Royal Bank of Canada (RBC), one of the country’s largest banks, has been accused of “multi-hundred million dollar” fraud over derivatives trading by a US regulator.
BBC, April 2, 2012
The Commodity Futures Trading Commission filed civil charges against RBC, saying the bank made “unlawful non-competitive trades” with itself.
Both sides of the so-called wash sales were controlled by RBC, the CFTC alleged.
RBC called the allegations “baseless”.
The Canadian bank said the trades had been vetted in advance by the CFTC and futures exchanges back in 2005 with no objections being lodged against them.
The trades in question are exchange-traded stock futures contracts.
The CFTC said that between June 2007 and May 2010, RBC traded hundreds of millions of dollars’ worth of narrow based stock index futures and single stock futures with two of its subsidiaries that RBC reported as “block” trades on electronic futures trading platform, OneChicago.
The regulator said that the trades were not negotiated “at arm’s length between the counter parties to the trades, as required by law”, but designed and controlled by a small group of senior RBC staff.
RBC said it would contest the charges in court.