CFTC Reaches Settlement with JPMorgan over Alleged Large-Trader Swap Reporting Violations | Practical Law

CFTC Reaches Settlement with JPMorgan over Alleged Large-Trader Swap Reporting Violations | Practical Law

The CFTC issued an order settling charges with JPMorgan Ventures Energy Corp. and JPMorgan Chase Bank, N.A. for alleged failure to submit accurate and complete large-trader reports for physical commodity swap positions under CFTC Dodd-Frank rules.

CFTC Reaches Settlement with JPMorgan over Alleged Large-Trader Swap Reporting Violations

by Practical Law Finance
Published on 29 Mar 2016 • USA (National/Federal)
The CFTC issued an order settling charges with JPMorgan Ventures Energy Corp. and JPMorgan Chase Bank, N.A. for alleged failure to submit accurate and complete large-trader reports for physical commodity swap positions under CFTC Dodd-Frank rules.
On March 23, 2016, the CFTC issued an order which filed and simultaneously settled charges against JPMorgan Ventures Energy Corp. (JPMVE) and JPMorgan Chase Bank, N.A. (JPMCB) for alleged failure to submit accurate and complete large-trader reports (LTRs) for physical commodity swap positions as required under Section 4s(f) of the Commodity Exchange Act (CEA) (7 U.S.C. § 6s(f)) and CFTC Regulations 20.4 and 20 (17 C.F.R. 20), adopted under Title VII of the Dodd-Frank Act.
In anticipation of administrative proceedings, JPMVE and JPMCB prepared and submitted a settlement offer, which was accepted by the CFTC. The order requires JPMVE and JPMCB to:
  • Pay a civil monetary penalty of $225,000.
  • Cease and desist from committing further violations of the CEA and CFTC Regulations.
Under the terms of the settlement, neither party admitted nor denied any wrongdoing.
Certain swap dealers (SDs) are required to file daily LTRs for physical commodity swap positions, which must include specific data and conform to the form and manner for reporting prescribed by CFTC Regulations 20.4 and 20.7, in conjunction with further instructions provided in the CFTC's Division of Market Oversight Part 20 Guidebook.
According to the CFTC, from March 1, 2013 through April 30, 2014, JPMVE and JPMCB filed LTRs that failed to comply with certain CFTC requirements, including:
  • Failing to submit LTRs on two days.
  • Filing LTRs that routinely contained errors such as:
    • reporting the underlying commodity futures equivalent months, and currency value strike in the wrong data fields;
    • reporting futures contract equivalents, commodity units, and notional values that were incorrect or missing;
    • providing identifying information for principals that attributed positions to the wrong entities; and
    • incorrectly reporting counterparty names.
The CFTC alleged that these errors caused JPMVE and JPMCB to submit LTRs that inaccurately reported their positions in various commodities and therefore failed to comply with LTR requirements under CFTC Regulations 20.4 and 20.7.
The order notes that JPMVE and JPMCB have:
  • Modified their data processing and reporting systems to comply with the LTR reporting requirements.
  • Corrected the identified errors.
  • Submitted corrected historical LTRs for the inaccurate period.
For more details on the CFTC large-trader reporting rules for physical commodity swap positions, see: