Three of the largest U.S. financial institutions agreed to pay penalties totaling $53 million across settlements with the Commodity Futures Trading Commission (CFTC) addressing alleged swap reporting failures among their respective affiliates.
Goldman Sachs was fined $30 million, while JPMorgan Chase and Bank of America were assessed penalties of $15 million and $8 million, respectively. The CFTC announced the settlements in a press release Friday, in which Ian McGinley, director of the agency’s Enforcement Division, said it is “well past time for swap dealers to ensure they are in full compliance” with CFTC regulations.
The details: At Goldman Sachs & Co., some deficiencies uncovered by the CFTC were found to have persisted over the course of the last decade. The agency’s investigation revealed supervisory weaknesses in areas including swap data reporting, pre-trade mid-market mark (PTMMM) disclosures, personnel reporting lines, clearing member risk management policies, notices regarding initial margin model and segregation, and disclosure of static material economic terms, per the CFTC’s order.
The agency found more than 1 million instances since 2013 where Goldman provided counterparties with PTMMMs that were inaccurate or not provided at all.
“The commission has not brought a swap data reporting case or a [PTMMM] case with this volume of failures,” it said.
At JPMorgan, affiliates JPMorgan Chase Bank, J.P. Morgan Securities LLC, and J.P. Morgan Securities plc were each found to have failures that resulted in a total of more than 40 million swap transactions not being reported in a manner consisted with CFTC regulations. From November 2017 to the present, the issues were the result of “multiple, distinct deficiencies” in JPMorgan’s reporting systems and software, the agency said in its order.
Bank of America, N.A. and Merrill Lynch International were penalized for reporting failures affecting nearly 4 million swap transactions to swap data repositories and caused by 25 types of errors that involved swap allocations, the CFTC said in its order.
Compliance considerations: Like Goldman, Bank of America was called out by the CFTC for supervision failures regarding swap dealer activities.
All three firms received credit for cooperation and remediation. JPMorgan and Bank of America admitted the CFTC’s findings, while Goldman neither admitted nor denied.
The settlement with Goldman calls for the firm to retain an independent consultant for three years to advise on and assess its remediation plan.
CFTC Commissioner Christy Goldsmith Romero said in a statement she felt the penalties against Goldman were “not strong enough to achieve the goals of law enforcement,” citing other enforcement cases the agency has brought against the firm in recent months.
Firm responses: JPMorgan declined to comment. Bank of America did not respond to a request for comment.
In an emailed statement, a Goldman spokesperson said the firm was “pleased to have resolved these matters,” also referring to a separate settlement with the CFTC announced Friday for failing to maintain adequate supervisory systems regarding customer trading and for material omissions in response to a request for information from the agency’s Enforcement Division regarding the alleged deficiencies. Goldman, without admitting or denying the findings, agreed to pay $3 million in the matter.
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