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CFTC Accuses Royal Bank of Canada of Wash Sale Scheme

 The Commodity Futures Trading Commission (CFTC) has sued the Royal Bank of Canada (RBC) for allegedly engaging in a multi-hundred million dollar illegal wash-sales scheme from 2007 to 2010 through two of its subsidiaries in order to improperly realize tax benefits. 

The trades at RBC allegedly were orchestrated by a small group of senior officials.  Regulators said officials coordinated the trading strategy “on a day-to-day basis” and passed along the information to two RBC subsidiaries that bought and sold offsetting positions.

RBC was accused of routing the transactions through OneChicago, an electronic futures-trading exchange in Chicago.  RBC also designed specific instruments related to the transactions that were traded on OneChicago.  Trades between different RBC subsidiaries were the only transactions of certain of those products from 2006 to 2010, according to the CFTC.

The lawsuit is the largest wash-sale case the CFTC has ever filed, as measured by the notional dollar amount of futures contracts.  

David Meister, the CFTC’s director of enforcement, said the suit “should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures markets for their own gain.”

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