Swap Dealer Disclosure and Reporting Requirements
Under the Dodd-Frank Act, swap dealers and major swap participants are required to comply with certain disclosure, recordkeeping, and reporting requirements related to its swap transactions. This includes the timely and accurate reporting of:
- swap transaction and pricing data that is reported in real-time and made available to the public;
- required swap creation data; and
- required swap continuation data.
We represents whistleblowers at the CFTC. Call our CFTC whistleblower lawyers today at 202-930-5901 or contact us here to find out if you are eligible for a CFTC whistleblower award. All inquiries are confidential.
Purpose of Swap Reporting Requirements
The reporting requirements are designed to enhance transparency, promote standardization, and reduce systemic risk. Among the many requirements include: maintaining a data field for the legal entity identifiers (LEI), correcting any errors in swap data that were previously reported, and implementing a Business Continuity and Disaster Recovery Plan to be implemented in the event of a disruption of the swap dealer’s normal business activities. For a complete list of the reporting requirements, refer to 17 CFR Part 45.
CFTC Swap Reporting Enforcement Action
In September 2023, the CFTC ordered three financial institutions to pay more than $50 million for a variety of swap dealer activities including failures related to swap data reporting and, in one case, failures related to the disclosure of Pre-Trade Mid-Market Marks (PTMMMs):
- Goldman Sachs for failing to diligently supervise a wide range of its swap dealer activities, and for unprecedented failures regarding swap data reporting and the disclosure of PTMMMs in violation of multiple sections of the Commodity Exchange Act (CEA) and CFTC regulations. The order imposes a $30,000,000 civil monetary penalty and includes Goldman taking steps to develop a written remediation plan and retain a consultant to advise on and assess its remediation plan.
- J.P. Morgan for violations related to swaps reporting. The order imposes a $15,000,000 civil monetary penalty and other undertakings.
- Bank of America for failing to diligently supervise swaps reporting and failing to comply with swaps reporting obligations. The order imposes an $8 million civil monetary penalty and other undertakings.
In 2016, Deutsche Bank AG (“Deutsche Bank”) was charged with “failing to report any swap data for multiple asset classes for five days; submitting incomplete and untimely swap data; failing to supervise its employees responsible for swap data reporting; having an inadequate Business Continuity and Disaster Recovery Plan; and violating a prior CFTC Order.” The charge derived from a system outage in the bank’s swap data reporting system that prevented Deutsche Bank from reporting any swap data for multiple asset classes for approximately five days. Due to an ineffective Business Continuity and Disaster Recovery Plan, the subsequent efforts to end the system outage only exacerbated the problems.
CFTC Whistleblower Program
Under the CFTC Whistleblower Program, whistleblowers may be eligible for monetary awards when they voluntarily provide the CFTC with original information about violations of the Commodity Exchange Act (“CEA”) that leads the CFTC to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.
CFTC Whistleblower Rewards and Bounties
Whistleblowers are eligible to receive between 10 percent and 30 percent of the monetary sanctions collected. In October 2021, the CFTC awarded $200 million to a whistleblower for providing information that led the CFTC to evidence of wrongdoing concerning the manipulation of financial benchmarks used by global banks.
CFTC Whistleblower Protection
The CFTC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Furthermore, the Dodd-Frank Act protects whistleblowers from retaliation by their employers for reporting violations of the CEA to the CFTC.
CFTC Whistleblower Lawyers
Since 2014, the CFTC has issued more than $325 million in awards to whistleblowers. The largest CFTC whistleblower awards to date are $200 million, $45 million, $30 million, and $10 million. Whistleblower disclosures have enabled the CFTC to bring successful enforcement actions against wrongdoers with orders for more than $3 billion in monetary relief.
Call our CFTC whistleblower lawyers today at 202-930-5901 or contact us here to find out if you are eligible for a CFTC whistleblower award. A delay in reporting commodities fraud can potentially disqualify a whistleblower from recovering an award or can lower a whistleblower award, so call us today for a free consultation. We represent CFTC whistleblowers concerning a wide variety of market manipulation schemes.
Our experienced CFTC whistleblower lawyers are frequently quoted in the media about whistleblower reward programs. Recently, the Wall Street Journal quoted Jason Zuckerman in an article titled Senate Passes Bill to Fund CFTC Whistleblower Program, and quoted Matthew Stock, Director of our Whistleblower Rewards Practice, in an article titled CFTC Whistleblower Tips and Awards Fall After Record 2018.
Recently the Association of Certified Fraud Examiners published a profile of Matt Stock’s success working with whistleblowers to fight fraud:
CFTC Regulation of Swaps
In a September 7, 2022 statement regarding a trader’s misconduct and a financial intermediary’s failure to supervise, Commissioner Kristin N. Johnson explained the CFTC’s regulation of swaps:
Companies around the country and across the globe use swaps, which comprise a global market with a notional value in the hundreds of trillions of dollars, to manage risk. As evidenced by the events that precipitated the onset of the 2008 financial crisis, however, swaps—an unregulated sector of financial markets at that time—concentrated risk, obscured risk management failures, and contributed to one of the most pernicious financial market crashes in recent history. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) introduced several key reforms; among these monumental regulatory initiatives, the Dodd Frank Act directed the CFTC to exercise its oversight authority in the markets for certain swaps. The CFTC’s implementation of these critical reforms has increased transparency in swaps markets through mandatory reporting of swaps and governance reforms for market participants such as swaps dealers.
Section 4s of the Commodity Exchange Act (CEA) contains the key swap provisions added by the Dodd-Frank Act. CEA Section 4s(f) imposes reporting and recordkeeping requirements on registered swap dealers and major swap participants, including a requirement to keep books and records as prescribed by the CFTC. These requirements were implemented by the CFTC in Subpart F of Part 23 of the CFTC’s Regulations. The Dodd-Frank Act also added CEA Section 21, which established a new category of registrant—swap data repositories—to collect and disseminate information about the swaps being entered into, in order to avoid the opaque accumulation of risk that characterized the markets leading up to the financial crisis. Increased transparency leads to lower costs, greater liquidity, and lower risk for the swaps market. However, these benefits are not achieved if market participants provide inaccurate or misleading information about the swaps they are entering into—which is why it is crucial for the CFTC to enforce compliance with the reporting and recordkeeping requirements in the CEA and CFTC Regulations.
Other aspects of Dodd-Frank Act reforms aim to improve the governance of swap dealers to ensure the greater safety and soundness of the swaps market. CEA Section 4s(h)(1)(B) requires swap dealers to conform with business conduct standards relating to the diligent supervision of the business of the swap dealer, as set forth in Regulation 23.602. Pursuant to this rule and other provisions of the business conduct standards, swap dealers must establish risk management programs and designate senior personnel to oversee them. In this way, swap dealers become responsible for ensuring compliance with the CFTC’s Regulations so that the Dodd-Frank Act reforms may achieve intended prudential and regulatory goals. The CFTC’s enforcement actions in these matters and others parallel these aims and seek to ensure that swap dealers are, in fact, implementing appropriate and mandated risk management programs effectively. Those who fail to meet their supervisory responsibilities should anticipate inquiries, investigations, and the possibility of enforcement actions.