The bank has agreed to enhance compliance by hiring an independent consultant as part of the settlement with the CFTC.
BNY Mellon Faces $5 Million Fine for Swap Reporting Missteps
The Commodity Futures Trading Commission (CFTC) has imposed a $5 million civil penalty on Bank of New York Mellon (BNY) for failing to accurately report millions of swap transactions and for inadequate oversight of its swap dealer operations.
Violations Spanning Five Years
The CFTC’s enforcement action, announced on Monday, targets reporting violations that occurred between 2018 and 2023. During this time, BNY Mellon reportedly failed to correctly report at least five million swap transactions to a registered swap data repository, in violation of both CFTC regulations and a prior order issued in 2019.
Ian McGinley, Director of the CFTC’s Division of Enforcement, stressed the importance of precise reporting within the swaps regulatory framework. “Accurate reporting is a fundamental responsibility for swap dealers,” McGinley said.
He also acknowledged BNY Mellon’s cooperation with the investigation, saying, “I commend BNY for its extensive cooperation, remediation efforts, and the decision to engage an independent compliance consultant to enhance its compliance program and prevent future violations.”
Lack of Supervision and Compliance
The order also criticizes BNY Mellon for failing to properly supervise its swap dealer business. The bank was found to lack adequate written policies or procedures to monitor voice communications of its associated persons (APs) and to oversee electronic communications in languages other than English, both of which are necessary for complying with CFTC regulations.
As part of the settlement, BNY Mellon has committed to appointing an independent compliance consultant to review and improve its compliance practices. The bank’s proactive steps, including self-reporting and substantial cooperation, contributed to a reduced penalty in this case.
Separate Action: Wisconsin Man Fined $75,000 for Unregistered CTA Activities
In another enforcement action announced on the same day, the CFTC ordered Mark Hendershott of Wisconsin to pay a $75,000 civil penalty for operating as an unregistered commodity trading advisor (CTA).
According to the CFTC’s order, Hendershott provided hedging advice and trading services related to agricultural futures contracts to farmers between May 2018 and June 2021 without the necessary registration. His services included offering tailored advice on futures contracts for hedging crop production and directly placing trades in clients’ accounts.
The CFTC determined that Hendershott met the criteria requiring CTA registration, as he provided commodity trading advice to more than 15 clients within a 12-month period and conducted his business across state lines.
