TD Bank is paying over US$100 million and RBC Capital Markets is paying US$45 million as part of a series of settlements with U.S. securities and derivatives regulators over their use of unapproved electronic communications, such as private texting and WhatsApp messaging.
The U.S. Securities and Exchange Commission (SEC) charged 26 firms, including broker-dealers, investment advisers and dual registrants, for widespread use of off-channel communications and related record-keeping failures, which undermine the regulators’ ability to oversee markets.
The more than two dozen firms, which admitted the violations, agreed to pay a combined US$392.75 million in penalties and improve their compliance.
The U.S. affiliates of two Canadian firms, RBC Capital Markets and TD Securities (USA) LLC, were included in the SEC’s actions, and they agreed to penalties of US$45 million and US$30 million, respectively.
Among the other firms charged by the SEC, the largest penalties went to four brokers, which each paid US$50 million, including Edward D. Jones & Co. L.P. and Raymond James & Associates Inc.
TD Bank was also sanctioned by the U.S. Commodity Futures Trading Commission (CFTC) for similar misconduct. It agreed to pay a US$75-million penalty to settle the CFTC’s allegations in that case.
The CFTC also settled with two other firms sanctioned by the SEC — Cowen & Co. and Truist Bank — over their own compliance failures in this area. Cowen, which was acquired by TD in 2023, and Truist each paid a US$3-million penalty to settle their charges.
According to the CFTC’s order, from at least 2015 to the present, TD “failed to stop employees, including those at senior levels, from communicating using unapproved communication methods, including messages sent via personal text.”
These exchanges also generally weren’t preserved by the firm, which means they couldn’t be turned over to regulators, as required.
The use of unapproved communications also violated the firm’s own policies and procedures, and the personnel charged with enforcing those policies also used off-channel communications, the CFTC alleged.
Separately, the CFTC fined TD another US$4 million for supervisory failures relating to its surveillance of electronic communications.
“This resulted in TD Bank failing to [supervise] certain communications for hundreds of its swap dealer personnel over a five-year period,” the CFTC said.
The bank admitted the violations in a settlement with the CFTC.
“Communications surveillance is a critical component of an effective system of supervision,” said Ian McGinley, director of enforcement with the CFTC, in a release.
“This order and the significant monetary penalty reflect that swap dealers must not only have robust systems to detect and prevent market abuse and other misconduct, they must also vigilantly oversee and monitor those systems to ensure they are working,” he said.
In settling the case, the CFTC said the bank cooperated with its investigation and resolved the surveillance failures.
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