CFTC Fines Wells Fargo for Failure to Submit Accurate Large-Trader Commodity Swap Reports | Practical Law

CFTC Fines Wells Fargo for Failure to Submit Accurate Large-Trader Commodity Swap Reports | Practical Law

The CFTC filed and simultaneously settled charges against Wells Fargo Bank, N.A. for failing to comply with obligations to submit accurate large-trader reports for physical commodity swap positions.

CFTC Fines Wells Fargo for Failure to Submit Accurate Large-Trader Commodity Swap Reports

by Practical Law Finance
Published on 04 Oct 2016 • USA (National/Federal)
The CFTC filed and simultaneously settled charges against Wells Fargo Bank, N.A. for failing to comply with obligations to submit accurate large-trader reports for physical commodity swap positions.
On September 27, 2016, the CFTC filed and simultaneously settled charges against Wells Fargo Bank, N.A. (Wells Fargo) for failing to comply with its obligations to submit accurate large trader reports (LTRs) for physical commodity swap positions, in violation of Section 4s(f)(1)(A) of the Commodity Exchange Act (CEA) and CFTC Regulations 20.4 and 20.7 (see Practice Note, US Derivatives Regulation: CFTC Swap Data Reporting and Recordkeeping Rules: Large-Trader Position Data Reporting for Physical Commodity Swaps).
Wells Fargo has been registered as a swap dealer (SD) with the CFTC since December 31, 2012, and is therefore obligated to submit LTRs to the CFTC. LTRs allow the CFTC to conduct effective surveillance on markets in US physical commodity futures and economically equivalent swaps. The CFTC found that:
  • From March 1, 2013 through November 13, 2015, the LTRs that were submitted by Wells Fargo failed to meet requirements provided in CFTC Regulations 20.4 and 20.7 (17 C.F.R. §§ 20.4 and 20.7), in conjunction with further instructions from the CFTC's Part 20 Guidebook on large-trader reports.
  • Wells Fargo submitted inaccurate LTRs which contained multiple errors, including:
    • missing data;
    • data that was presented in a format inconsistent with CFTC requirements;
    • failure to use the correct clearing member identifier;
    • improperly formatted entries;
    • failure to use the correct reporting entity identifier;
    • failure to provide a value for the gross swap or swaption notional position;
    • failure to complete logically related fields when the non-standard swaption indicator was either "null" or "standard"; and
    • use of improper values.
Since receiving its first error message from the CFTC in July 2015, Wells Fargo has:
  • Analyzed past reports.
  • Self-disclosed additional issues with its LTRs.
  • Made modifications to its data processing and reporting systems to properly comply with LTR reporting requirements.
In agreeing to the CFTC Order, Wells Fargo neither admitted nor denied the CFTC's findings, but agreed, among other things, to:
  • Pay a $400,000 civil monetary penalty.
  • Cease and desist from committing further violations of the CEA and CFTC Regulations, as charged.