The Commodity Futures Trading Commission (CFTC) 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.
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.
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.
The order finds the Division of Enforcement became aware of information regarding multiple BNS employees’ use of unapproved communication methods for business conversations, and that documents produced and information disclosed by BNS indicated the use of non-BNS-approved methods to communicate business internally and externally.
Following a review, BNS acknowledged to CFTC staff that it was aware of widespread and longstanding use by its employees of unapproved methods to engage in business-related communications.
As a result of each registrant’s failure to ensure that its employees—including supervisors and senior-level employees—complied with communications policies and procedures, the BNS Affiliates failed to maintain thousands of business-related communications, including records in connection with their commodities and swaps businesses that were required to be kept pursuant to Commission recordkeeping requirements. The BNS Affiliates thus failed diligently to supervise their business as CFTC registrants.
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.
