New York-based Mizuho Capital Markets LLC has been slapped with over $6.8 million in penalties by the Commodity Futures Trading Commission (CFTC) for trade practice violations, the agency announced Tuesday. The firm, a provisionally registered swap dealer, failed to adequately disclose crucial information to customers during specific foreign exchange forward transactions between June 2018 and December 2020.
The CFTC order requires Mizuho to cease and desist from further violations of the Swap Dealer Business Conduct Standards outlined in the Commodity Exchange Act (CEA) and related regulations. The firm must pay $1,847,182.90 in restitution to affected customers and a $5 million civil monetary penalty.
According to the CFTC, Mizuho engaged in “deal-contingent FX forwards” without informing customers that the firm was trading in the immediate moments before providing the spot exchange rate and executing the transaction. This practice potentially moved the exchange rate against the customer, resulting in less favorable currency acquisition rates. Simultaneously, Mizuho may have benefited by securing more favorable hedging rates.
“Congress mandated these standards to ensure that honesty and transparency prevail in swaps markets,” said Ian McGinley, Director of Enforcement at the CFTC. “Our significant penalties here reflect the consequences swap dealers face from failing to meet these standards.”
The investigation revealed that Mizuho’s lack of disclosure allowed the firm to potentially profit at the expense of its clients. The CFTC’s action underscores a broader effort to enforce business conduct standards within the swaps market, with similar enforcement actions taken against other swap dealers in recent periods.
Ashley J. Burden, Bryan Hsueh, David A. Terrell, Scott R. Williamson, and Robert T. Howell of the CFTC’s Division of Enforcement led the investigation. The CFTC encourages individuals with information regarding potential violations of commodity trading laws to report it via their toll-free hotline or online complaint system. Whistleblowers may be eligible for financial rewards.
Source: CFTC.gov
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