Statement of Commissioner Kristin N. Johnson Regarding CFTC Order Against The Bank of Nova Scotia and Scotia Capital USA Inc. for Recordkeeping and Supervision Failures Relating to Offline Communications
May 11, 2023
Today, the Commodity Futures Trading Commission (CFTC or Commission) issued an order settling charges against The Bank of Nova Scotia and Scotia Capital USA Inc. (together, “BNS”) for failing to maintain, preserve, and produce records in compliance with CFTC recordkeeping requirements with respect to certain offline communications (often carried out through chat or social media messaging platforms). BNS also failed to diligently supervise matters related to its CFTC-registered businesses with respect to this conduct. The settlement order requires BNS to pay $15 million for these violations, and also to implement immediate and effective remediation measures to ensure compliance with the Commodity Exchange Act (CEA) and Commission regulations, including ensuring appropriate recordkeeping and supervision.
As with the orders issued last September against other banks and affiliated entities for similar violations relating to offline communications, the egregious and widespread nature of the use of unapproved communications methods—which were not monitored, reviewed, and captured as required by CFTC regulations—undermines the recordkeeping and supervisory frameworks that we rely on registrants to have in place not only to prevent and detect misconduct, but to enable the Commission to conduct examinations and investigations and to enforce the CEA and Commission regulations.
I note that BNS is (and was at the time of the misconduct described in the order) subject to a monitorship pursuant to a prior CFTC consent order entered in August 2020 addressing separate swap dealer compliance failures. While the conduct at issue here is not the same as the conduct addressed by that prior order, it is highly troubling that BNS continues to violate related provisions of the CEA and Commission regulations. The penalty imposed here reflects this context and history; it should be expected that any future settlements would similarly do the same, with correspondingly more significant sanctions.
I continue to emphasize that registrants must update and adapt their internal compliance programs to keep up with technological change, but, even more importantly, must ensure a culture of compliance at all levels of their organization even as markets face rapid change.
I offer my highest commendation of the work performed by Division of Enforcement staff in bringing this case, including Peter Janowski, Alejandra de Urioste, Lenel Hickson, Jr., and Manal M. Sultan.
 As with the settlements announced in September, the Securities & Exchange Commission (SEC) is also bringing an action against a BNS-affiliated entity registered with the SEC for similar recordkeeping and supervision violations, with the imposition of an additional penalty of $7.5 million. See SEC Release No. 2023-91, SEC Charges HSBC and Scotia Capital with Widespread Recordkeeping Failures, May 11, 2023, https://www.sec.gov/news/press-release/2023-91.
 See Statement of Commissioner Kristin N. Johnson Regarding CFTC Orders for $700 Million Penalty Against Bank-Affiliated Entities for Offline Communications, Sept. 27, 2022, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement092722 (discussing administrative orders settling claims arising from similar offline communications with eleven swap dealers and their affiliated futures commission merchants).
 See In re Bank of Nova Scotia, CFTC No. 20-26, 2020 WL 4926053 (Aug. 19, 2020).