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Canadian bank sued by US regulator for improper trades

The Commodity Futures Trading Commission is suing RBC over allegations that Canada’s largest bank made hundreds of millions of dollars of improper “wash trades" - an allegation the bank said was "absurd."

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A US regulator is accusing the Royal Bank of Canada, the country's largest bank, of illegal trades in a lawsuit worth hundreds of millions. (Wikimedia/Wikimedia commons)

Royal Bank of Canada (RBC), Canada's largest bank, was accused Monday of making hundreds of millions of dollars in illegal trades by a US federal regulator.

The Commodity Futures Trading Commission (CFTC) is suing RBC over allegations that Canada’s largest bank orchestrated hundreds of millions of dollars of so called “wash trades,” in which various parts of the bank trade blocks of shares between themselves to distort the market, the Globe and Mail reported.

In addition to the wash trade allegations, the CFTC said the bank concealed the nature of the trades it was making and also made false statements to the futures trading exchange, OneChicago.

RBC has denied any wrongdoing, calling the allegations “absurd.”

“This lawsuit is meritless and we will rigorously defend ourselves against such baseless allegations,” RBC said in a statement, according to the National Post.

The bank says that US regulators were aware of what the bank was doing and never questioned its trades until now.

The CFTC said the Toronto-based bank's trading strategy sought to benefit from Canadian tax credits on its holdings of US and Canadian stocks and that it was carried out, according to Bloomberg, by a small group of executives at the bank.

The Financial Post reported Tuesday that the investigation focused on an RBC senior official at the bank's Caribbean offices.

The allegations represent one of the biggest wash trading schemes ever prosecuted by the CFTV, an organization under enormous political pressure after failures to regulate banks in the lead up to the 2008 financial crisis.

The Globe and Mail reported that the CFTC had been in contact with RBC prior to announcing the lawsuit and had offered the bank a chance to settle - an offer that was denied.

http://www.globalpost.com/dispatch/news/business-tech/120403/canadian-bank-sued-us-regulator-alleged