May 2022 | Volume 42 | Issue 5 Futures and Derivatives Law Report diation , the CFTC charged a major multi-national bank and its affiliated entities , all of which are registered swap dealers , with violating swap data reporting obligations by submitting to their SDR “ inaccurate daily valuation data for the majority of their equity swap transactions .” 85 Compounding the severity of the violations was the fact that the error went on , undetected , for six years . Despite this , the Commission ordered the respondents to pay a $ 1.5 million civil monetary penalty , which reflected a significantly reduced penalty due to the company ’ s self-reporting , cooperation , and remediation efforts . In describing the factors which may have impacted the penalty assessed , the CFTC noted that the company remediated the problem for swaps reporting going forward and further corrected the historical record of reported information . The CFTC has held fast to the need to completely correct historical data as part of its requirements for swaps reporting settlements . This can often be a sticking point in negotiations with the agency due to the time and cost to correct old trades .
Expanding beyond swaps reporting , the CFTC also focused last year on swap dealer compliance with business conduct standards and disclosures related to the pricing of swaps . In one of these cases , the CFTC brought charges for the first time involving the portfolio reconciliation requirements under CEA Section 4s ( i )( 1 ) and Regulation 23.502 , which require swap dealers to maintain and follow written procedures to engage in portfolio reconciliation with non-swap counterparties . 86 Looking beyond swap dealers , the CFTC also brought an action against a financial communications and collaboration company that offered and operated a tool that automated requests for quotes (“ RFQs ”) in interest rate and cross-currency swaps for swap market participants . The CFTC found that the automated RFQ tool was equivalent to a multiple-tomultiple platform for trading swaps and charged the company with failure to register as a SEF , which is “ a trading system or platform in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by multiple participants in the facility or system , through any means of interstate commerce , including any trading facility , that —( A ) Facilitates the execution of swaps between persons ; and ( B ) is not a designated contract market .” 87
Two other actions initiated after the close of FY 2021 are also worth highlighting . Just two weeks into FY 2022 , the CFTC issued an order settling recordkeeping charges against a multinational swap dealer . 88 The company had selfreported — first by phone call in December 2019 and then with a more formal letter on February 21 , 2020 — that certain voice recordings had only been retained for one day instead of the required year . Despite self-reporting , the CFTC issued an enforcement order that included a $ 500,000 penalty . Another multinational swap dealer was hit with a similar enforcement order on December 17 , 2021 . 89 The alleged recordkeeping violations in that case were discovered during “ a Commission investigation ” into certain trading by the swap dealer , which led investigators to learn that the company ’ s traders “ had been using personal text messages and WhatsApp to communicate .” These methods of communication , which were not recorded and maintained by the company , were in violation of several CFTC rules and regulations . This recordkeeping failure allegedly led the company to fail to produce certain responsive communications during that investigation . The CFTC issued a massive $ 75 million fine , noting that compliance with recordkeeping rules “ is
10 K 2022 Thomson Reuters