Washington, D.C. – Aitan Goelman, a Director at the U.S. Commodity Futures Trading Commission (CFTC), is at the center of an enforcement action stemming from failures by Morgan Stanley & Co. LLC to maintain sufficient U.S. Dollar reserves, according to an order issued August 6, 2015.
The CFTC levied a $300,000 civil monetary penalty against Morgan Stanley for violations of CFTC Regulation 22.9. The firm allegedly failed to hold adequate U.S. Dollar funds in segregated accounts between March 12, 2013, and March 7, 2014, to cover its obligations to cleared swaps customers. Instead of U.S. Dollars, the firm held equivalent amounts in Euros and other currencies.
The Order details that the deficits, while not impacting overall collateral levels, ranged from approximately $5 million to as high as $265 million, at times exceeding 10 percent of the required U.S. Dollar holdings. The CFTC found that Morgan Stanley also lacked adequate procedures and training for personnel to ensure compliance with currency denomination requirements for cleared swaps customer collateral, violating CFTC Regulation 166.3.
“Since passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFTC has implemented rules to protect swaps customers and market participants,” stated Aitan Goelman, the CFTC’s Director of Enforcement. “This action demonstrates that the Division of Enforcement will investigate and pursue violations of these important rules of the road in the swaps market.”
The CFTC acknowledged Morgan Stanley’s prompt self-reporting of the deficiencies, implementation of corrective procedures, and cooperation with the investigation. The case was led by CFTC staff members Elizabeth C. Brennan, Douglas K. Yatter, Lenel Hickson, Jr., and Manal M. Sultan.
Source: CFTC.gov
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