The UK’s Financial Services Authority announced that it has fined Toronto-Dominion Bank £7 million ($12.12 million) for systems and control failings within its credit products group.

The regulator says that these issues around the pricing of sophisticated financial products forced the bank to take a $96 million charge to earnings in July 2008. The breaches relate to pricing issues that were uncovered on a proprietary trader’s books.

“Amongst other failings the FSA found that Toronto Dominion failed to follow their established procedures in ensuring the trader’s books were independently verified, and did not have adequate controls in place which could have detected the pricing issues,” it says.

The FSA notes that TD cooperated fully and agreed to settle at an early stage of the FSA’s investigation. Without the discount for this, the fine would have been £10 million, it adds. Also, the firm’s senior management promptly commissioned a thorough review of the matter, as well as a wider review of its systems and controls framework and business strategies, it says.

However, the FSA also points out that it fined TD £490,000 back in November 2007 when a fixed income trader attributed false values to his trading positions and created fictitious trades to hide significant losses on his book.

“This is one of our largest fines and it underlines the seriousness with which the FSA views repeat offences. When we uncover failings in a firm we expect them to put it right immediately and to take special care to ensure it does not happen again. Toronto Dominion clearly failed to apply proper controls in this area despite its previous sanction and repeat offenders need to know that they will face severe consequences,” said Margaret Cole, FSA director of enforcement and financial crime.

“It is important that firms trading in sophisticated and often illiquid financial products have robust controls in place, particularly in times of increased market volatility. Where a firm doesn’t do this the FSA will take action,” she added.

IE