Release Number 8429-21
CFTC Orders Mizuho Capital Markets LLC to Pay $1.5 Million for Swap Portfolio Reconciliation, Other Compliance and Supervision Failures
September 27, 2021
Washington, D.C. — The Commodity Futures Trading Commission today filed and settled charges against Mizuho Capital Markets LLC, a provisionally registered swap dealer, for failing to comply with certain swap dealer requirements concerning reconciling swap portfolios with its counterparties; providing disclosures to counterparties concerning the daily mid-market mark of swaps; and reporting swap transactions to a swap data repository (SDR); and related supervision failures.
The order imposes a $1,500,000 civil monetary penalty on Mizuho Capital and orders it to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged, and mandates its compliance with certain undertakings, including continuing its remediation efforts and updating the CFTC on its remediation efforts and compliance.
The CFTC recognizes the civil monetary penalty in this matter reflects a substantial reduction based upon Mizuho Capital’s self-reporting its violations to the CFTC, its substantial cooperation with the Division of Enforcement’s investigation, and its appropriate remediation.
“As demonstrated by today’s action, the CFTC will work vigorously to ensure the fairness and integrity of our markets by holding swap dealer registrants who fail to meet their compliance, regulatory and supervisory obligations accountable for their failures,” said Acting Director of Enforcement Vincent McGonagle.
Specifically, the order finds that Mizuho Capital’s compliance and supervision failures occurred from in or about 2013 to at least April 2021. The order finds that Mizuho Capital failed to establish, maintain, and follow written policies and procedures reasonably designed to ensure that it engages in portfolio reconciliation with its non-swap dealer counterparties. As a result of this failure, Mizuho Capital failed to engage in portfolio reconciliation with, or to provide all required portfolio reconciliation information to, its non-swap dealer counterparties for more than six years.
The order also finds that Mizuho Capital repeatedly failed to disclose daily marks, as well as the methodology and assumptions used to prepare daily marks, to a substantial portion of the counterparties for which Mizuho Capital was subject to daily mark disclosure requirements. As further found in the order, Mizuho Capital made various errors and omissions in its swap data reporting to an SDR pursuant to Parts 43 and 45 of the CFTC Regulations, which impacted at least one hundred thousand swaps. The order also finds that relating to these violations, Mizuho Capital Marks failed to maintain an adequate supervisory system and failed to perform its supervisory obligations diligently.
The CFTC thanks and acknowledges the assistance of the National Futures Association with this matter.
The CFTC Market Participants Division staff members who assisted with this matter are Rajal Patel and Pamela Geraghty.
The Division of Enforcement staff members responsible for this case are Alejandra de Urioste, Trevor Kokal, K. Brent Tomer, Lenel Hickson Jr., and Manal M. Sultan.