CFTC Slaps Six Institutions with Fines for Reporting Failures

The Commodity Futures Trading Commission (CFTC) revealed that it issued a number of orders on Monday against six large financial institutions - HSBC Bank USA, N.A., Société Générale International Limited, The Northern Trust Company, NatWest Markets Plc, The Bank of New York Mellon, and PNC Bank, National Association for reporting failures.

In addition to being charged with reporting failures, Société Générale and The Northern Trust Company were also charged by the commodities regulator with failing to supervise in connection with the reporting failures.

On Monday, HSBC was also charged by the CFTC with violating swap-dealer Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term regulations. This is the first time the Commission has brought such an action, it said in the statement released on Tuesday.

Commenting on the orders, CFTC Director of Enforcement James McDonald said: “Accurate reporting is essential to effective fulfillment of the regulatory functions of the CFTC, including meaningful surveillance and enforcement programs."

“As these actions show, the CFTC will continue to vigorously enforce reporting requirements. The CFTC will also take appropriate action where reporting failures are occurring as a result of serious supervisory failures.”

Enforcement action against HSBC

On Monday, the commodities regulator filed and settled charges against HSBC Bank for failing to have sufficient risk management systems for its swap activities. The authority also found that the company failed to properly report swap data in certain categories, for certain swap transactions, to a swap data repository.

Because of this, the US watchdog has imposed a civil monetary penalty against HSBC of $650,000, among other sanctions. According to the statement, this penalty was reduced because the bank cooperated with the regulator and has already taken remediation steps.

“The Commission’s swap-dealer risk management rules are designed to monitor and regulate the systemic risk endemic to the Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term market. At the heart of these regulations is the requirement that swap dealers separately consider the risks unique to swaps as an asset class, separate from their other businesses,” added McDonald.

“This is the first action the CFTC has brought regarding violations of these particular swap-dealer risk management regulations, and the Commission will continue to focus on enforcing these critical requirements.”

CFTC slaps firms with civil monetary penalties

The other companies which the regulator has both filed and settled charges against have also incurred civil monetary penalties. Namely, Société Générale was slapped with a $2.5 million penalty and has also been ordered to continue its remediation efforts in relation to swap data reporting and updating the CFTC on its efforts and compliance.

The Northern Trust Company, a provisionally registered swap dealer, was also charged with numerous violations of the CEA and CFTC regulations relating to swap reporting under Parts 23, 43, and 45 of the CFTC regulations. In order to settle the charges, Northern Trust must pay a $1.0 million civil monetary penalty, among other sanctions.

Due to NatWest’s cooperation and “substantial” remediation, the watchdog has imposed an $850,000 civil monetary penalty, amongst other sanctions. The charges were placed against the firm for failing to comply with its obligations to submit accurate large trader reports (LTRs) for physical commodity swap positions to the CFTC.

BNY Mellon fined $750,000

The Bank of New York Mellon, a provisionally registered swap dealer, was also found to have made numerous violations of the CEA and CFTC regulations relating to swap reporting. Because of this, the world’s largest custody bank and asset servicing company has been ordered to pay a $750,000 civil monetary penalty.

The last firm to be charged is PNC, whose reporting failures were in violation of the reporting requirements of Parts 20, 43, and 45 of the CFTC regulations, the statement said. The regulator’s order imposes a $300,000 civil monetary penalty on PNC, among other sanctions, for these reporting violations.

You can read more about the orders here.