Release Number 8699-23
CFTC Orders The Bank of Nova Scotia to Pay a $15 Million Penalty for Recordkeeping and Supervision Failures for Widespread Use of Unapproved Communication Methods
May 11, 2023
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against The Bank of Nova Scotia, a provisionally registered swap dealer and Scotia Capital USA Inc., a futures commission merchant, (collectively BNS Affiliates). The order charges BNS Affiliates with failing to maintain, preserve, or produce records that were required to be kept under CFTC recordkeeping requirements, and failing to diligently supervise matters related to their businesses as CFTC registrants.
The BNS Affiliates admit the facts detailed in the order, are ordered to cease and desist from further violations of recordkeeping and supervision requirements, and are ordered to engage in specified remedial undertakings.
“Adhering to the Commission’s recordkeeping and supervision requirements is not optional,” said Director of Enforcement Ian McGinley. “This matter is another in a series of cases that reflects the Commission’s commitment to ensuring the Division of Enforcement can effectively investigate potential misconduct and, where needed, hold wrongdoers operating in our markets to account.”
The order finds BNS Affiliates for a period of years, failed to stop their employees, including those at senior levels, from communicating both internally and externally using unapproved communication methods, including messages sent via personal text and WhatsApp. BNS Affiliates were required to keep certain of these written communications because they related to BNS Affiliates’ businesses as CFTC registrants. These written communications generally were not maintained and preserved by the BNS Affiliates, and the BNS Affiliates generally would not have been able to furnish them promptly to the CFTC when requested.
The order further finds the widespread use of unapproved communication methods violated BNS’s own policies and procedures, which generally prohibited business-related communication taking place via unapproved methods. Further, some of the very same supervisory personnel responsible for ensuring compliance with the firms’ policies and procedures themselves used non-approved methods of communication to engage in business-related communications, in violation of firm policy.
Related Civil Action
The Securities and Exchange Commission (SEC) today announced entry of an order filing and settling charges against an SEC-registered BNS affiliate and imposing civil monetary penalties for related recordkeeping and supervision violations.
The Division of Enforcement staff responsible for this matter are Peter Janowski, Alejandra de Urioste, Lenel Hickson, Jr., and Manal M. Sultan.