Washington, D.C. – Cargill, Inc., a Minnesota-based provisionally registered swap dealer, has been slapped with a $10 million penalty by the Commodity Futures Trading Commission (CFTC) for allegedly concealing mark-ups on thousands of complex swaps. The CFTC alleges Cargill provided inaccurate mid-market marks to counterparties and its swap data repository (SDR) between 2013 and the present, violating the Commodity Exchange Act (CEA) and related Commission Regulations.
According to the CFTC order, Cargill intentionally underreported its mark-up – the profit added to the base price of a swap – concealing as much as 90% of the actual amount. Instead of disclosing the full mark-up immediately, Cargill reportedly recognized only 10% on the first day and spread the remaining amount over sixty days. This practice was allegedly motivated by a desire to maintain revenue, as accurate reporting was feared to reduce earnings.
The investigation revealed concerns within Cargill regarding the legality of this marking methodology, yet the company allegedly avoided seeking clarification from the CFTC to prevent scrutiny. James McDonald, CFTC Director of Enforcement, stated the agency “will vigorously pursue those who undermine the fairness and integrity of our markets,” emphasizing that counterparties are entitled to accurate information.
As part of the settlement, Cargill is required to cease and desist from violating specific sections of the CEA and Commission Regulations, including those related to swap valuation and supervision. The company must also implement remedial measures to ensure future compliance. The CFTC order details that the deceptive practice impacted hundreds of counterparties and involved thousands of swaps.
This case highlights the CFTC’s ongoing efforts to police the swaps market and ensure transparency in financial reporting. The penalty serves as a warning to other market participants that inaccurate valuation practices will not be tolerated.
Source: CFTC.gov
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