Gary DeWaal and Associates LLC

Bridging the Weeks by Gary DeWaal: August 18 to 29 and September 2, 2014 (Mortgage Securities Gone Bad; AML; Disruptive Trades; Shakespeare)

Bridging the Week    Compliance Weeds    My View   
Published Date: September 01, 2014

It’s been two weeks since the last edition of Bridging the Week, and summer is, if not officially, now unofficially over. It’s time to get back to work! That being said, there were a number of high-level enforcement matters in the financial services industry during the waning days of August, including two CFTC settlements and two anti-money laundering cases, both brought by a New York state agency, that touched upon very topical compliance themes: the importance of (1) having robust monitoring systems to detect potential issues and (2) not untowardly pressuring persons obligated to detect potential issues from accurately reporting on such problems. Also, the CME Group announced a new rule and issued new FAQs related to certain prohibited trade practices.

As a result, the following matters are covered in this week’s Bridging the Week:

Video Version:

Article Version:

Bank of America Will Pay US $16.65 Billion to Settle Various Regulatory Claims Related to Its Handling of Mortgage Instruments; Separately, Goldman Sachs Settles Dispute With Federal Housing Finance Agency

The US Department of Justice settled various federal and state civil claims against Bank of America related to its, and certain of its current and former subsidiaries’, handling of mortgage instruments and loans from 2004 to 2013.

Pursuant to the terms of the settlement, BofA agreed to pay up to US $16.65 billion in total: US $9.65 billion in fines, and the remainder in the form of direct relief to homeowners (for example, through reductions in the principal of outstanding mortgage loans and new loans) and the establishment of a tax relief fund to help certain homeowners with their potential tax liability resulting from their mortgage loan relief.

The settled matters included charges related to alleged conduct by Countrywide Financial Corporation and Merrill Lynch, companies acquired by BofA during the 2007—2009 financial crisis. The federal and state claims raised issues with BofA’s packaging, structuring and sale of residential mortgage-backed securities and collateralized debt obligations without disclosing negative facts about the quality of the underlying loans, and with the bank’s origination of risky mortgage loans that included making misrepresentations about their quality to Fannie Mae, Freddie Mac and the Federal Housing Administration. These agencies insured or subsequently acquired the loans after they were originated.

As part of its settlement, BofA agreed to a statement of facts in which the bank acknowledged many of the practices alleged to have been wrongful in the various federal and state claims. BofA expressly admitted its disclosure failures as part of its settlement with the Securities and Exchange Commission—one of the federal agencies that had sued BofA.

The settlement does not cover potential criminal liability or the liability of any individual.

According to the statement of facts, BofA’s acquisition of Merrill Lynch and Countrywide occurred after the events that gave rise to the charges related to those companies’ conduct.

Separately, in a similar matter in part, Goldman Sachs & Co. agreed to a settlement with the Federal Housing Finance Agency for alleged violations of federal and state securities laws in connection with Fannie Mae’s and Freddie Mac’s purchase of residential mortgage-backed securities sold by the company between 2005 and 2007. As part of this settlement, Goldman Sachs, on its own behalf and for related entities and persons, agreed to buy back the disputed securities for US $3.15 billion. Based on the current market value of these securities, FHFA estimates the value of this settlement to be US $1.2 billion. Goldman Sachs did not admit any liability or wrongdoing as part of its settlement.

Fannie Mae and Freddie Mac are government-sponsored enterprises whose purpose is to help expand the ability of financial institutions to grant mortgage loans by participating in the transformation of such loans into mortgage-backed securities that are sold in global capital markets. (For information on new SEC rules related to asset-backed securities, click here see the article elsewhere in this edition of Bridging the Week entitled “SEC Adopts Rules Aimed at Increasing Transparency Related to Asset-Backed Securities.”

CFTC Fines Merrill Lynch $1.2 Million for Not Having an Adequate Supervisory System for Its Exchange and Clearinghouse Fees Reconciliation Process

Merrill Lynch, Pierce, Fenner & Smith Incorporated agreed to pay a fine of US $1.2 million to the Commodity Futures Trading Commission related to the CFTC’s allegation that, from at least January 1, 2010, through April 2013, it failed to employ “an adequate supervisory system” related to the processing of exchange and clearinghouse fees charged to the firm’s customers.

This large fine was assessed despite Merrill apparently self-detecting its reconciliation issues, and endeavoring to correct them. Merrill is registered with the CFTC as a futures commission merchant.

According to the CFTC, in December 2012, the director of the fee group at Merrill brought to his manager’s attention the fact that he was not able to reconcile for November 2012 the amount of exchange and clearing fees collected from the firm’s customers and the amount of fees charged by the relevant exchanges and clearinghouses. These amounts should be equal.

In response, Merrill’s senior management reviewed the reconciliations for November and December 2012, and when they identified weaknesses, the firm commenced an internal review of reconciliations conducted by Merrill’s fee group. The firm also commenced a project to improve its reconciliation process, which included retaining two outside consulting firms to assist it and to help correct past problems.

Through its review, Merrill determined that exchange and clearinghouse fees for the Chicago Mercantile Exchange were not reconciled properly from January 2010 through October 2013 and those for the Chicago Board of Trade were done incorrectly from January 2011 to October 2013. According to the CFTC, for the relevant time, Merrill "paid more than $318 million in exchange and clearing fees to the CME and CBOT…, but had unexplained over-accruals of approximately $415,318 (0.14% of fees paid) from 196 clients."

This shows, claims the CFTC, that Merrill did not have an adequate supervisory system during the relevant time and “failed to perform its supervisory duties diligently.” The Commission also asserts that Merrill did not have procedures in place for staff during the relevant time on “how to conduct fee reconciliations.”

Under the terms of its settlement, in addition to paying a fine, Merrill is required to retain an outside consulting firm to review its fee reconciliation processes and procedures, provide training, and help the firm avoid futures law violations in connection with its clearing fee reconciliation process.

As part of its settlement, Merrill did not admit or deny any of the CFTC’s findings or conclusions.

My View: Some readers will reflect on the Merrill Lynch settlement and shake their heads. What is the reward, they may ask, for self-detecting a problem, voluntarily retaining two consulting firms to help fix the issue, mostly fixing the issue, and taking decisive action in connection with a found issue (e.g., firing a supervisor)? Does the CFTC truly believe human error can fully be avoided? Without having heard from staff of the Division of Enforcement, I am sure they will suggest that without Merrill Lynch taking its remediation steps in this matter, the settlement fine would have been greater. Perhaps. But whether it results in a smaller sanction or not in connection with a potential CFTC enforcement action, firms should continue to endeavor to ferret out problems, self-correct them promptly, and implement enhanced policies and procedures to help prevent a future reoccurrence. This is part of a robust compliance culture—whether the CFTC gives adequate credit or not.

CME Group Enacts Anti-Disruptive Trade Practices Rule and Guidance

The CME Group enacted a new rule prohibiting certain disruptive trading practices that mirrors equivalent prohibitions in the Dodd-Frank Act. Most basically, the rule requires that all orders “must be entered in good faith for legitimate purposes.”

In addition, the CME Group issued 22 frequently asked questions and answers regarding prohibited and non-prohibited conduct, and nine non-exclusive examples of prohibited activity.

Specifically, new CME Rule 575 makes it unlawful to (1) enter an order “with the intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution;” (2) “enter or cause to be entered an actionable or non-actionable message or messages with intent to mislead other market participants;” (3) “enter or cause to be entered an actionable or non-actionable message or messages with intent to overload, delay, or disrupt the systems of the Exchange or other market participants;” and (4) “enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.” Under this rule, messages generally are the same as orders, but could also include requests for quotes, creation of user defined spreads or administrative messages.

The new rule applies to open outcry and electronic trading, and during all times of trading sessions.

In general, as stated in its FAQs, the CME Group will consider misleading any order where the intent of the trades was to create “the false impression of market depth or market interest.”

The CME Group makes it clear that intent may be inferred:

Proof of intent is not limited to circumstances in which a market participant admits its state of mind. Where the conduct was such that it more likely than not was intended to produce a prohibited disruptive consequence without justification, intent may be found. Claims of ignorance, or lack of knowledge, are not acceptable defenses to intentional or reckless conduct. Recklessness has been commonly defined as conduct that "departs to far from the standards of ordinary care that it is very difficult to believe the actor was not aware of what he or she was doing."

In the FAQs, the CME Group provides many examples of specific factors it may consider in assessing a violation, including whether the purpose of an order was to prompt other persons to trade when they otherwise would not; whether the purpose of an order was for the trader to influence the price rather than change the trader’s position; or whether the trader’s intent was to mislead the market, among other matters.

The CME Group also indicates that a partial fill in response to an order does not “automatically” render an order in compliance with its new rules, although it may be one indication that the order was entered in “good faith.” Likewise, it is permissible under certain circumstances (i.e., pursuant to a pro-rata matching algorithm) for a trader to place an order for a quantity larger than it actually wants, provided the purpose of the order is to achieve an execution. However, "[p]articipants should be prepared to, and capable of, handling the financial obligations attendant to the full execution of their orders."

The new rule will be effective September 15 unless the Commodity Futures Trading Commission objects.

Compliance Weeds: The CME has historically prosecuted episodes of disruptive trading as violations of its prohibition against  engaging in acts inconsistent with just and equitable principles of trades or similar high level standards. The CME's new rule — although providing the CME a new explicit tool for prosecution — mostly gives insight into specific conduct it has always considered disruptive rather than prohibits new conduct. The FAQs that are included in the market advisory notice related to this new rule are comprehensive and should be reviewed by compliance professionals—particularly at high frequency trading firms—in order to avoid potential issues. The requirement of intent for all violations helps avoid issues created by the too-broad language under Dodd-Frank and the CFTC’s May 2013 interpretive guidance and policy statement (click here to access the CFTC's interpretive guidance) that could, in certain circumstances, capture trades that are part of legitimate market practices. Any person that trades CME Group products is subject to this new rule -- whether a member of CME Group or not.

And briefly:

FINRA Charges Wedbush Securities With Systematic Misconduct Related to Provision of Direct Market and Sponsored Access: The Financial Industry Regulatory Authority filed an administrative proceeding against Wedbush Securities Inc. related to alleged “egregious and systemic” anti-money laundering and supervisory issues from 2008 through 2013. These alleged issues arose, claims FINRA, because of the firm’s provision of direct market and sponsored access to the firm’s broker-dealer and other clients. According to FINRA, “[d]uring the relevant time, Wedbush’s system of regulatory risk management controls and supervisory procedures were not reasonably designed to manage the risk associated with its market access business … [including] potentially manipulative and suspicious trading by the Firm’s market access customers, such as layering, spoofing, wash trading, suspicious patterns of order cancellations and odd-lot manipulation.” In June 2014, the Securities and Exchange Commission also brought administrative charges against Wedbush and two of its executives for violations of its 2011 market access rule, among other related matters. (For more information on the SEC complaint, click here to see the article “Broker Dealer and Two Supervisors Charged with Market Access Violations” in the June 2 to 6 and 9 edition of Bridging the Week.)

Accounting Firm Sanctioned for Allegedly Removing Adverse Information From Report Filed With Regulator Regarding Client’s Non-Compliance With AML Requirements: PriceWaterhouseCoopers was fined US $25 million and suspended from accepting certain consulting engagements at financial institutions overseen by the NY State Department of Financial Services (DFS) for its issuance of a report to the DFS in 2008 that failed to disclose certain wrongful conduct by its client, Bank of Tokyo Mitsubishi. In 2013, the bank’s NY branch had agreed to a consent order with the DFS related to improper payments involving Iran, Sudan, Myanmar and certain entities on the US Department of Treasury’s specially designated national list. In agreeing to this settlement, the regulator had relied on the report issued by PwC about the bank’s practices that it considered “the product of an objective and methodologically sound process.” However, claims the regulator, the PwC report failed to include certain adverse information about its client that PwC had included in a draft report, but that its client had requested be removed from the final report submitted to the DFS.

My View: With all respect to Shakespeare, “to include or not to include” is really the important question these days for many professionals advising financial service firms or working within such entities in compliance or other control functions. Outside advisers engaged to issue reports to management regarding conduct that might be contrary to law, or internal staff required to author annual compliance or other control-oriented reports, must struggle between what they see, hear, and conclude, and how they write it, and the views of some management that may want a different emphasis in an official publication. These different perceptions can lead to tough discussions. In the end, however, a firm with a strong compliance culture will not seek to avoid accurate descriptions of facts being included in official documents no matter how embarrassing or how adverse the consequences of such disclosure may be.

CFTC Fines FirstRand Bank for Unlawful Pre-Execution Discussions Related to Soybean Futures Trades: Last week, the CFTC charged FirstRand Bank, Ltd., a South African-based financial services company, with non-competitive trading, in violation of applicable law and rules. According to the CFTC, the bank's violations occurred at various times from June 2009 to August 2011 when employees of FirstRand and another unnamed company had conversations prior to trading on opposite sides of trades involving Chicago Board of Trade soybean futures contracts. The CFTC claims that, during these conversations, the parties agreed on the precise futures contract they would trade opposite each other, the quantity, the direction each side would take (i.e., buy or sell), the price and the timing. The CFTC noted that FirstRand claimed it participated in these prearranged conversations to hedge positions on the Johannesburg Stock Exchange’s SAFEX Commodity Derivatives Markets where certain pre-arranged trades are permitted. Apparently, says the CFTC, FirstRand “mistakenly believed” that since SAFEX permitted pre-arranged transactions “so did the [Chicago Mercantile Exchange].” The CFTC also noted that, “[u]pon being alerted to concerns about its prearranged trading… FirstRand immediately ceased such trading and it has cooperated fully during the investigation.” FirstRand agreed to pay a fine of US $150,000 to resolve the CFTC’s charges and to augment its policies related to pre-arranged and non-competitive transactions, among other undertakings.

Standard Chartered Bank Agrees to Pay NYS Department of Financial Services US $300 Million for Failing to Fix AML Problems: Standard Chartered Bank is required to pay a US $300 million fine as part of a settlement with the NY State Department of Financial Services (DFS) over its alleged failure to fix anti-money laundering problems as required by a 2012 settlement between the bank and the DFS. As part of its 2012 settlement, the bank was required to retain an on-site independent monitor for 24 months to review its AML operations, including its transaction monitoring system. The monitor subsequently observed that the system failed to detect a number of “high-risk transactions” emanating from the bank’s branches in the United Arab Emirates and a subsidiary in Hong Kong, among other places. According to the DFS, this was “because of a lack of adequate testing and analysis both pre- and post-implementation of the transaction monitoring system and fail[ure] to adequately audit the transaction monitoring system.” As part of its current settlement with the DFS, the bank again agreed to upgrade its transaction monitoring system and temporarily to suspend US-dollar clearing services for certain clients from the UAE and Hong Kong, among other sanctions.

CME Group Fines Credit Suisse Securities for Untimely and Inaccurate Reporting of Block Trades: Credit Suisse Securities (USA) LLC agreed with CME Group to pay a fine of US $120,000 because of its alleged failure timely to report various block trades between February 4, 2010, and August 29, 2012, and its inclusion of inaccurate execution times in reports to the Chicago Board of Trade regarding “many of these same block trades.” CME Group also alleged that, on one day subsequent to this period, Credit Suisse executed a block trade that did not meet the applicable minimum quantity threshold for block trades.

Cipperman Compliance Services Survey Finds Financial Services Firms Do Not Invest Adequately in Compliance Function: Cipperman Compliance Services, Inc., a Pennsylvania-based provider of compliance services to registered advisers and funds, has issued a survey of mostly compliance professionals that suggests not all financial services firms may be investing adequately in compliance resources. According to the company’s analysis of its survey of more than 110 persons associated mostly with asset managers, broker-dealers, alternative managers and wealth managers, “a common finding was that firms are understaffing and underfinancing the compliance function.” The company’s analysis found that “while the majority of financial service organizations say they value compliance, few compliance professionals believe their firms are managing the burden well.” Most of the respondents were associated with firms with US $5 billion of assets or less. (For an interesting report on the cost of compliance in the hedge fund industry, click here to see the 2013 KPMG/AIMA/MFA survey entitled “The Cost of Compliance.”)

CME Group Amends Requirements Related to Pre-Execution Communications for CME and CBOT Interest Rate Options: CME Group increased the mandatory waiting time to 15 seconds between entry of a request for quote and a request for cross in Chicago Mercantile Exchange and Chicago Board of Trade interest rate options executed on its Globex platform. This change was scheduled to be effective August 24.

Compliance Weeds: CME Group has strict rules regarding pre-execution discussions (ICE Futures U.S. and other designated contract markets have similar requirements). These include discussions that relate to the size, side of market or price of an order or a potential order. In general, pre-execution communications are prohibited in connection with transactions executed on the live trading floors of the CME (subject to limited exceptions), CBOT, New York Mercantile Exchange and Commodity Exchange. Pre-execution communications are permitted for transactions executed on CME Globex for all CME, NYMEX and COMEX futures and options products. Pre-execution communications for some (but not all) CBOT futures and options products executed on Globex are also permitted, but a different rule may apply to a futures contract and the related options contract (e.g., futures and options on grain and oilseed). A person on whose behalf a pre-execution communication occurs must have previously consented to such communication, and no person involved in a pre-execution communication may disclose the details of such conversation to any other person or take advantage of the information discussed in such conversation, except as necessary to execute the trade. Other conditions also apply. CME’s pre-execution communication rules are easy to misapply, but still must be studied and followed strictly. (See the link in the “For More Information” section below for a helpful CME Market Regulatory Advisory Notice on pre-execution communications.) Moreover, the Commodity Futures Trading Commission made clear again last week that unauthorized pre-execution discussions may cause a futures trade to be deemed a non-competitive trade in violation of applicable law and its rules. (Click here to see the article elsewhere in this edition of Bridging the Week entitled “CFTC Fines FirstRand Bank for Unlawful Pre-Execution Discussions Related to Soybean Futures Trades.”)

NFA Alerts Members of Recent Advisories Regarding FATF-Identified Jurisdictions With AML/CFT Deficiencies and on Promoting a BSA/AML Compliance Culture: The National Futures Association posted a helpful notice to members on its website noting that the Financial Action Task Force has updated its list of jurisdictions with anti-money laundering and counter-terrorist deficiencies, and the Financial Crimes Enforcement Network of the US Department of Treasury has issued an advisory on the importance of firms maintaining a robust anti-money laundering and Bank Secrecy Act compliance culture. (For more details regarding these matters, click here to see the article “FinCEN Issues Advisories for US Financial Institutions” in the August 22 2014 edition of Katten Muchin Rosenman LLP’s Corporate and Financial Weekly Digest.) 

ICE Futures U.S. Fines Two Firms for Non-Compliant EFPs: ICE Futures U.S. fined Louis Dreyfus Suisse S.A. and Odebrecht Agroindustrial International Corp. US $75,000 each for engaging in two exchange of futures for physical transactions on April 25, 2012 that did not comply with exchange rules. According to ICE Futures the EFP transactions lacked a cash or physical component and thus, effectively, constituted prearranged futures trades in violation of exchange rules. Apparently, according to ICE Futures, the trades were arranged “to repay monies owed from a prior transaction.” Louis Dreyfus and Odebrecht settled to this matter without admitting or denying the rule violations.

FINRA Fines Citigroup Global Markets US $1.85 Million for Not Providing Best Execution Related to Non-Convertible Preferred Securities: The Financial Industry Regulatory Authority sanctioned Citigroup Global Markets Inc. US $1.85 million for allegedly not complying with best execution requirements from January 1, 2008, through May 31, 2011, in connection with transactions for retail customers involving non-convertible preferred securities. According to FINRA, this violation arose because of flawed programing in a Citigroup proprietary order entry system that was used to facilitate transactions in the relevant securities, as well as a mistaken pricing methodology used by the relevant trading desk that did not consider the national best bid and offer in offering prices to customers. During the relevant time, claims FINRA, Citigroup received five inquiry letters related to best execution where, in response, it acknowledged problems with the pricing of the non-convertible preferred securities. According to FINRA, “[d]espite these red flags the firm failed to perform any meaningful supervisory reviews.” Citigroup agreed to its sanction without admitting or denying FINRA’s findings, and to provide more than US $638,000 (and interest) as restitution to relevant customers.

And even more briefly:

CFTC Says Its Okay for US FCMs to Hold Client 30.7 Funds with UK Investment Firms Subject to PRA or FCA Regulations: The Commodity Futures Trading Commission authorized US future commission merchants to hold their clients’ so-called Part 30.7 funds in the form of cash collateral with UK investment firms that may be subject to either oversight by the UK Financial Conduct Authority or the UK Prudential Regulatory Authority in connection with their handling of such funds. A staff interpretation issued last week now explicitly allows FCMs to hold clients’ cash collateral with investment firms that are also UK  deposit-taking banks under UK regulation.

CFTC Issues No-Action Relief to the Chicago Mercantile Exchange in Connection With Its Acceptance of Certain High-Grade Corporate Bonds at Third-Party Depositories to Satisfy Customers’ Initial Margin Obligations: The Commodity Futures Trading Commission has issued no-action relief to the Chicago Mercantile Exchange that allows depositories to provide to futures commission merchants a variation of a template acknowledgment letter mandated by the CFTC for depositories handling FCM customer funds accounts under a very limited circumstance. This relief is granted solely for FCMs and depositories participating in a CME-administered program that permits clearing members to pledge certain high-quality corporate bonds as initial margin for futures and cleared swaps positions.

CFTC Issues Temporary No-Action Relief From Confirmation Requirements for Certain Uncleared Swap Transactions: The Commodity Futures Trading Commission issued temporary no-action relief to swap execution facilities  that permit them in connection with a swap transaction (1) to incorporate by reference in mandatory confirmations to the counterparties terms from underlying previously negotiated agreements between the counterparties without such agreements being submitted to a SEF prior to execution and (2) not to receive and maintain the documents incorporated by reference. This relief is conditioned on the CFTC being able to gain access to the relevant agreements and documents upon request within a “reasonable” period and expires at midnight on September 15. (For more details regarding this no-action relief, click here to see the article “CFTC Provides Limited Relief to SEFs from Certain Confirmation and Recordkeeping Requirements” in the August 22 2014 edition of Katten Muchin Rosenman LLP’s Corporate and Financial Weekly Digest.)

ICE Clear Europe Limited Amends Rules to Make Clear That FCM/BD Clearing Members Cannot Offer Individually Segregated Accounts: ICE Clear Europe has amended its rules to further clarify that (1) its new individual client and omnibus segregation models required under the European Market Infrastructure Regulation are not available to US-sponsored principals and (2) clearing members which are US-registered future commission merchants or broker-dealers (BDs) may not act as sponsors of individually segregated sponsored accounts. These amended rules are expected to be effective September 3.

SEC Announces Pilot Program to Assess Impact of Tick Size for Smaller Companies: The Securities and Exchange Commission announced that the Financial Industry Regulatory Authority and the US national securities exchanges had filed a proposal to widen minimum quoting and trading increments for certain stocks with smaller capitalization to assess whether such changes might enhance their market quality. The pilot program will last 12 months after which time FINRA and the exchanges will assess the impact of the changes and provide the assessment to the SEC. (For more details regarding this pilot program, click here to see the article “SEC Announces Pilot Program to Widen Tick Sizes for Smaller Companies” in the August 29, 2014 edition of Katten Muchin Rosenman LLP’s Corporate and Financial Weekly Digest.) 

SEC Adopts Rules Aimed at Increasing Transparency Related to Asset-Backed Securities: The Securities and Exchange Commission adopted draft final rules related to asset-backed securities. In general, these rules require certain standardized information to be provided to investors about the assets underlying some asset-backed securities (such as residential mortgages, commercial mortgages, auto loans and auto leases) and increase the amount of time investors can consider a securitization offering. The new rules are effective 60 days after they are published in the Federal Register. (The SEC issued the final rules in draft form pending a required review at the US Office of Management and Budget.)

For more information, see:

Accounting Firm Sanctioned for Allegedly Removing Adverse Information From Report Filed With Regulator Regarding Client’s Non-Compliance With AML Requirements:
http://www.dfs.ny.gov/about/press2014/pr140818_PwC_Order.pdf

Bank of America Will Pay US $16.65 Billion to Settle Various Regulatory Non-Disclosure Claims Related to Its Handling of Mortgage Instruments:

US Department of Justice:
http://www.justice.gov/iso/opa/resources/9622014821111642417595.pdf
http://www.justice.gov/iso/opa/resources/617201482111178213394.pdf
SEC:
http://www.sec.gov/litigation/admin/2014/34-72888.pdf

Cipperman Compliance Services Survey Finds Financial Services Firms Do Not Invest Adequately in Compliance Function:
http://cippermancs.com/resources/ComplianceInvestmentandCommitmentFallsShort.pdf
http://cippermancs.com/resources/C-SuiteSurveyResults.pdf

CBOT Fines Credit Suisse Securities for Untimely and Inaccurate Reporting of Block Trades:
http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/CBOT-10-7428-BC-CREDIT-SUISSE-SECURITIES-USA-LLC.html

See also equivalent Frequently Asked Questions of ICE Futures U.S. regarding pre-execution communications (May 2014):
https://www.theice.com/publicdocs/futures_us/Pre_execution_Communication_FAQ.pdf

CFTC Issues No-Action Relief to the Chicago Mercantile Exchange in Connection With Its Acceptance of Certain High-Grade Corporate Bonds at Third-Party Depositories to Satisfy Customers’ Initial Margin Obligations:
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-106.pdf

CFTC Issues Temporary No-Action Relief From Confirmation Requirements for Certain Uncleared Swap Transactions:
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-108.pdf

CFTC Fines FirstRand Bank for Unlawful Pre-Execution Discussions Related to Soybean Futures Trades:
http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enffirstrandorder082714.pdf

CFTC Fines Merrill Lynch $1.2 Million for Not Having an Adequate Supervisory System for Its Exchange and Clearinghouse Fees Reconciliation Process:
http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfmerrillorder082614.pdf

CFTC Says Its Okay for US FCMs to Hold Client 30.7 Funds with UK Investment Firms Subject to PRA or FCA Regulations :
http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-110.pdf

CME Group Amends Requirements Related to Pre-Execution Communications for CME and CBOT Interest Rate Options:
http://www.cmegroup.com/rulebook/files/ra1404-5.pdf

CME Group Enacts Anti-Disruptive Trade Practices Rule and Guidance:
http://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/CME_CBOT_NYMEX_COMEX_RA1405-5.html

Federal Housing Finance Agency Settles with Goldman Sachs:

Fannie Mae:
http://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/2014%208%2022%20%20FHFA-Goldman%20Sachs%20Settlement%20Agreement_Fannie%20Mae.pdf
Freddie Mac:
http://www.fhfa.gov/Media/PublicAffairs/PublicAffairsDocuments/2014%208%2022%20%20FHFA-Goldman%20Sachs%20Settlement%20Agreement-Freddie%20Mac.pdf

See also initial complaint FHFA v Goldman Sachs:
http://www.fhfa.gov/SupervisionRegulation/LegalDocuments/Documents/Litigation/FHFA_v_Goldman_Sachs_Complaint.pdf

FINRA Charges Wedbush Securities With Systematic Misconduct Related to Provision of Direct Market and Sponsored Access:
http://disciplinaryactions.finra.org/viewDocument.aspx?DocNb=37085

See also SEC Action, In the Matter of Wedbush Securities et al.:
https://www.sec.gov/litigation/admin/2014/34-72340.pdf

FINRA Fines Citigroup Global Markets US $1.85 Million for Not Providing Best Execution Related to Convertible Preferred Securities:
http://disciplinaryactions.finra.org/viewDocument.aspx?DocNb=37223

ICE Clear Europe Limited Amends Rules to Make Clear That FCM/BD Clearing Members Cannot Offer Individually Segregated Accounts:
https://www.theice.com/publicdocs/regulatory_filings/ICEU_CFTC_081814.pdf

ICE Futures U.S. Fines Two Firms for Non-Compliant EFPs:
https://www.nfa.futures.org/basicnet/Case.aspx?entityid=0480142&case=2012-061&contrib=ICE

NFA Alerts Members of Recent Advisories Regarding FATF-Identified Jurisdictions With AML/CFT Deficiencies and on Promoting a BSA/AML Compliance Culture:
http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=4458

SEC Announces Pilot Program to Assess Impact of Tick Size for Smaller Companies:
http://www.sec.gov/divisions/marketreg/tick-size-pilot-plan-final.pdf

SEC Adopts Rules Aimed at Increasing Transparency Related to Asset-Backed Securities:
http://www.sec.gov/nb/reg-ab-adopting-release-draft.pdf

Standard Chartered Bank Agrees to Pay NYS Department of Financial Services US $300 Million for Failing to Fix AML Problems:
http://www.dfs.ny.gov/about/ea/ea140819.pdf

The information in this article is for informational purposes only and is derived from sources believed to be reliable as of August 30, 2014. No representation or warranty is made regarding the accuracy of any statement or information in this article. Also, the information in this article is not intended as a substitute for legal counsel, and is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The impact of the law for any particular situation depends on a variety of factors; therefore, readers of this article should not act upon any information in the article without seeking professional legal counsel. Katten Muchin Rosenman LLP and/or Gary DeWaal may represent one or more entities mentioned in this article. 

Quotations attributable to speeches are from published remarks and may not reflect statements actually made.

© 2024 Gary DeWaal and Associates LLC | 1 (212) 382-4615 | 1180 Avenue of the Americas, Suite 809, New York, NY 10036