ARTICLE
4 January 2017

Bank Agrees To Pay Fine To Settle Benchmark Manipulation Charges

CW
Cadwalader, Wickersham & Taft LLP

Contributor

Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
A financial services firm and its parent company (collectively, the "firm") agreed to pay a $120 million penalty to settle CFTC charges alleging that the firm submitted false reports...
United States Finance and Banking

A financial services firm and its parent company (collectively, the "firm") agreed to pay a $120 million penalty to settle CFTC charges alleging that the firm submitted false reports in an attempt to manipulate the U.S. Dollar International Swap and Derivatives Association Fix ("USD ISDAFIX"), a global benchmark for interest rate products.

The CFTC alleged that certain traders at the firm intended to affect reference rates and spreads and, consequently, USD ISDAFIX by executing transactions in targeted interest rate products in order to move the USD ISDAFIX rate in a direction that would benefit derivative positions held by the bank, which were priced against this benchmark. The CFTC determined that certain traders at the firm made false submissions in order to skew the rates and spreads in a direction that would shift the USD ISDAFIX setting to reflect prices that were more favorable to the firm's trading positions.

The CFTC Order required the firm to (i) cease and desist from further violations, as charged, (ii) monitor and prevent trading intended to manipulate swap rates, (iii) maintain the accuracy of the firm's benchmark submissions, and (iv) enhance related internal controls and (v) pay a civil monetary penalty of $120 million plus post-judgment interest. The CFTC noted that it now has imposed over $5.2 billion in fines in enforcement cases relating to the manipulation of benchmarks.

In connection with the enforcement action, the SEC granted a waiver to the firm under the disqualification provision in Regulation D, Rule 506(d)(1)(iii).

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