The FSA has fined Toronto Dominion Bank 490,000 for systems and control failings and banned one of its former traders from carrying out regulated activities.
The FSA says the failings took place in London from the beginning of 2005 until March 2007. The trader, Simon Rich-ard Brignall, resigned on March 9 and revealed to the bank that he had been attributing false values to his trading positions for almost two years.
He did this to hide significant losses on his trading book. The net total loss caused by Brignall was around 4.3m which was borne by the bank.
The regulator says Brignall entered into a number of fictitious trades during the two weeks leading up to his resignation. The FSA says the bank did not identify through its own systems and controls either the extent of the mispricing of the trades or the fictitious trades.
The regulator says it identified three main systems and control failings – the absence of a system of independent price verification, a lack of effective trading supervision and a failure to implement effective trade break escalation procedures.
The FSA says it recognises that Brignall admitted his actions to his employer, was under significant pressure in his personal life and cooperated fully, agreeing to settle the action brought by the regulator.
Director of enforcement Margaret Cole says: “The FSA expects regulated firms to have appropriate systems and controls in place to ensure that trading positions are valued accurately. The level of penalty imposed on Toronto Dominion demonstrates that the FSA regards the implementation and maintenance of these systems as essential to maintaining confidence in the financial system.
“The FSA also expects approved persons to act properly to ensure that trading positions are valued accurately. Mr Brignall failed to observe proper standards of market conduct by mispricing his futures positions over a period of almost two years and entering false trades. In so doing, he concealed significant losses on his trading book.
“We regard this as a very serious breach of the standards of behaviour expected of approved persons.”