The Commodity Futures Trading Commission today issued six orders simultaneously filing and settling material compliance-related violations against 10 firms resulting in a combined $8,325,000 in civil monetary penalties. These orders stem from Acting Chairman Caroline D. Pham’s enforcement sprint initiative.
Under the initiative, eligible firms provided the Division of Enforcement with their remediation plans and reasonable settlement offers based on comparable cases over the last decade and DOE’s Advisory on Self-Reporting, Cooperation, and Remediation. The initiative was limited to enforcement matters regarding compliance violations, such as recordkeeping, reporting, or other compliance violations that did not involve fraud, customer harm, or market abuse.
Each firm has completed or nearly completed remediation and agreed to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged.
“When I announced the enforcement sprint initiative at FIA Boca in March, I expressed concerns about a ballooning enforcement docket for operational or technical non-compliance issues with no harm, with some matters languishing for nearly a decade, diverting resources away from the most critical aspects of DOE’s mission to protect against fraud, manipulation and abuse in our markets. The goal of this initiative was to provide firms an opportunity to work with DOE to fairly and efficiently resolve compliance-related investigations,” Acting Chairman Pham said. “This initiative did just that, and positions DOE staff to refocus on fighting fraud and helping victims.”
“The enforcement sprint initiative was a success,” said Charles Marvine, Acting Chief of the Retail Fraud and General Enforcement Task Force. “It not only allowed the CFTC to wrap up these six matters efficiently and conserve resources, but it was also part of a larger effort to help DOE clean up its overall docket and prioritize pursuing fraudsters and other wrongdoers going forward.”
Supervision and Other Violations Related to Systems Errors
Two orders involve supervision and related CEA and CFTC regulation violations due to systems errors:
- UBS AG, a registered swap dealer; UBS Financial Services Inc., a registered futures commission merchant; and UBS Securities LLC, a registered futures commission merchant, commodity pool operator, and commodity trading advisor (collectively, UBS), were sanctioned for failing to diligently supervise trade surveillance systems from at least 2015 until 2024, leaving gaps in monitoring foreign exchange, metals, rates, and credit products and exchange-traded derivatives. UBS will pay a $5 million civil monetary penalty and submit a remediation plan with progress reports.
- Citigroup Global Markets Inc., a registered futures commission merchant and swap dealer, was sanctioned for failing to file accurate large trader reports from at least 2015 to fall 2022 due to a programming logic error, and for failing to reliably maintain regulatory records for 10 weeks in 2023. Because of these failures, as well as a 2022 supervision-related issue concerning daily excess net capital reporting, Citi will pay a $1.5 million civil monetary penalty, which was reduced by the maximum mitigation credit based on its exemplary self-reporting and exemplary cooperation.
Recordkeeping and Supervision Violations Related to Offline Communications
Three orders involve firms whose employees used unapproved communication channels, such as messaging apps and personal text messages, violating recordkeeping and supervision rules. Each firm will pay a $500,000 civil monetary penalty, which was reduced by the maximum cooperation mitigation credit based on exemplary cooperation.
- SMBC Capital Markets, Inc., a registered swap dealer, was cited for violations from 2019 to 2023.
- Banco Santander, S.A., a registered non-U.S. swap dealer; and Santander US Capital Markets LLC, a registered futures commission merchant (collectively, Santander), were cited for violations since 2021. Santander must also comply with certain remedial undertakings, including conducting an internal audit to assess its electronic communications compliance program with respect to U.S.-based associated persons and addressing any concerns identified from this audit.
- The Bank of New York Mellon, a registered swap dealer; and BNY Mellon Securities Corporation, a registered introducing broker (collectively, BNYM), were cited for violations since 2020. BNYM must also comply with certain remedial undertakings, including implementing the recommendations of an independent compliance consultant.
Swap Data Reporting Violations
The final order resolves charges against U.S. Bank, N.A., a registered swap dealer, for reporting inaccurate swap valuation data to its swap data repository for various FX products and interest rate swaps from at least 2022 to 2024 because of errors in its valuation methodology. The firm will pay a $325,000 civil monetary penalty, which was reduced by the maximum mitigation credit based on its exemplary self-reporting and exemplary cooperation.
CFTC DOE staff responsible for these actions include Rebecca Jelinek, A. Daniel Ullman II, Julia Colarusso, Traci Rodriguez, Dmitriy Vilenskiy, Elsie Robinson, Joseph Patrick, Christopher Reed, Charles Marvine, and Paul Hayeck.
