Firm Settles CFTC Charges for Swap Reporting Failures
A "custody bank and asset servicing company" settled CFTC charges for failing to correctly report swap transactions.
According to the Order, the firm repeatedly failed to correctly report swap transactions, including FX swaps, forwards and interest rate swaps, over a period from 2018 to 2023. The CFTC found that the reporting inaccuracies included the failure to report valuation data and the failure to accurately report the valuation timestamp in connection with swap continuation data for all FX trades. The CFTC also found improper reporting of other required data fields, described as creating "orphan allocations" due to a "failure to link bunched trade allocations to the parent bunched trades." Additionally, the CFTC found deficiencies in the firm's supervision of its trading activities, noting that the firm had no written policies to monitor the voice communications of its Associated Persons or the e-communications of those that communicated in languages other than English.
The CFTC found that the firm violated CEA Sections 2(a)(13)(G) ("Jurisdiction of Commission"), 4r(a)(3) ("Reporting and recordkeeping for uncleared swaps"), and 4s(h)(1)(B) ("Registration and regulation of swap dealers and major swap participants"); and CFTC Regulations 43.3(a)(1) ("Method and timing for real-time public reporting"), 45.3(b)(1) and 45.3(c) ("Swap data reporting: Creation data"), 45.4(a) and 45.4(c) ("Swap data reporting: Continuation data"), 23.402(a)(1)(i) and 23.402(a)(2) ("General provisions") and 23.602(a) ("Diligent supervision"). The violations also breached a prior CFTC Order issued in 2019, which required the firm to cease further violations of swap reporting requirements.
To settle the charges, the firm agreed to (i) cease and desist from violating CEA regulations and (ii) pay a $5,000,000 civil monetary penalty. The CFTC acknowledged the firm's self-reporting of certain violations and cooperation during the investigation, which resulted in a reduced penalty.
In a statement, CFTC Commissioner Caroline D. Pham highlighted the "recognition of self-reporting and cooperation credit" and urged the CFTC to adopt a clear standard that is applied consistently." (See related coverage.)