CFTC charges RBC with multi-hundred million scheme

CFTC charges RBC with multi-hundred million scheme

The CFTC charged the Royal Bank of Canada (RBC) with a multi-hundred million dollar wash scheme. It charged the bank with concealing material information from, and making material false statements to, a futures exchange.

The Canadian bank and financial services firm, which does business in New York, connected the scheme in connection with exchange-traded stock futures contracts. According to the complaint, RBC also willfully concealed and made false statement concerning its wash sale scheme from OneChicago, LLC, an electronic futures exchange, and CME Group, the entity that exercised regulatory compliance for OneChicago.

For three years – from June 2007 to May 2010 – RBC allegedly non-competitively traded hundreds of millions of dollars in narrow based stock index futures (NBI) and single stock future (SSF) contracts with two of its subsidiaries. RBC reported the trades as “block” trades to OneChicago. RBC’s NBI and SSF trading activity, which accounted for the majority of OneChicago’s business, were unlawful wash sales and fictitious sales, the CFTC says. The sales were not negotiated at arm’s length between the counterparties, but were designed and controlled by senior RBC personnel.

The CFTC alleges that the Bank identified U.S. and Canadian stocks that would generate a tax benefit, and bought and sold futures contracts written on stocks opposite one another to achieve Canadian tax benefits.

From January 2005 to April 2010, RBC concealed and made false statements about the trading activities to CME Group, the CFTC alleges. RBC described the trades to CME Group as conducted at arm’s length between the counterparties. It concealed that the stock futures were designed to exclude non RBC-affiliated parties from its trade.

“(The) action should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures market for their own gain,” said David Meister, the Director of the CFTC’s Division of Enforcement, in a statement.

Read more about the enforcement action.

Photo credit: Zach McCarthy

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About The Author


Felix Shipkevich

Felix Shipkevich

Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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