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Financial Services Law Insights and Observations


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  • CFTC issues no-action letter on compliance date for swap data

    Agency Rule-Making & Guidance

    On January 31, the CFTC issued a no-action letter on the compliance dates for the November 25, 2020 amendments to the swap data reporting rules. According to the letter, the CFTC’s Division of Data does not recommend that the Commission take enforcement action against market participants “for failure to comply with the Amendments before December 5, 2022, and for failure to comply with the Block and Cap Amendments before December 4, 2023, provided that the entity comply with the Parts 43, 45, 46, and 49 regulations that were in effect on January 1, 2021.” A statement released by CFTC Commissioner Dawn D. Stump noted that she “expect[s] market participants to work diligently toward resolving the operational and technological issues they have encountered in complying with the Amendments,” and that she hoped the efforts will “better align swap data reporting rules internationally [and] will at last permit much needed international deference among the various regulatory bodies who long ago committed to improving swap data for the benefit of these global markets.”

    Agency Rule-Making & Guidance Federal Issues CFTC Swaps Compliance

  • Agencies adjust civil penalties to account for inflation

    Agency Rule-Making & Guidance

    Recently, the CFPB, CFTC, FDIC, FinCen, FHFA, and OCC provided notice in the Federal Register regarding adjustments to the maximum civil money penalties due to inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Each notice or final rule (see CFPB here, CFTC here, FDIC here, FinCen here, FHFA here, and OCC here) adjusts the maximum amounts of civil money penalties and provides a chart reflecting the inflation-adjusted maximum amounts associated with the penalty tiers for particular types of violations within each regulator’s jurisdiction. The OCC’s adjusted civil money penalty amounts are applicable to penalties assessed on or after January 12. The new CFPB, CFTC, FDIC, and FHFA civil money penalty amounts are applicable to penalties assessed on or after January 15. FinCEN's adjusted civil money penalty amounts are effective January 24. 

    Agency Rule-Making & Guidance OCC CFPB CFTC FDIC FHFA Bank Regulatory Assessments Fees Civil Money Penalties FinCEN

  • CFTC revises LIBOR transition no-action letters

    Federal Issues

    On December 22, the CFTC announced that the Division of Clearing and Risk (DCR), Division of Market Oversight (DMO), and Market Participants Division each issued revised no-action letters (see 21-2621-27, and 21-28) to swap dealers and other market participants associated with the transition from swaps that reference LIBOR and other interbank rates to swaps that reference alternative benchmarks. As previously covered by InfoBytes, the United Kingdom’s Financial Conduct Authority announced the dates that all LIBOR settings will cease to be provided by any administrator and will no longer be representative. All sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month U.S. dollar settings ceased immediately after December 31, 2021, while all remaining U.S. dollar settings will cease immediately after June 30, 2023. Therefore, according to the recent CFTC announcement, the DMO and the DCR letters are effective until June 30, 2023 “for swaps otherwise covered by such letters to the extent such swaps reference one of the 2023 USD LIBOR Settings.”

    Federal Issues CFTC LIBOR UK Of Interest to Non-US Persons Financial Conduct Authority Swaps

  • U.S.-UK financial regulators discuss bilateral issues

    Financial Crimes

    On December 17, the U.S. Treasury Department issued a joint statement covering the recently held fifth meeting of the U.S.-UK Financial Regulatory Working Group (Working Group). Participants included officials and senior staff from both countries’ treasury departments, as well as regulatory agencies including the Federal Reserve Board, CFTC, FDIC, OCC, SEC, the Bank of England, and the Financial Conduct Authority. The Working Group discussed, among other things, (i) international and bilateral cooperation; (ii) “emerging regulatory approaches and the need to promote multilateral cooperation and alignment given that a number of third-party providers operate cross-border to provide services to the financial sector and there are potential risks of regulatory fragmentation”; (iii) “risks associated with regulatory driven fragmentation in derivatives clearing and banking markets”; (iv) “efforts in relation to the LIBOR transition, market developments, the risks associated with newly created credit-sensitive rates, and transition implications for other jurisdictions;” and (v) the management of climate-related financial risks and other sustainable finance issues. According to the statement, Working Group participants will continue to engage bilaterally on these issues and others ahead of the next meeting planned for this spring.

    Financial Crimes UK Of Interest to Non-US Persons Department of Treasury Federal Reserve OCC FDIC SEC CFTC Financial Conduct Authority LIBOR Climate-Related Financial Risks

  • SEC, CFTC settle with national bank’s subsidiary


    On December 17, the SEC announced charges against a subsidiary limited liability company of a national bank for Securities Exchange Act violations because the firm and its employees allegedly failed to maintain recordkeeping requirements. According to the order, from at least January 2018 through at least November 2020, the company’s employees communicated about securities business matters on their personal devices, using text messaging applications and personal email accounts. These communications were not maintained or preserved by the company, and some were not able to be furnished promptly to a Commission representative when requested, allegedly in violation of Section 17(a) of the Exchange Act and Rules 17a4(b)(4) and 17a-4(j) thereunder. Additionally, the company’s “widespread failure to implement its policies and procedures which forbid such communications led to its failure to reasonably supervise its employees within the meaning of Section 15(b)(4)(E) of the Exchange Act.” The company received subpoenas for documents and records requests in numerous Commission investigations during the time that it failed to maintain required securities records relating to the business. In its response to the subpoena requests, the bank allegedly did not search for relevant records contained on the personal devices of its employees. The order further noted that because the company’s “recordkeeping failures impacted the Commission’s ability to carry out its regulatory functions and investigate potential violations of the federal securities laws across these investigations, the Commission was often deprived of timely access to evidence and potential sources of information for extended periods of time and, in some instances, permanently.” According to the SEC, the company admitted the facts set forth in the SEC’s order and acknowledged that its conduct violated the federal securities laws, and agreed to: (i) pay a $125 million penalty; (ii) implement robust improvements to its compliance policies and procedures, including retaining “a compliance consultant to, among other things, conduct a comprehensive review of its policies and procedures relating to the retention of electronic communications found on personal devices and [the company’s] framework for addressing non-compliance by its employees with those policies and procedures”; and (iii) cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Exchange Act and Rule 17a-4 thereunder.

    The same day, the CFTC announced a $75 million settlement with the company, the national bank, and its public limited company (collectively, “respondents”) for allegedly failing to maintain, preserve, and produce records that were required to be kept under CFTC recordkeeping requirements, and failing to diligently supervise matters associated with its businesses as CFTC registrants. According to the CFTC order, from at least 2015, the respondents’ employees internally and externally communicated on unapproved channels, and had messages related to the respondents’ businesses as CFTC registrants that were required to be maintained under CFTC-mandated recordkeeping requirements. The order also noted that the written communications were not maintained and preserved by the respondents, and they were not able to be furnished promptly to a CFTC representative when requested. The order further alleged that the widespread use of unauthorized communication methods by the respondents’ employees to conduct firm business violated their own policies and procedures. The respondents also did not maintain adequate internal controls with respect to business-related communications on non-approved communication methods. The order requires the respondents to pay a $75 million civil monetary penalty, to cease and desist from further violations of recordkeeping and supervision requirements, and to engage in specified remedial undertakings.

    Securities SEC Enforcement CFTC Securities Exchange Act

  • CFTC awards $200 million to whistleblower


    On October 21, the CFTC announced an approximately $200 million whistleblower award to a claimant who reported “specific, credible, and timely” information that contributed to an already open investigation, which led to a successful Commodity Exchange Act (CEA) enforcement action, as well as to the success of two related actions by a U.S. federal regulator and a foreign regulator. The associated order notes that the claimant voluntarily provided original information that led the CFTC to important, direct evidence of wrongdoing. According to the announcement, “to qualify for an award, a whistleblower who significantly contributed to the success of an enforcement action must demonstrate that there is a ‘meaningful nexus’ between the information provided and the CFTC’s ability to successfully complete its investigation, and to either obtain a settlement or prevail in a litigated proceeding.” The Commission determined the whistleblower met this standard. However, because the whistleblower’s information was never shared with the state regulator, the claim associated with a third related action by the state regulator was denied. In a statement released by CFTC Commissioner Dawn D. Stump, the Commissioner expressed her disagreement with the Commission’s award to the claimant with respect to the foreign regulator’s action. She concluded that there needs to be “an especially close look at cases where a whistleblower asks the Commission to tap its limited Customer Protection Fund for an award relating to an action by a foreign futures authority to address harm outside the United States.”

    The CFTC has awarded approximately $300 million to whistleblowers since the enactment of its Whistleblower Program under Dodd-Frank, and whistleblower information has led to nearly $3 billion in monetary relief.

    Securities CFTC Whistleblower Dodd-Frank Enforcement Commodity Exchange Act Of Interest to Non-US Persons

  • CFTC announces a $500,000 fine for swap dealer


    On October 14, the CFTC announced a $500,000 settlement with a non-U.S. provisionally registered swap dealer to resolve claims that it failed to comply with certain swap dealer recordkeeping requirements. Among other things, the institution allegedly failed to retain certain audio recordings for the time required under CFTC regulations. In addition to the civil monetary penalty, the institution must cease and desist from further violations of the CFTC regulations and must continue its remediation efforts.

    Securities CFTC Commodity Exchange Act Swaps Enforcement Of Interest to Non-US Persons

  • EU and U.S. release statement on Joint Financial Regulatory Forum

    Financial Crimes

    On September 29 and 30, EU and U.S. participants, including officials from the Treasury Department, Federal Reserve Board, CFTC, FDIC, SEC, and OCC, participated in the U.S. – EU Joint Financial Regulatory Forum to continue their ongoing financial regulatory dialogue. Matters discussed focused on six different themes: “(1) market developments and current assessment of financial stability risks, (2) sustainable finance, (3) multilateral and bilateral engagement in banking and insurance, (4) regulatory and supervisory cooperation in capital markets, (5) financial innovation, and (6) anti-money laundering and countering the financing of terrorism (AML/CFT).”

    While acknowledging that both the EU and U.S. are experiencing “robust economic recoveries,” participants cautioned that the uncertainty around the Covid-19 pandemic and the economic outlook has not dissipated. “[C]ooperative international engagement to mitigate financial stability risks remains essential,” participants warned. Participants also explored issues concerning climate-related challenges for the financial sector and mandates for addressing climate-related financial risks, and touched upon the EU’s strategy for financing its transition to a sustainable economy. Regarding financial innovation, participants discussed potential central bank digital currencies and exchanged views on topics such as new types of digital payments, crypto-assets, and stablecoins, with all participants recognizing the “benefits of greater international supervisory cooperation” and “promot[ing] responsible innovation globally.” In addition, participants discussed progress made in strengthening their respective AML/CFT frameworks, “exchanged views on the opportunities and challenges arising from financial innovation in the AML/CFT area and explored potential areas for enhanced cooperation to combat money laundering and terrorist financing bilaterally and in the framework of [the Financial Action Task Force].”

    Financial Crimes Department of Treasury EU OCC Federal Reserve CFTC SEC FDIC Fintech Of Interest to Non-US Persons Supervision Anti-Money Laundering Combating the Financing of Terrorism FATF Climate-Related Financial Risks Bank Regulatory

  • CFTC announces more than $2.5 million in fines for swap data reporting violations


    On September 29, the CFTC announced a $1.5 million settlement with a non-U.S. provisionally registered swap dealer headquartered in France to resolve claims that it failed to comply with certain swap dealer reporting requirements. Among other things, the swap dealer allegedly failed to meet mid-market mark disclosure requirements for numerous swaps, failed to accurately report certain swap valuation data to a swaps data repository, and did not diligently perform its supervisory obligations related to these disclosures. In addition to the civil monetary penalty, the swap dealer must cease and desist from further violations of the Commodity Exchange Act and CFTC regulations and must continue its remediation efforts.

    Earlier, on September 27, the CFTC announced a $1 million civil monetary penalty to resolve allegations that a global financial institution violated swap data legal entity identifier (LEI) reporting requirements as well as related supervision responsibilities. According to the CFTC, the alleged failures violated the cease and desist provision of a 2017 CFTC order, in which the CFTC found that the financial institution, among other things, failed to report LEI swap transaction data or establish systems and procedures to do so, did not correct errors in previously reported LEI data, and failed to diligently perform its supervisory duties when reporting LEI swap data. The 2017 order imposed a $550,000 civil monetary penalty and required the financial institution to cease and desist violating CFTC regulations. The CFTC’s September 27 order further found that the financial institution’s alleged continued reporting failures occurred, in part, from a failure to diligently supervise its swap dealer activities with respect to LEI swap data reporting.

    Securities CFTC Enforcement Swaps Of Interest to Non-US Persons Commodity Exchange Act

  • Biden announces key FTC, CFTC nominations

    Federal Issues

    On September 13, President Biden nominated Alvaro Bedoya for Commissioner of the FTC. Bedoya would replace FTC Commissioner Rohit Chopra, who was nominated as the permanent director of the CFPB (covered by InfoBytes here). Chopra currently awaits a Senate confirmation vote on his nomination to serve as the Bureau’s director.

    Bedoya, a Georgetown University visiting professor of law, also founded the law school’s Center on Privacy & Technology. According to the administration’s announcement, Bedoya previously “co-led a coalition that successfully pressed an Internet giant to drop ads for online payday loans” and served as the first chief counsel to the Senate Judiciary Subcommittee on Privacy, Technology and the Law. FTC Chair Lina M. Khan issued a statement following Bedoya’s nomination praising his “expertise on surveillance and data security.”

    Additionally, Biden announced several CFTC Commissioner nominees: Kristin Johnson, Christy Goldsmith Romero, and Rostin Behnam, who currently serves as the agency’s acting chairman and has been nominated to be the permanent CFTC Chair. Behnam’s priorities include safeguarding customer protections, climate-related financial market risk, and diversity, equity, and inclusion in the financial markets.

    Federal Issues Biden FTC CFTC


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