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Two Citigroup-affiliated swap dealers agreed to pay a fine to settle charges of violating swap data recordkeeping and reporting regulations and related supervisory requirements.
In an Order, the CFTC reported that Citibank, N.A., and London-based Citigroup Global Markets Limited (collectively, "Citi") improperly reported swap data and did not implement adequate supervisory practices to monitor swap data. The alleged improper conduct is based entirely on failures in collecting and reporting legal entity identifiers ("LEI") for certain Citi swap counterparties. According to the CFTC, Citi did not properly report LEIs for numerous swaps during 2015 and 2016. As the result of a design flaw in its data reporting systems, Citi consistently failed to correct errors in its data reporting and did not re-report trades based solely on a change in the LEI of a counterparty. In addition, the CFTC alleged that Citi failed to adequately supervise its swap data reporting practices and procedures. Citi, the CFTC said, (i) did not adhere to its own internal policies for swap data reporting and (ii) improperly relied upon no-action relief without meeting the conditions of that relief. As a result of the alleged misconduct, the CFTC charged Citi with violating CFTC Rules 23.204, 23.602, 45.4, 45.6, 45.14, 46.3, 46.4 and 46.11.
To settle the charges, Citi agreed to pay a fine of $550,000 and to enhance existing procedures for swap data reporting.
Commentary / Nihal Patel
Perhaps most notably, the CFTC made clear (including by highlighting it in the press release) that swap dealers are expected to adhere to the conditions in relying on CFTC Letter 15-01, which provides limited no-action relief from the LEI reporting requirement. In particular, the CFTC noted that the no-action relief requires the use of a "privacy law identifier" and that reporting "name withheld" will not suffice for this purpose.
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