“Swap dealer registrants must ensure they make complete and accurate disclosures to counterparties and accurately report swap valuation data to SDRs, and they must also diligently perform their supervisory duties.”
The Commodity Futures Trading Commission has filed and settled charges against ED&F Man for failing to comply with certain swap dealer requirements to report accurate swaps data to a swaps data repository (SDR), failing to disclose a conflict of interest to swaps counterparties, failing to disclose mid-market marks to counterparties, and for related supervision failures.
The CFTC imposed a $3,250,000 civil monetary penalty on the London-based provisionally registered swap dealer
“The CFTC will not hesitate to bring cases against swap dealers that violate substantive customer protection regulations and fail to have adequate supervisory controls in place. Swap dealer registrants must ensure they make complete and accurate disclosures to counterparties and accurately report swap valuation data to SDRs, and they must also diligently perform their supervisory duties”, said CFTC Acting Director of Enforcement Vincent McGonagle.
The CFTC states that, between February 2014 and July 2021, ED&F Man failed to report certain swaps data to an SDR accurately for hundreds of thousands of swaps. During that time, the swaps dealer allegedly failed to disclose mid-market marks to some of its counterparties as required for numerous metals and FX swaps.
The order also states that, during the first four years, ED&F Man also failed to disclose to its U.S. swaps counterparties that proprietary traders, trading on behalf of an affiliate, had access to counterparties’ trade information.
In addition, the capital markets firm didn’t maintain an adequate supervisory system to perform its supervisory obligations diligently with respect to swaps data reporting, conflict of interest disclosures, and providing mid-market marks, according to the financial watchdog.
In late 2021, the CFTC fined ICE Clear Europe $450,000 for violating regulations requiring derivatives clearing organizations (DCOs) to obtain written acknowledgment letters from a depository.
Acknowledgment letters state that the depository was informed that funds deposited are customer funds being held in accordance with the Commodity Exchange Act (CEA) and restrict the use of such funds, among other things.
According to the order, from February 2015 to August 2019, ICE Clear Europe opened six customer segregated accounts, each clearly titled to identify them as futures customer funds, without obtaining executed acknowledgment letters from the depository prior to or contemporaneously with the opening of those accounts.
The derivatives clearing organization also failed to have adequate standards and procedures designed to protect and ensure the safety and assets belonging to clearing members and their customers, the CFTC stated.
Two of the accounts ICEU opened in April 2018 and May 2019 held customer funds in connection with tri-party reverse repurchase transactions, collectively holding more than $500 million at one time.
