An error via a software update caused derivative transaction reporting problems for the French banking giant.
The CFTC has issued a penalty of $450,000 against Société Générale SA over charges that the French banking giant failed to properly report non-deliverable forward transactions to a swap data repository (SDR), and failed to report many FX swap, FX forward, and non-deliverable forward transactions to an SDR.
The cause of the problem was a glitch in a software update and the regulator acknowledges that Société Générale “cooperated with the CFTC’s investigation by self-reporting its errors, undertaking an internal investigation, and taking remedial action to correct its reporting failures.”
Although Société Générale serves as a swap dealer based in Paris, the firm has been provisionally registered with the CFTC in that capacity since December 31, 2012, according to the commission. The regulator issued the order filing and settlement after it decided the firm was in violation of the Commodity Exchange Act (CEA) and CFTC regulations.
Thus the CFTC order will require “Société Générale to pay a $450,000 civil monetary penalty and to cease and desist from committing further violations of the CEA and CFTC Regulations, as charged,” according to the CFTC.
“In particular, the order states that the CEA requires parties to a swap transaction to report swap transaction information to a registered SDR in a timely manner, and requires swap dealers to report swap transactions to an SDR within such time period as prescribed by the CFTC,” officials add.
In fact, CFTC regulations 43 and 45 say that firms must conform to “real-time public reporting, public availability of swap transaction and pricing data, and reporting of creation and continuation data to an SDR,” according to the regulator. The reporting requirements are a key part of the post-Great Recession regulatory reforms “designed to enhance transparency, promote standardization, and reduce systemic risk.”
CFTC officials say that in July 2014 Société Générale “implemented a software update to its FX trading platform which led to the trading platform incorrectly coding Société Générale’s counterparty as the reporting counterparty for certain FX swap, FX forward, and non-deliverable forward transactions, which resulted in no reports being made to the SDR regarding the swaps.”
The regulator reports that Société Générale discovered the software update error months later in January 2015, “and it was not until April 2015 that Société Générale was able to fix it,” according to the CFTC.
In addition, Société Générale “initiated a project to identify trades affected by the coding error and in September 2015 notified CFTC staff about its failure to report,” CFTC officials say. “According to the order, Société Générale back-loaded approximately 51,821 unreported transactions in October 2015 and in April and May 2016 made submissions to its SDR for approximately 2,024 non-deliverable forward transactions.”
FTF News reached out to officials at Société Générale for any further comment.
“Société Générale is pleased to have resolved the matter,” a spokesperson for the firm told FTF News.
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