Washington D.C. – The Commodity Futures Trading Commission (CFTC) has simultaneously filed and settled charges against affiliates of three financial institutions, including Goldman Sachs, for violations related to swap dealer activities. The primary issues stem from failures in swap data reporting and, in one instance, inaccurate disclosure of Pre-Trade Mid-Market Marks (PTMMMs).
The CFTC’s order against Goldman Sachs details a systemic failure to properly resource and prioritize CFTC compliance, leading to pervasive supervisory deficiencies since 2013. These deficiencies impacted multiple areas, including swap data reporting, PTMMM disclosures, personnel reporting, clearing member risk management, margin model notices, segregation disclosures, and the reporting of static material economic terms.
Specifically, the CFTC alleges Goldman failed to accurately and timely report a significant portion of its swap data to a swap data repository (SDR), as required. While the company has backported over 20 million swaps, the CFTC believes this number underestimates the full extent of the failures. Furthermore, Goldman allegedly provided inaccurate or incomplete PTMMMs to counterparties on over one million occasions since 2013.
The CFTC acknowledged Goldman Sachs’ substantial cooperation with the investigation, which resulted in a reduced civil monetary penalty. The specific amount of the penalty was not disclosed in the release.
In a separate, related case, JPMorgan Chase (JPM) was also charged with similar swap data reporting deficiencies. The CFTC found that from November 2017 through the present, JPM failed to report over 40 million swap transactions in compliance with regulations, including both underreporting and misreporting.
“It now has been 13 years since Dodd-Frank and well past time for swap dealers to ensure they are in full compliance with the CEA and CFTC regulations,” stated Ian McGinley, Director of the Division of Enforcement. “As significant reporting failures continue to persist, our resolutions will reflect the gravity of swap dealers’ continuing failures to prioritize compliance and seek to deter future failures.”
The CFTC also indicated it may require a neutral third party to advise, assist with, and test the sufficiency of the entities’ remediation efforts. The National Futures Association, the Market Participants Division, the Division of Market Oversight, the Division of Data, and the Division of Clearing and Risk all assisted in the Goldman Sachs case.
Source: CFTC.gov
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