The Commodity Futures Trading Commission (CFTC) announced on Tuesday separate agreements with BNP Paribas and JPMorgan Chase for swap reporting breaches extending back many years.
JPMorgan was fined $850,000, while BNP Paribas agreed to pay $6 million.
Neither company accepted nor rejected the conclusions of the CFTC.
BNP Paribas details: According to the CFTC's ruling, BNP Paribas "failed to accurately record multiple swap transactions in accordance with applicable requirements" between at least 2016 and 2021. More than three million swap transactions were improperly recorded over the time, with hundreds of thousands each underreported and overreported.
According to the CFTC, more than 6,000 swap transactions involving U.S. individuals were not disclosed because the counterparties were wrongly designated as non-U.S. persons.
In addition, the agency discovered that BNP Paribas modified daily mark disclosures to swap counterparties on some swap transactions in 2016 and 2017 in a way that led to discrepancies. According to the directive, BNP Paribas workers referred to these modifications as "smoothing." The practise was discontinued when firm compliance officials concluded it violated CFTC regulations.
BNP Paribas agreed to pay the fine, prevent additional breaches, and provide a written report to the CFTC's Division of Enforcement within one year detailing its compliance with the Commodity Exchange Act and other applicable laws. The ruling stipulates that the report must be signed by the top compliance officer of BNP Paribas.
The CFTC rewarded BNP Paribas for its assistance during the inquiry with a "significantly reduced" fine.
BNP Paribas declined to comment in response to a request.
JPMorgan details: The CFTC punished JPMorgan for similar swap reporting breaches, including failing to declare "roughly 2.1 million short-dated foreign currency (FX) swap transactions," according to a news statement from the agency.
According to the CFTC's order, from September 2015 to February 2020, JPMorgan "mistakenly believed that short-dated FX swap transactions did not meet the definition of a 'foreign exchange swap' under the [Commodity Exchange Act] as interpreted in the CFTC's 2012 guidance on the definition of a swap and were therefore not required to be reported."
The CFTC stated that these unreported transactions constituted about 51 percent of the entire number of FX swaps conducted by JPMorgan during the relevant timeframe.
JPMorgan committed to pay the fine and refrain from committing additional infractions.
JPMorgan declined to comment.
In the BNP Paribas case, CFTC Commissioner Caroline Pham criticised the agency's choice to have just the top compliance officer sign the written consent order.
“Management accountability is essential to ensuring that compliance with CFTC regulations is a priority and that there are sufficient resources dedicated to the swap dealer compliance program,” she wrote in a statement. “It is the business and management, not the compliance department, who are the first line of defense. I am disappointed that the commission failed to send this strong message today, and my expectation is that we will not fail to do so again.”
By fLEXI tEAM