through unlawful trading undermine public confidence in US Treasuries markets and defraud other market participants. The Criminal Division is committed to ensuring the integrity of our financial markets and holding accountable those who engage in deceptive trading practices.”

TD Securities received credit for its cooperation with the department’s investigation and for remedial measures taken, including terminating Nadarajah, and reviewing and continuing to enhance the compliance function.

Latest News

Powell heads for hot-seat hearings with ongoing pressure from Trump policies
Powell heads for hot-seat hearings with ongoing pressure from Trump policies

The Fed chair is in for some "hyper-charged" meetings, with legislators likely to raise questions on tariff threats and apparent steps to comply with anti-DEI orders.

Revealed: The InvestmentNews Top Advisors for 2025
Revealed: The InvestmentNews Top Advisors for 2025

Driven by long-term vision and a steadfast commitment to client service, the top-ranking advisors are reaching new heights of success.

Trepidation at SEC as Trump workforce overhaul casts shadow on agency
Trepidation at SEC as Trump workforce overhaul casts shadow on agency

While the regulator's lawyers may be exempt, a federal effort to purge workers is causing uncertainty across its broader employee base.

Prime Capital Financial, Carnegie expand Eastern footprints
Prime Capital Financial, Carnegie expand Eastern footprints

The two national RIA firms are bolstering their presence separately in Georgia and Connecticut with new billion-dollar acquisitions.

Embattled TD Bank eyes $14B raise in Schwab stake exit
Embattled TD Bank eyes $14B raise in Schwab stake exit

The banking giant is looking to sell its interest in the online brokerage giant amid the continuing fallout of its historic money-laundering settlement with federal regulators.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.