CFTC Fines Banks for Swap Reporting Failures07.06.2022
The Commodity Futures Trading Commission issued an order simultaneously filing and settling charges against JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, and J.P. Morgan Securities, plc (collectively, J.P. Morgan), provisionally registered swap dealers, for failing to comply with their reporting obligations as swap dealers. The order requires J.P. Morgan to pay an $850,000 civil monetary penalty and to cease and desist from any further violations of the Commodity Exchange Act (CEA) or CFTC regulations, as charged.
ENFORCEMENT NEWS: CFTC orders J.P. Morgan to pay $850,000 for swap reporting failures. https://t.co/St8TzsNYkC
— CFTC (@CFTC) July 5, 2022
“Timely and accurate reporting of swaps transactions by registered swaps dealers is critical to the CFTC’s mission to protect market participants and ensure market transparency and integrity,” said CFTC Acting Director of Enforcement Gretchen Lowe.
The order specifically finds that, from September 2015 to February 2020, J.P. Morgan failed to report approximately 2.1 million short-dated foreign exchange (FX) swap transactions. These unreported short-dated FX swap transactions represented approximately fifty-one percent of the total number of FX swaps that J.P. Morgan executed during that same period.
Short-dated FX swaps are transactions in which the parties exchange two currencies the day after execution and then reverse that exchange at a predetermined rate on the following business day. A short-dated FX swap is a reportable FX swap transaction because it involves an exchange of currencies and a reversal of that exchange on specific dates and at rates fixed at the inception of the contract. Consequently, J.P. Morgan was obligated to report its short-dated FX swaps under the relevant statutory and regulatory provisions, which it failed to do during the relevant period.
J.P. Morgan has represented that it has reported all of the previously-unreported FX swaps transactions it was obligated to report.
The Division of Enforcement staff responsible for this case are Brett Shanks, Jennifer Chapin, Lauren Fulks, Tom Simek, Christopher Reed, and Charles Marvine, as well as former staff member Jo Mettenburg.
ENFORCEMENT NEWS: CFTC orders swap dealer to pay $6 million for swap reporting and daily mark disclosure violations. https://t.co/Q35G6vwbtI
— CFTC (@CFTC) July 5, 2022
The Commodity Futures Trading Commission issued an order filing and simultaneously settling charges against BNP Paribas (BNPP), a global financial services corporation and swap dealer, for violations of the Commodity Exchange Act (CEA) and Commission regulations relating to swap reporting and daily mark disclosures.
The order requires BNPP to pay a $6 million civil monetary penalty, cease and desist from violating the applicable provisions of the CEA and CFTC regulations, and comply with certain conditions and undertakings, including that BNPP make, within one year, a written report to the Division of Enforcement regarding the swap dealer’s compliance with the CEA and CFTC regulations.
According to the order, for more than five years, from 2016 through at least 2021, BNPP failed to correctly report numerous swap transactions to a swap data repository (SDR) as required by the CEA and CFTC regulations. BNPP did not report more than 6,000 swap transactions with U.S. persons, because the counterparties had been incorrectly classified as non-U.S. persons. As a result, BNPP failed to make more than 300,000 reports relating to these transactions. These reports are required by the CEA and CFTC regulations.
The order also finds that BNPP also entered into more than 3 million swap transactions during this period that were incorrectly reported under the CFTC’s rules. From 2016 to 2018, the swap dealer also failed to correctly report thousands of bunched trades. Instead of correctly reporting them as allocations of trades, BNPP reported these transactions as new trades. In addition, from 2016 to 2020, BNPP incorrectly reported certain commodity swaps. These trades were reported, but were incorrectly described as equity trades rather than commodity trades. In total, approximately 3,000 transactions were incorrectly reported in this fashion.
Moreover, during the period 2016 to 2017, as the order finds, BNPP adjusted daily mark disclosures for 82 swap transactions, which resulted in approximately 19,000 adjusted daily mark disclosures being made to the relevant swap counterparties, contrary to the requirements of the CEA and CFTC regulations.
In accepting BNPP’s Offer of Settlement, the CFTC recognizes BNPP’s substantial cooperation during the Division of Enforcement’s investigation of this matter. The CFTC notes that BNPP’s cooperation and remediation are recognized in the form of a substantially reduced civil monetary penalty.
Division of Enforcement staff members responsible for this action are Lauren Bennett, Jason Wright, Dan Ullman, and Paul Hayeck
This will bolster KKR’s capacity to serve as a full-service underwriter for IPOs.
Jamie Dimon said Latino-led businesses are critical to the U.S. economy but lack access to capital.
Due diligence process has not kept pace with the proliferation of algorithmic trading.
Jeffrey Solomon, chair & CEO of Cowen will lead TD Cowen, a division of TD Securities.
Turnover rose across all instruments except for currency swaps.