CFTC Hits Banks with Fines: Attracts Criticism from New Commissioner

The US Commodity Futures Trading Commission (CFTC) has fined BNP Paribas $6 million for a series of swap reporting failures, but attracted criticism from one of its own commissioners over remedial instructions. Separately, the Commission has fined JP Morgan $850,000 for failing to report 2.1 million short-dated FX swap trades, however the bank, CFTC says, “has represented that it has reported all of the previously-unreported FX swaps transactions it was obligated to report”.

CFTC says BNP failed to report more than 6,000 transactions with US persons over a five-year period from 2016, because it incorrectly classified them as non-US persons. It finds that it also incorrectly reported more than three million swap trades as well as “thousands” of bunched trades. It also reported commodity swaps as equity trades, CFTC says in the order, as well as 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 regulatory requirements.

While a statement from recently-confirmed commissioner Christy Goldsmith Romero praised the CFTC’s action against the banks, the Commission’s action against BNP came under fire from another of its recently-appointed commissions, Caroline Pham.

In a statement, Pham says, “I am concerned that this ultimately is a missed opportunity for the Commission to fully enforce a culture of compliance and management accountability. That is what “tone from the top” means. On this point in particular, the Commission cannot be all talk.

“The Commission’s decision not to require a senior officer of the swap dealer, in addition to the chief compliance officer, to sign the written consent order report on remediation status and any ongoing material non-compliance issues suggests that the Commission does not take management accountability seriously,” she continues. “Management accountability is essential to ensuring that compliance with CFTC regulations is a priority and that there are sufficient resources dedicated to the swap dealer compliance program.

“It is the business and management, not the Compliance department, who are the first line of defence. I am disappointed that the Commission failed to send this strong message today, and my expectation is that we will not fail to do so again.”