TD Securities to Pay SEC More Than $6.5 Million in Spoofing Charges Probe

By Connor Hart

TD Securities will pay more than $6.5 million stemming from charges related to a form of fraudulent trading known as spoofing brought against the bank by the Securities and Exchange Commission.

The commission on Monday also said the bank was charged for failing to supervise Jeyakumar Nadarajah, the former head of the TD Securities desk responsible for trading U.S. Treasuries, who allegedly made hundreds of illegal trades over a 13-month period. Nadarajah didn't immediately respond to a request for comment.

The bank consented to the entry of the SEC's order, and as a result, was required to cease and desist from future violations and censured. It was also ordered to pay $400,000 in disgorgement, prejudgment interest and a $6.5 million civil penalty.

Spoofing involves flooding the market with fake orders in an effort to push a stock's price up or down.

According to the SEC's order, Nadarajah between April 2018 and May 2019 entered orders that he had no intention of executing on one side of the market, in turn obtaining more-favorable execution prices on bona fide orders he was simultaneously entering on the other side of the market. After the genuine orders were filled, resulting in profits to TD Securities, Nadarajah allegedly canceled the non-bona fide orders.

The SEC's order also said that TD Securities failed to take reasonable steps to scrutinize Nadarajah after receiving warnings of his potentially irregular trading activity.

"Manipulative and deceptive trading undermines the integrity of our markets," the SEC Division of Enforcement's Associate Director Mark Cave said. "Broker-dealers and other firms cannot ignore their employees' manipulative conduct and must take meaningful steps to detect and prevent it."

In a statement TD Securities said it takes regulatory and employee conduct violations seriously.

"We took action five years ago to report Mr. Nadarajah' behavior to FINRA, terminated his employment and have since enhanced our monitoring and compliance capabilities. TD Securities values the trust our clients place in us and we are committed to meeting their ongoing needs."

In a related matter, TD Securities entered into a deferred prosecution agreement and agreed to pay a total monetary sanction of more than $15 million following a Justice Department investigation into spoofing and scalping by short sellers.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

September 30, 2024 18:16 ET (22:16 GMT)

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