UK regulator slams TD over credit mismarking

The UK regulator has slapped Toronto Dominion Bank with a large fine for the credit pricing irregularities that came to light as a result of a Creditflux investigation in 2008. The Financial Services Authority said that TD was guilty of serious failings in its systems and controls of the off-the-run index and index tranche trading book.

The fine at £7 million ($11 million) was much larger than the one imposed on TD for irregularities in its repo book in 2007. In its notice, the FSA said: “The failings in this matter demonstrate that Toronto Dominion has not responded adequately to previous disciplinary action taken by the FSA.” Ouch.

Among other things, the FSA said that TD’s managers should have been alerted to mismarking by the fact that Bloomberg quotes forwarded by the trader in question included the header “edit & fwd”.

Toronto Dominion made a public statement about the mis-marking in its credit products business after enquiries from Creditflux. It later took a CAD96 million ($90 million) write-down as a result of the problem.