TD Bank, Fired Bond Trader Settle Suit Over Incorrect Derivatives Pricing

A bond trader fired by Toronto- Dominion Bank after an investigation into incorrectly priced credit derivatives settled a lawsuit in which the bank sought to recoup his bonuses and the cost of the probe.

Nabeel Naqui, the former head of the credit products group for Europe and Asia, and Toronto-Dominion reached a settlement in July, according to a court filing in London that became public this month. The terms of the settlement weren’t disclosed. The bank sued Naqui last year seeking 3.1 million pounds ($4.8 million).

The trader was suspended in June 2007 and fired six months later, he said in a court filing last year. Toronto-Dominion said he overvalued his trading positions by altering quotes from dealers and forwarding them on to the bank without notification that they had been changed.

The mispriced derivatives forced the bank to cut earnings by about C$96 million ($91 million) in mid-2008. Toronto- Dominion was fined 7 million pounds in December by the U.K. financial regulator, its fourth-largest fine levied at the time.

Kathryn Garbett, Naqui’s lawyer, and Matthew Fortier, a Toronto-Dominion spokesman in London, didn’t immediately respond to requests for comment.

Naqui denied the claims in the Toronto-based bank’s suit and said the bank was attempting to make him a “scapegoat” for alleged failures in the bank’s systems and controls. He said he sometimes used different prices than the dealer quotes he received because of his own assessment of the correct price.

The case is Toronto-Dominion Bank v. Nabeel Naqui, 2009/3363, High Court of Justice, Chancery Division (London).

To contact the reporter for this story: Lindsay Fortado in London at lfortado@bloomberg.net.

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