The Commodity Futures Trading Commission (CFTC) levied a $10 million fine to Cargill on November 6, charging the company of “providing mid-market marks that concealed from counterparts and its swap data repository (SDR) its full markup on certain swaps.” This is in violation of the Commodity Exchange Act and commission regulations.
CFTC found that Cargill was providing counterparties and the SDR inaccurate marks. This action, in effect, concealed up to 90% of Cargill’s markup. CFTC also found Cargill did not “diligently supervise” the employees connected with the inaccurate marks.
“The Commission will vigorously pursue those who undermine the fairness and integrity of our markets, as Cargill did by providing marks that concealed its full mark-up on the swaps at issue in this case,” said CFTC director of enforcement James McDonald.
CFTC contends Cargill was not disclosing its full markup over a concern that doing so would reduce the company’s revenue, McDonald said.
“Participants in our markets are entitled to trust that information they receive from counterparties complies with governing laws and regulations,” he said. “Thanks to the hard work of the team in this case, we uncovered the misconduct and brought this action to ensure the marks on the swaps will be accurate going forward.”
In a statement, Cargill said the company is an advocate for “open, competitive and efficient swap markets” and does not expect customers to experience any interruption of its risk management products and services in the wake of the $10 million fine.
“Cargill takes its legal obligations and market integrity seriously and makes every effort to ensure compliance with all laws and regulations relevant to its businesses,” according to the company statement. “Cargill is satisfied to fully resolve this civil matter with the CFTC, which will allow it to continue focusing on meeting the risk management needs of its customers.”
In a separate statement, Cargill did not admit to wrongdoing but promised to “enhance its internal controls and employee training programs” within its swap dealer division.