The U.S. Commodity Futures Trading Commission (CFTC) has issued an Order filing and simultaneously settling charges against Commerzbank AG (Commerzbank) for numerous violations of the Commodity Exchange Act (CEA) and CFTC Regulations, including failing to supervise its Swap Dealer’s activities for more than 5 years and making misleading statements and material omissions to the CFTC concerning its Swap Dealer’s operations and compliance with the CEA and CFTC Regulations.
Commerzbank AG is a global banking and financial services company based in Frankfurt, Germany, that has been provisionally registered with the CFTC as a Swap Dealer since December 31, 2012.
The CFTC Order requires Commerzbank to pay a $12 million civil monetary penalty and comply with specified undertakings including retention of an outside consultant to review swap dealer compliance for a period of two years and to generate, during that period, annual reports assessing the swap dealer’s compliance with the CEA and CFTC Regulations. The Order further requires Commerzbank to submit annual reports to the CFTC regarding swap dealer compliance and remedial efforts for a period of two years.
CFTC Chairman J. Christopher Giancarlo said, “This case is just the latest example of the close regulatory communication and cooperation that exists between the CFTC and BaFin and I look forward to continuing our very strong partnership with BaFin, one of the world’s leading financial regulatory authorities.”
CFTC Director of Enforcement James McDonald said, “This case highlights the importance of complete and accurate reporting of swap transactions, supervision, and transparency with the CFTC. The Commission will work vigorously to ensure the integrity of our markets by ensuring registrants comply with their reporting, compliance, and supervision obligations.”
According to the Order, Commerzbank management failed to supervise its Swap Dealer’s activities from December 31, 2012 until at least 2018. The Order finds that Commerzbank’s failure to supervise its Swap Dealer was systemic and directly resulted in thousands of violations of other provisions of the CEA and CFTC Regulations.
In particular, the Order finds that Commerzbank failed to adopt any effective process for determining whether swap transactions with certain non-U.S. swap counterparties were subject to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in violation of Regulation 23.402(b); failed to report swap transactions to swap data repositories (SDRs) in violation of Section 2(a)(13)(G) of the CEA and Regulations 43.3 and 45.3; failed to submit Large Trader Reports (LTRs) consistent with the CFTC’s requirements in violation of Section 4s(f)(1)(A) of the CEA and Regulations 20.4 and 20.7; and failed to execute certain swaps on swap execution facilities (SEFs) in violation of Section 2(h)(8) of the CEA and Regulation 37.9(a)(2).
Additionally, the CFTC Order finds that Commerzbank made misleading statements and material omissions in its 2014 and 2015 annual Chief Compliance Officer reports (CCO reports) to the CFTC, in violation of Section 6(c)(2) of the CEA. In these CCO reports, Commerzbank failed to adequately disclose numerous deficiencies in its systems and controls for swap dealer compliance and made misleading statements and material omissions regarding the Swap Dealer’s compliance with the CEA and Regulations.