The Commodity Futures Trading Commission (CFTC) has ordered Bank of New York (BNY) to pay a $5 million civil penalty for repeatedly failing to report millions of swap transactions correctly and inadequately supervising its swap dealer business.

Bank of New York Mellon Fined $5 Million for Swap Reporting Failures

The enforcement action, announced yesterday (Monday), addresses violations that occurred between 2018 and 2023. During this period, BNY failed to accurately report at least five million swap transactions to a registered swap data repository, breaching both CFTC regulations and a prior order issued against the bank in 2019.

CFTC's Division of Enforcement Director Ian McGinley emphasized the importance of accurate reporting in the regulatory framework for swaps. “It is essential that swap dealers get this right,” he stated.

“In that vein, I commend BNY for its extensive cooperation, remediation, and decision to retain an independent compliance consultant to assist the bank in improving its compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term program and preventing the reoccurrence of misconduct,” McGinley added.

The order also highlights BNY's failure to supervise its swap dealer business properly. The bank lacked written policies or procedures to monitor voice communications of its associated persons (APs) and e-communications in languages other than English, which are necessary to ensure compliance with CFTC regulations.

As part of the settlement, BNY has agreed to retain an independent compliance consultant to review and advise on its compliance program. This decision and the bank's self-reporting and substantial cooperation with the investigation contributed to a reduced civil monetary penalty.

.@CFTC Orders The Bank of New York Mellon to Pay $5 Million for Swap Reporting and Supervision Failures and Violation of a Prior CFTC Order: https://t.co/68TjTlW7pF

— CFTC (@CFTC) August 26, 2024

Wisconsin Man Fined $75,000 for Unregistered Commodity Trading Advisor Activities

In a separate action also on Monday, CFTC has ordered Mark Hendershott of Wisconsin to pay a $75,000 civil monetary penalty for operating as an unregistered commodity trading advisor (CTA).

According to the CFTC order, Hendershott provided hedging advice and trading services related to agricultural futures contracts to farmers without proper registration between May 2018 and June 2021. His activities included offering tailored advice on using futures contracts to hedge crop production and directly placing trades in clients' accounts.

The order states that Hendershott developed a client base by contacting prospective farmers and charged a flat fee for his services. He assisted clients in opening trading accounts and managed various aspects of those accounts, including fund transfers and margin issues.

The CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term found that Hendershott met the criteria requiring CTA registration, as he held himself out as a CTA and provided commodity trading advice to more than 15 persons in a 12-month period while using interstate commerce to conduct his business.