UPDATE 1-RBC to pay $35 mln to settle U.S. lawsuit on trading scheme

Thu Dec 18, 2014 3:56pm EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

(Updates with background on case, comment from RBC)

By Nate Raymond

NEW YORK Dec 18 (Reuters) - Royal Bank of Canada has agreed to pay $35 million to resolve a lawsuit by the U.S. Commodity Futures Trading Commission that accused it of running an illegal trading scheme to gain lucrative Canadian tax benefits.

The settlement, disclosed in papers filed on Thursday in Manhattan federal court, would resolve claims that a group of RBC employees improperly coordinated to allow bank subsidiaries to buy and sell stock futures without taking a position in the market.

RBC neither admitted nor denied the allegations in settling the lawsuit, which was filed in 2012. The deal was approved by U.S. District Judge Alvin Hellerstein.

In its complaint, the CFTC said that from June 2007 to May 2010, RBC and its subsidiaries conducted a "wash trading" scheme involving the illegal trading of hundreds of millions of dollars' worth of stock index futures and single stock futures.

Wash trading, the simultaneous and offsetting purchase and sale of a contract, is banned under U.S. futures law.

RBC in a statement said it was "pleased to put this matter behind us and continue to remain committed to complying with our regulators' requirements."

Aitan Goelman, director of enforcement at the CFTC, said while wash trades may seem innocuous, they "provide misleading signals to the market and are thus prohibited, whether their purpose is to lessen a foreign tax bill or another reason."   Continued...