November 12, 2021
by Katherine Cooper

Since the end of September, the Commodity Futures Trading Commission (“CFTC”) has brought enforcement actions against five different swap dealers for a range of alleged violations.  On September 27, 2021, the CFTC charged Citibank, N.A. and Citibank Global Markets Ltd., both provisionally registered swap dealers with violations of the requirements for swap dealers to report Legal Entity Identity (“LEI”) information to a swap data repository along with related supervision failures.[1]  The agency also alleged that the firms’ failures violated a prior 2017 CFTC order[2] to cease and desist from reporting and supervisory failures.  The CFTC imposed a $1 million dollar fine on the firms which represented a reduction for the firms’ substantial cooperation in the Enforcement Division’s investigation and proactive remediation.

Also on September 27, 2021, the CFTC charged Mizuho Capital Markets LLC, a provisionally registered swap dealer, for failing to comply with requirements regarding swap portfolio reconciliations, disclosures to counterparties regarding mid-market marks for swaps and swap transaction reporting failures to a swap data repository.[3]  The order imposed a $1.5 million fine on Mizuho and required the firm to enter into undertakings regarding its continuing remediation efforts.

On September 29, 2021, the CFTC ordered Société Générale S.A., a provisionally registered swap dealer, to pay a $1.5 million fine for improperly disclosing mid-market marks to counterparties, reporting inaccurate swap valuation data to an SDR and related supervisory failures.[4]  On September 30, 2021, the CFTC charged Cargill, Inc., a provisionally registered swap dealer, with violating its swap dealer reporting obligations and required Cargill to pay a $750,000 fine.[5]  Finally, on October 14, 2021, the CFTC ordered UBS, AG, a provisionally registered swap dealer, to pay a $500,000 fine for UBS’s failure to maintain over 1,000 hours of audio data where CFTC regulations required UBS to retain those recordings for at least one year.[6]

These CFTC actions come on the heels of several NFA business conduct committee disciplinary cases against swap dealers and swap firm introducing brokers for failing to comply with qualification testing requirements,[7] swaps recordkeeping violations,[8] lacking adequate written procedures to ensure the firm executed written swap trading relationship documentation with counterparties, failing to provide material disclosures prior to entering into swap transactions and failing to provide required pre-trade mid-market marks and daily marks to some counterparties.[9]

This raft of CFTC enforcement actions and NFA disciplinary matters demonstrate the importance of swap dealers’ compliance with the requirements imposed on them under Section 4s of the Commodity Exchange Act[10] and the related regulations in Parts 23, 43 and 45 of the CFTC’s Regulations.[11]

 

[1] In re Citibank, N.A. and Citigroup Global Markets Limited, CFTC Docket No. 21-15 (CFTC Sept. 27, 2021).

[2] In re Citibank, N.A. and Citigroup Global Markets Limited, CFTC Docket No. 17-26 (CFTC Sept. 25, 2017).

[3] In re Mizuho Capital Markets, LLC, CFTC Docket No. 21-17 (CFTC Sept. 27, 2021).

[4] In re Société Générale S.A., CFTC Docket No. 21-36 (CFTC Sept. 29, 2021).

[5] In re Cargill, Inc., CFTC Docket No. 21-37 (CFTC Sept. 30, 2021).

[6] In re UBS AG, CFTC Docket No. 22-03 (CFTC Oct. 14, 2021).

[7] In re ED&F Man Capital Markets Limited, NFA Case No. 21-BCC-010 (NFA Sept. 16, 2021) (fined ED&F $150,000).

[8] In re Tullett Prebon Financial Services LLC, NFA Case No.21-BCC-008 (NFA Aug. 5, 2021) (fined Tullet Prebon $150,000).

[9] In re The Northern Trust Company, NFA Case No. 21-BCC-009 (NFA June 29, 2021) (fined Northern Trust $999,000).

[10] 7 U.S.C. § 6s.

[11] 17 C.F.R. Parts 23, 43 & 45.

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