Wells Fargo Bank has made the headlines again after the US Commodity Futures Trading Commission (CFTC) filed and settled charges against the bank for failing to comply with its obligations to submit accurate large trader reports (LTRs) for physical commodity swap positions. Wells Fargo has been provisionally registered with the CFTC as a Swap Dealer since 31 December, 2012.
The case is reminiscent of a recent charge made by the CFTC last July after it penalised Barclays Bank for a similar offence in violation of the Commodity Exchange Act.
Large trader reporting for physical commodity swaps is essential to the CFTC’s ability to conduct effective surveillance of markets in US physical commodity futures and economically equivalent swaps. The order makes clear that as of 1 March 2013, swap dealers required to submit LTRs are expected to be in full compliance with the requirements governing LTRs set forth in CFTC regulations.
According to the CFTC, from at least 1 March 2013 through November 13 2015, every LTR submitted by Wells Fargo failed to fully meet its requirements.
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Wells Fargo submitted inaccurate LTRs that contained multiple errors, including missing data and data presented in a format inconsistent with CFTC requirements.
Amongst the errors, Wells Fargo’s reports included records that failed to use the correct Clearing Member Identifier and improperly formatted swaption expiration date values.
Upon receiving its first error message from the CFTC in July 2015, Wells Fargo analysed its past reports and made, and continues to make, modifications to its data processing and reporting systems as necessary to comply with its LTR reporting requirements.
Nonetheless, Wells Fargo has been ordered by the CFTC to pay a $400,000 penalty and to refrain from committing further violations of the CEA and CFTC Regulations.