The London branch of the bank has had to cough up £490,000 for systems and controls failings in relation to one of its trading books. The failings occurred from the beginning of 2005 until 9 March 2007.
Simon Richard Brignall has subsequently been banned from carrying out regulated activities on the grounds that he is not a fit and proper person.
Brignall was employed as a senior fixed income trader at the firm. On 9 March, he resigned and revealed to TD Bank that he had been attributing false values to his trading positions for a period of almost two years. He had done this in order to hide significant losses on his trading book. He had also entered a number of fictitious trades during the two weeks leading up to his resignation.
TD Bank did not identify, through its own systems and controls, either the extent of the mispricing of the trades or the fictitious trades. The FSA identified three main system and control failings in relation to Brignall's trading book. These were:
- 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 net total loss caused by Brignall was CAD $8.8 million and this was borne by TD Bank. No client or third party suffered any loss and Mr Brignall made no personal gain.
Margaret Cole, director of enforcement, said: "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."
The FSA acknowledges that TD Bank informed the FSA as soon as practicable on learning that the misconduct had taken place, cooperated fully with the investigation and acted quickly to launch an internal audit investigation into the matter. The firm has also taken a number of steps to address the systems and controls failings, including ensuring that all valuations are now independently verified.
By agreeing to settle at an early stage of the FSA's investigation, TD Bank qualified for a 30 per cent discount under the FSA's executive settlement procedures.
The FSA recognises that Brignall admitted his actions to his employer and has been candid in his dealings with the FSA. At the time of the misconduct, Brignall was under significant pressure in his personal life. He cooperated fully and agreed to settle the action brought by the FSA.
