CFTC fines Societe Generale for failures in swap reporting

December 14, 2016

A logo is pictured on a branch of Societe Generale Private Banking in LausanneFrench investment bank Societe Generale has agreed to pay a $450,000 fine for its failure to properly report nearly 54,000 transactions, the Commodity Futures Trading Commission has announced.

Paris-based Societe Generale violated the Commodity Exchange Act, 7 U.S.C.A. § 1, and various CFTC rules when a software update caused it to misreport the transactions, the CFTC said in a Dec. 7 order instituting proceedings against the firm.

The bank agreed to pay the fine without admitting or denying the allegations and also agreed to cease and desist from committing future CEA and CFTC rule violations.

The agency noted that SocGen self-reported the error, cooperated with the CFTC, conducted an internal investigation and took remedial action to correct the reporting issue.

The software update

According to the CFTC order, SocGen, a provisionally registered swap dealer, updated the software of its foreign exchange trading platform in July 2014.

After the update, the platform began incorrectly coding the firm as the counterparty for FX swaps, FX forwards and non-deliverable forwards instead of the reporting party, the order said.

Swaps are financial products used to hedge against different market risks, in this case the change in foreign exchange rates. A forward contract is an agreement to buy or sell an asset at a specific price on a future date.

Due to the update, neither the bank nor its counterparty for the trades reported the transactions to its swap data repository, the Depository Trust and Clearing Corp., as required by the CEA and CFTC rules, the agency said.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Commodity Exchange Act to require that market participants clear and report swap transactions in order to increase transparency and reduce risks to the financial markets.

Error detected

SocGen discovered the reporting problem in January 2015 but did not solve the coding error until April 2015, the order said.

The bank allegedly informed the CFTC’s division of market oversight on Sept. 18, 2015, and the division’s staff told the bank it had to submit reports on the unreported trades to the CFTC. The division also said that the DTCC had to publish some of those reports to the public.

According to the order, the reports indicated that SocGen needed to back-load report about 54,000 trades with the data repository.

The bank and DTCC worked with the agency’s staff on how to best proceed with back-loading the trades. They agreed to back-load about 52,000 trades in October 2015 and report about 2,000 trades in April and May 2016, the order said.

In re Societe Generale SA, No. 17-01, order issued (C.F.T.C. Dec. 7, 2016).