Swap Dealers Fined for Trade Reporting Violations

Swap dealers at three different financial institutions settled separate CFTC enforcement actions for trade reporting and other compliance violations.

• In the first matter, the CFTC charged a swap dealer with "unprecedented" failures in swap data reporting under Parts 43 and 45 and in providing pre-trade mid-market marks as required under CFTC Rule 23.431(a)(3)(i) ("Disclosures of material information"). The dealer was also charged with supervisory failures under CFTC Rule 23.602(a) ("Diligent supervision") and also for failures in (i) improper reporting lines between clearing and trading, (ii) lack of adequate clearing risk management policies, (iii) lack of procedures to notify regulators of changes to initial margin models, (iv) failure to provide 23.701 segregation notices and (v) failure to include or update relevant material economic terms based on use of older templates. The dealer was required to pay a $30 million monetary penalty. The dealer settled without admitting or denying the findings.
• In a second matter, the CFTC charged a pair of affiliated swap dealers with "widespread" reporting failures under CFTC Rules Part 43 ("Real-Time Public Reporting") and Part 45 ("Swap Data Recordkeeping and Reporting Requirements"), as well as related supervisory failures under CFTC Rule 23.602. The dealers were required to pay an $8 million monetary penalty. The dealers admitted the facts set forth in the Order.
• In a third matter, the CFTC charged a group of three affiliated swap dealers with failing to correctly report a significant amount of swap data required under Parts 43 and 45 of the CFTC rules due to "multiple, distinct deficiencies" in the firms' reporting systems and software. The dealers were required to pay a $15 million monetary penalty. The dealers admitted the facts set forth in the Order.

Each of the firms were recognized for their substantial cooperation in the enforcement matters.

CFTC Commissioner Statements

In a separate statement on the cases, Commissioner Kristin N. Johnson emphasized the importance of the CFTC reporting regime and the need for data to identify and detect systemic risk concerns.

Commissioner Christy Goldsmith Romero issued three separate statements relating to these cases. As to the first matter, Ms. Romero did not support the settlement Order, saying that it was "not strong enough to achieve the goals of law enforcement." For the second matter, Ms. Romero said that she was "appalled" by the firms' approach to handling the CFTC reporting regulations. As to the third matter, Ms. Romero supported the sending of a "strong message of public accountability" by requiring the firms to admit their wrongdoing.