TD Securities to Pay More Than $28 Million in Connection With Spoofing Charges — Update

By Connor Hart

TD Securities will pay more than $28 million to resolve three separate cases of spoofing, a type of fraudulent trading that involves flooding the market with fake orders in an effort to push a stock price up or down.

It was announced Monday the Toronto bank would pay the Justice Department over $15.5 million, the Financial Industry Regulatory Authority approximately $6 million and the Securities and Exchange Commission about $7 million.

The settlement comes more than five years after the former head of the TD Securities desk responsible for trading U.S. Treasuries, Jeyakumar Nadarajah, allegedly made hundreds of illegal trades over a 13-month period.

According to the SEC's order, Nadarajah between April 2018 and May 2019 entered orders that he had no intention of executing, and in turn obtained 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.

"TD Securities placed hundreds of orders to buy and sell U.S. Treasuries that it never intended to execute, in order to deceive market participants and manipulate prices by creating the false appearance of supply and demand," said Principal Deputy Assistant Attorney General Nicole Argentieri, head of the Justice Department's Criminal Division. "Such efforts to profit through unlawful trading undermine public confidence in U.S. Treasuries markets and defraud other market participants."

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

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

Nadarajah, who was indicted in November in the District of New Jersey in connection with the scheme and is awaiting trial, didn't immediately respond to a request for comment.

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

(END) Dow Jones Newswires

September 30, 2024 18:50 ET (22:50 GMT)

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