Financial Institution Fraud

August 20, 2020

TD Bank, N.A. has been ordered to pay an estimated $97 million in restitution to about 1.42 million customers, as well as a civil monetary penalty of $25 million, for engaging in deceptive practices that violated the Consumer Financial Protection Act of 2010 and the Fair Credit Reporting Act.  In connection with its optional Debit Card Advance (DCA) service, TD Bank allegedly interfered with its customers’ ability to understand terms and conditions by misrepresenting DCA as “free” or a “feature” of their new checking accounts, when in reality it could result in fees of $35 per overdraft transaction.  Furthermore, in connection with consumer account information, TD Bank allegedly failed to implement policies that would ensure the accuracy of that information before it was provided to consumer reporting agencies.  CFPB

August 19, 2020

The Bank of Nova Scotia (Scotiabank) has been ordered to pay $127.4 million to the CFTC and $60.4 million in criminal fines, forfeiture, and restitution to the DOJ for attempting to manipulate prices and spoofing in precious metals futures contracts, making false and misleading statements to investigators, and failing to comply with swap dealer conduct and supervision requirements.  The alleged misconduct occurred over the eight years ending in 2016 and involved four precious metals traders in New York, London, and Hong Kong.  From the penalty paid to the CFTC, a record-breaking $42 million will go toward resolving the price manipulation and spoofing allegations, and a record-breaking $17 million will go toward resolving the false and misleading statements allegations.  In addition to the fines, Scotiabank has entered into a deferred prosecution agreement and agreed to retain an independent monitor.  CFTC; DOJ; USAO NJ 

August 10, 2020

Greenwich, Connecticut-based brokerage firm Interactive Brokers LLC will pay fines and disgorgement totaling $23.7 million to the SEC and CFTC, as well as a $15 million penalty to the Financial Industry Regulatory Authority (FINRA), to resolve allegations related to the firm's anti-money laundering policies.  The SEC penalty of $11.5 million resolves charges that over the course of one year the brokerage failed to file more than 150 Suspicious Activity Reports (SARs) for U.S. microcap securities trades it executed on behalf of its customers.  The SEC order finds that defendant failed to recognize red flags concerning transactions, failed to properly investigate suspicious activity, and failed to file SARs even when suspicious transactions were flagged by compliance personnel. The $11.5 CFTC penalty, together with over $700,000 in restitution, resolves charges including that the firm, which is a registered futures commission merchant, failed to detect and report suspicious transactions, including in its handling of the accounts of Haena Park.  SEC; CFTC

July 28, 2020

Houston-based VALIC Financial Advisors will pay $40 million to resolve charges that it failed to disclose payments made as a result of referrals and failed to disclose fees it received for steering clients to certain mutual funds. With respect to its mutual fund fee disclosure practices, VFA was alleged to steer individual clients to more expensive funds that VFA was able to purchase through its clearing broker’s no-transaction fee program and with respect to which VFA received both 12b-1 fees and revenue sharing from the clearing broker, while VFA was also receiving advisory fees from the individual clients, telling clients those fees would cover execution costs.  With respect to the referral payments, VFA failed to disclose that its parent company paid an entity associated with Florida teachers’ unions in exchange for the entity’s exclusive endorsement of VFA as its preferred financial services partner and the entity’s agreement to not promote or endorse VFA’s competitors.  In addition to the penalty, VFA has agreed to provide Florida K-12 teachers who participate in its advisory product in Florida’s 403(b) and 457(b) retirement programs with its most favorable rates in the Florida K-12 market.  SEC

July 20, 2020

UBS Financial Services Inc. and two of its registered representatives will pay $10 million in penalties, disgorgement, and interest to resolve claims that UBS improperly redirected municipal bond offerings away from retail customers and to “flippers,” who re-sold the bonds to other broker-dealers, including UBS.  This practice allowed UBS to circumvent the priority retail order periods set by bond issuers and improperly obtain a greater allocation of bonds for its own inventory.  SEC

July 7, 2020

Deutsche Bank AG and Deutsche Bank Trust Company America will pay a $150 million penalty to New York in a settlement with the State’s Department of Financial Services resolving charges that the bank failed to adequately monitor the activity of its customer Jeffrey Epstein and failed to adequately monitor its international corresponding banking relationships with Danske Bank Estonia and FBME Bank.  In the case of Epstein, Deutsche Bank processed hundreds of transactions totaling millions of dollars that allegedly should have prompted additional scrutiny.  In the case of Danske Bank and FBME, Deutsche Bank was alleged to have been put on notice that those foreign banks were engaged in money laundering but, despite assigning the highest risk ratings to those institutions, failed to take appropriate actions to prevent the processing of suspicious transactions by those banks through Deutsche Bank accounts.  NY

June 24, 2020

SG Americas Securities LLC has agreed to pay $1.55 million to the SEC and $1.55 million to FINRA, for a total monetary penalty of $3.1 million, to resolve charges of failing to provide complete and accurate securities trading information, also known as “blue sheet data.”  The SEC had found that because of inadequate internal processes, SG Americas failed to catch these coding errors, causing them to submit missing or incorrect data for about $27.6 million transactions.  SEC

June 1, 2020

Broker-dealer and investment advisor U.S. Bancorp Investments, Inc. will pay a penalty of $2.4 million as well as disgorgement and interest totaling nearly $16 million to resolve claims that it steered clients to mutual fund share classes that charged 12b-1 and shareholder servicing fees when lower-cost share classes were available.  U.S. Bancorp allegedly failed to disclose to clients that it had a conflict of interest arising from its receipt of fees with respect to such shares, and, in recommending the higher-cost shares, failed to seek best execution for client transactions.  SEC