On September 27, 2016, the U.S. Commodity Futures Trading Commission (“CFTC” or the “Commission”) issued a fourth penalty for violations of its Swaps Large Trader Reporting (“Swaps LTR”) rule1. This time, the penalty was imposed against Wells Fargo Bank, N.A. (“Wells Fargo”). As we noted in July, the CFTC is continuing on its trend toward more aggressive enforcement of reporting violations, including violations of the particularly complex and technical Swaps LTR rule.2 Compliance professionals should continue to review their reporting processes, including Swaps LTR, to confirm that they conform to the CFTC rules.
CFTC Swaps LTR Settlement History
Wells Fargo Order
Despite cooperation, prompt remediation, and self-disclosure, the CFTC found that Wells Fargo violated Section 4s(f)(1)(A) of the Commodity Exchange Act (“CEA”) as well as CFTC Rules 20.4 and 20.7. Its finding was based upon what it characterized as “multiple errors, including both missing data and data presented in a format inconsistent with CFTC requirements” for Swaps LTR, with the Commission going on to provide a litany of reasons why Wells Fargo’s records were nonconforming, including: (1) failure to “use the correct Reporting Entity Identifier;” (2) “improperly formatted entries in the ‘Nonstandard Swaption Indicator’ field;” and (3) “improperly formatted swaption expiration date values.”
Based upon its findings, the Commission imposed a $400,000 civil monetary penalty on Wells Fargo, in addition to undertakings. The Order represents that Wells Fargo has reviewed and is revising its Swaps LTR system to fix any errors. Moreover, it requires Wells Fargo to continue monitoring its Swaps LTR system and provide monthly reports for one year to the CFTC’s Office of Data & Technology and/or the Division of Market Oversight. Further, within 15 months, Wells Fargo must submit replacement data to the Commission for any previously submitted data that is missing, incomplete, or erroneous.