- The Commodity Futures Trading Commission has ordered Goldman Sachs, Bank of America and JPMorgan Chase to pay $53 million over violations related to swap reporting and data infrastructure requirements.
- Goldman did not properly allocate resources or diligently oversee many aspects of CFTC compliance, leading to deficiencies persisting since 2013 in some cases. This impacted areas like swap data reporting, pre-trade mid-market marks disclosures, personnel reporting lines, clearing member risk management policy, notices about its initial margin model and segregation, and disclosure of static material economic terms, the statement said.
- JPMorgan failed to properly report more than 40 million swap transactions since November 2017, violating the Commodity Exchange Act and CFTC regulations. The bank’s widespread reporting deficiencies, including underreporting and submitting incorrect data, violated CFTC regulations. Meanwhile, Bank of America and Merrill Lynch did not report or misreported nearly 4 million swap transactions since 2015, the CFTC said.
“It now has been 13 years since Dodd-Frank and well past time for swap dealers to ensure they are in full compliance with the CEA and CFTC regulations,” Ian McGinley, director of the CFTC’s enforcement division, said in a statement. “As significant reporting failures continue to persist, our resolutions will reflect the gravity of swap dealers’ continuing failures to prioritize compliance and seek to deter future failures. And when appropriate, we will require a neutral third party to advise, assist with, and test the sufficiency of an entity’s remediation.”
The lapses occurred after the swap data reporting requirements went into effect, the CFTC said. Though Goldman back-reported more than 20 million swaps to date, the agency said it “believes this figure significantly underestimates the true scope of the swap data reporting failures at Goldman.”
Additionally, Goldman supplied more than 1 million inaccurate PTMMMs, or failed to provide a PTMMM completely since 2013, the order stated. The bank is also required to develop a written remediation plan to address the regulatory failures and retain an independent consultant to advise on necessary enhancements and evaluate the firm’s progress.
This is hardly the first time Goldman has been involved in misreporting a swap transaction case. In April, Goldman agreed to pay $15 million to settle charges that the lender “failed to disclose dozens of pre-trade-mid-market marks ... and failed to communicate to clients in a fair and balanced manner,” the CFTC said.
However, the bank’s latest penalty comes close on the heels of another penalty the CFTC issued Friday, ordering Goldman to pay $3 million for supervision failures and for material omissions in a letter to the CFTC’s Division of Enforcement.
“We are pleased to have resolved these matters,” Goldman said in a statement, without admitting or denying the allegations in either of the orders, Bloomberg reported.
Several of JPMorgan’s failures are related to underreporting swap data, including failure to report more than 150,000 component foreign exchange spot transactions, misclassifying more than 35,000 FX forwards as FX spots leading them to be not reported, and failure to report more than 600,000 pre-allocation FX swaps, the CFTC said. Further, the lender inaccurately reported pre-allocated trades for at least 20 million cross-currency equity swaps.
Meanwhile, Bank of America and Merrill Lynch failed to properly supervise swap data reporting to ensure timely compliance with CFTC regulations.
In its order, the CFTC noted that Goldman, Bank of America and JPMorgan Chase provided “substantial cooperation” during the investigation, resulting in reduced civil monetary penalties.