UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

) 

) 

) 

) 

) 

) 

) 

) 

In the Matter of: 

The Bank of Nova Scotia, 

CFTC Docket No. 20-28

Respondent. 

ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTION 6(c) AND (d) OF 

THE COMMODITY EXCHANGE ACT, MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS 

I. INTRODUCTION

The Commodity Futures Trading Commission (“Commission”) has reason to believe that 

from April 2016 through October 2017 (“Relevant Period”), The Bank of Nova Scotia (“BNS”) 

violated Sections 6(c)(2) and 9(a)(4) of the Commodity Exchange Act (“Act”), 7 U.S.C. § 9(2), 

13(a)(4) (2018). Therefore, the Commission deems it appropriate and in the public interest that 

public administrative proceedings be, and hereby are, instituted to determine whether BNS 

engaged in the violations set forth herein and to determine whether any order should be issued 

imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, BNS has submitted an 

Offer of Settlement (“Offer”), which the Commission has determined to accept. Without 

admitting or denying any of the findings or conclusions herein, except to the extent that BNS 

admits those findings in any related action against BNS by, or any agreement with, the United 

States Department of Justice (“DOJ”) or any other governmental agency or office, BNS consents 

to the entry of this Order Instituting Proceedings Pursuant to Section 6(c) and (d) of the 

Commodity Exchange Act, Making Findings, and Imposing Remedial Sanctions (“Order”), and 

acknowledges service of this Order.1 

1

 BNS consents to the use of the findings of fact and conclusions of law in this Order in this proceeding and in any 

other proceeding brought by the Commission or to which the Commission is a party or claimant, and agrees that 

they shall be taken as true and correct and be given preclusive effect therein, without further proof. BNS does not 

consent, however, to the use of this Order, or the findings or conclusions herein, as the sole basis for any other 

proceeding brought by the Commission or to which the Commission is a party or claimant, other than: a proceeding 

in bankruptcy or receivership; or a proceeding to enforce the terms of this Order. BNS does not consent to the use 

of the Offer or this Order, or the findings or conclusions in this Order, by any other party in any other proceeding. 

1 
 

 

 

 

II. FINDINGS

The Commission finds the following: 

A. SUMMARY

Before and during the Relevant Period, the Commission, through its Division of

Enforcement (the “Division”), investigated BNS and traders on its precious metals trading desk 

for the disruptive trading practice of “spoofing” (bidding or offering with the intent to cancel the 

bid or offer before execution) (the “investigation”). BNS had disclosed to the Division that one 

of its traders, who BNS terminated, had engaged in spoofing. The Commission’s investigation 

resulted in In re The Bank of Nova Scotia, CFTC No. 18-50, 2018 WL 4828376 (Sept. 28, 2018) 

(BNS I). 

After BNS I, the Commission discovered that BNS had made multiple false and 

misleading statements of material facts during the investigation. The Commission also 

discovered that BNS had omitted material facts, including omissions regarding the universe of 

BNS’s precious metals futures accounts, the identities of the traders who traded precious metals 

futures, and the order entry operator identifiers (“Tag50s”) traders—including the trader 

terminated for spoofing—used to trade precious metals futures. BNS’s misrepresentations and 

omissions violated Section 6(c)(2) of the Act, 7 U.S.C. § 9(2) (2018).2 

Relatedly, during the Relevant Period, BNS made multiple false statements to 

Commodity Exchange, Inc. (“COMEX”), via CME Group, Inc.’s Market Regulation Department 

(“CME Market Regulation”), regarding the bank’s failure to maintain a central repository of the 

Tag50s its traders used. Also during the Relevant Period, BNS made false statements to the 

National Futures Association (“NFA”) concerning its purported use of software to monitor 

manipulative or deceptive trading practices, including spoofing. BNS’s false statements or 

misrepresentations to COMEX and the NFA violated Section 9(a)(4) of the Act, 7 U.S.C. 

§ 13(a)(4) (2018).

B. RESPONDENT

The Bank of Nova Scotia is a chartered schedule I bank on the Bank Act (Canada),

headquartered in Toronto, Canada. BNS has been provisionally registered with the Commission 

as a Swap Dealer since December 31, 2012. 

2

 BNS’s false statements concealed, and prevented the Commission from addressing, in BNS I, the true nature and 

scope of BNS’s spoofing. Today, the Commission is issuing a separate order instituting proceedings pursuant to 

Section 6(c) and (d) of the Act, making findings, and imposing remedial sanctions against BNS that address the 

underlying conduct concealed by BNS. See In re The Bank of Nova Scotia, CFTC No. 20-27 (Aug. 19, 2020) (“BNS 

II”) (imposing a $42 million civil monetary penalty for spoofing and attempted manipulation in violation of Section 

9(a)(2) of the Act, 7 U.S.C. § 13(a)(2) (2018); for conduct occurring on or after July 16, 2011, Section 4c(a)(5)(C) 

of the Act, 7 U.S.C. § 6c(a)(5)(C) (2018); and for conduct occurring on or after August 15, 2011, Section 6(c)(1) of 

the Act, 7 U.S.C. § 9(1)(2018), and Regulation 180.1(a)(1) and (3), 17 C.F.R. § 180.1(a)(1), (3) (2019)). 

2 
 

C. FACTS

1. False Statements to the Commission

In September 2018, the Commission accepted an Offer of Settlement from BNS to resolve 

its investigation in BNS I at an early stage. The Commission’s decision to accept BNS’s offer was 

predicated on certain representations BNS made during the investigation that were false or 

misleading. Specifically, during the course of the Commission’s investigation in BNS I, the 

Division, on behalf of the Commission, issued multiple written requests to BNS to identify all 

accounts through which it traded precious metals futures contracts, all traders who traded those 

contracts, and all Tag50s those traders used to trade those contracts. In response, BNS submitted 

multiple letters to the Division that contained false or misleading statements, or omitted material 

information that would have made the statements not false or misleading. BNS’s false statements 

and omissions resulted in part from BNS’s incomplete and inconsistent record-keeping. 

Over five written submissions between February and July 2017, BNS failed to identify 

three accounts through which it traded precious metals futures contracts, three traders who traded 

precious metals futures contracts, and at least twenty seven Tag50s that BNS traders used to trade 

precious metals futures contracts (certain of the traders used more than one Tag50). At the time 

BNS made each statement, BNS was in possession of records identifying these accounts, traders, 

and Tag50s, and therefore knew or reasonably should have known of the accounts, traders, and 

Tag50s that it failed to identify in its submissions. In addition to having certain of this information 

in its files, BNS’s records reveal that it was contemporaneously reporting certain of the same 

trader and Tag50 information to COMEX, via CME Market Regulation, that it omitted reporting to 

the Division due in part to inconsistency in BNS’s recordkeeping and reporting. 

BNS failed to identify these errors to the Division and notify the Commission of its 

misrepresentations and omissions before it submitted its offer of settlement in BNS I. Ultimately, 

BNS’s multiple misrepresentations and omissions prevented the Commission from addressing 

the true nature and scope of BNS’s spoofing. 

2. False Statements to COMEX and the NFA

As part of its official duties under the Act, COMEX, via CME Market Regulation, 

periodically conducts exams of each COMEX clearing member firm’s compliance with the rules 

and requirements relating to electronic trading data accuracy and recordkeeping (“Electronic 

Trading Recordkeeping Exams”).3

 During the Relevant Period, COMEX conducted multiple 

Electronic Trading Recordkeeping Exams of BNS, which was a COMEX clearing member firm. 

On multiple occasions during these exams, in response to questions regarding how BNS 

maintained records of Tag50s, BNS falsely represented to COMEX that it kept a database of the 

Tag50s it had assigned to its traders by answering questions by referencing policy and procedure 

documents that were silent on the issue. These statements were false as the firm did not maintain 

a comprehensive repository of Tag50s at all times during the exams. 

3

 During the Relevant Period, COMEX was a board of trade designated as a contract market by the Commission. It 

is owned by CME Group Inc. 

3 
 

In addition, during the Relevant Period, BNS made false statements regarding its 

compliance program to the NFA, acting in furtherance of its duties under the Act.4

 Specifically, 

a presentation to the NFA regarding the BNS’s continuous monitoring program reflected, among 

other things, that BNS was using a software program to monitor for manipulative or deceptive 

trading activity, including spoofing, but failed to explain that BNS had not imported any trade 

order data into the program, rendering the program’s monitoring for spoofing activity ineffective. 

The BNS compliance officials who prepared the slide presentation knew this portion of the 

presentation was false. 

III. LEGAL DISCUSSION 

A. False Statements to the Commission in Violation of Section 6(c)(2) of the Act 

Section 6(c)(2) of the Act, 7 U.S.C. § 6c(a)(5)(C) (2018), makes it unlawful for any 

person: 

[T]o make any false or misleading statement of a material fact to the Commission 

. . . or to omit to state in any such statement any material fact that is necessary to 

make any statement of a material fact made not misleading in any material 

respect, if the person knew, or reasonably should have known, the statement to be 

false or misleading. 

During the Commission’s investigation into spoofing by traders on BNS’s precious 

metals trading desk, BNS provided incomplete information to the Commission, rendering its 

statements to Commission staff false and misleading regarding the universe of accounts through 

which BNS traded precious metals futures, all of the traders who traded precious metals futures, 

and the Tag 50s its traders used to trade precious metals futures. The statements were material as 

they concerned the very subject the Commission was investigating—BNS’s precious metals 

futures trading. BNS knew or reasonably should have known that its statements were false or 

misleading as it had in its records the accounts, trader names, and Tag50s it omitted from its 

representations to the Commission. By engaging in this conduct, BNS violated Section 6(c)(2) 

of the Act. 

B. False Statements to COMEX and the NFA in Violation of Section 9(a)(4) of the Act 

Section 9(a)(4) of the Act, 7 U.S.C. § 13(a)(4) (2018), makes it unlawful for any person 

“willfully to . . . make any false, fictitious, or fraudulent statements or representations . . . to a 

registered entity, board of trade, . . . or futures association designated or registered under [the 

Act] acting in furtherance of its official duties under [the Act].” As described above, BNS 

willfully made false statements to COMEX, via CME Market Regulation, acting in furtherance 

of its duties under the Act, and to the NFA, acting in furtherance of its duties under the Act. By 

engaging in this conduct, BNS violated Section 9(a)(4) of the Act. 

4

 During the Relevant Period, the NFA was a futures association registered under the Act. 

4 
IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that, during the Relevant Period, BNS 

violated Sections 6(c)(2) and 9(a)(4) of the Act, 7 U.S.C. § 9(2), 13(a)(4) (2018). 

V. OFFER OF SETTLEMENT 

BNS has submitted the Offer in which, without admitting or denying the findings and 

conclusions herein: 

A. Acknowledges service of this Order; 

B. Admits the jurisdiction of the Commission with respect to all matters set forth in this 

Order and for any action or proceeding brought or authorized by the Commission based 

on violation of or enforcement of this Order; 

C. Waives: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission’s 

staff in the Commission’s consideration of the Offer; 

6. Any and all claims that it may possess under the Equal Access to Justice Act, 

5 U.S.C. § 504 (2018) and 28 U.S.C. § 2412 (2018), and/or the rules promulgated 

by the Commission in conformity therewith, Part 148 of the Regulations, 

17 C.F.R. pt. 148 (2019), relating to, or arising from, this proceeding; 

7. Any and all claims that it may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, tit. II, §§ 201-253, 

110 Stat. 847, 857-74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

sections of 5 U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; 

and 

8. Any claims of Double Jeopardy based on the institution of this proceeding or the 

entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order; 

D. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which BNS has consented in the Offer; and 

E. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

5 
1. Makes findings by the Commission that BNS violated Sections 6(c)(2) and 

9(a)(4) of the Act, 7 U.S.C. § 9(2), 13(a)(4) (2018); 

2. Orders BNS to cease and desist from violating Sections 6(c)(2) and 9(a)(4) of the Act; 

3. Orders BNS to pay a civil monetary penalty in the amount of seventeen million 

dollars ($17,000,000) plus post-judgment interest if the civil monetary penalty is 

not paid in full within ten business days of the date of the entry of this Order; and 

4. Orders BNS and its successors and assigns to comply with the conditions and 

undertakings consented to in the Offer and as set forth in Part VI of this Order. 

Upon consideration, the Commission has determined to accept the Offer. 

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. BNS and its successors and assigns shall cease and desist from violating Sections 6(c)(2) 

and 9(a)(4) of the Act, 7 U.S.C. § 9(2), 13(a)(4) (2018). 

B. BNS shall pay a civil monetary penalty in the amount of seventeen million dollars 

($17,000,000) within ten business days of the date of the entry of this Order (“CMP 

Obligation”). If the CMP Obligation is not paid in full or otherwise satisfied within ten 

business days of the date of the entry of this Order, then post-judgment interest shall 

accrue on the CMP Obligation beginning on the date following entry of this Order and 

shall be determined by using the Treasury Bill rate prevailing on the date of the entry of 

this Order pursuant to 28 U.S.C. § 1961 (2018). 

BNS shall pay the CMP Obligation and any post-judgment interest by electronic funds 

transfer, U.S. postal money order, certified check, bank cashier’s check, or bank money 

order. If payment is to be made other than by electronic funds transfer, the payment shall be 

made payable to the Commodity Futures Trading Commission and sent to the address below: 

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 181 

Oklahoma City, OK 73169 

(405) 954-6569 office 

(405) 954-1620 facsimile 

9-AMC-AR-CFTC@faa.gov 

If payment is to be made by electronic transfer, BNS shall contact Marie Thorn or her 

successor at the above address to receive payment instructions and shall fully comply 

with those instructions. BNS shall accompany payment of the CMP Obligation with a 

6 
cover letter that identifies BNS and the name and docket number of this proceeding. 

BNS shall simultaneously transmit copies of the cover letter and the form of payment to 

the Chief Financial Officer, Commodity Futures Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW, Washington, DC 20581. 

C. BNS and its successors and assigns shall comply with the following conditions and 

undertakings set forth in the Off er: 

1. Public Statements: BNS agrees that neither it nor any of its successors, assigns, 

agents, or employees under its authority or control shall take any action or make 

any public statement denying, directly or indirectly, any findings or conclusions 

in this Order or creating, or tending to create, the impression that this Order is 

without a factual basis; provided, however, that nothing in this provision shall 

affect Respondent's and/or its agents' and/or employees': (i) testimonial 

obligations; or (ii) right to take positions in other proceedings to which the 

Commission is not a party. BNS and its successors and assigns shall comply with 

this Order, and shall undertake all steps necessary to ensure that all of its agents 

and/or employees under its authority or control understand and comply with this 

agreement. 

2. Partial Satisfaction: BNS understands and agrees that any acceptance by the 

Commission of partial satisfaction of BNS's CMP Obligation shall not be deemed 

a waiver of its obligation to make further payments pursuant to this Order or a 

waiver of the Commission's right to seek to compel payment of any remaining 

balance. 

3. Change of Address: Until such time as BNS satisfies in full its CMP Obligation 

as set forth in this Order, BNS shall provide written notice to the Commission by 

certified mail of any change to its telephone number and mailing address within 

ten days of the change. 

The provisions of this Order shall be effective as of this date. 

By the Commission. 

Christopher J. Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: August 19, 2020 

7