## Facts

- Commerzbank AG, a global bank headquartered in Germany, was provisionally registered with the CFTC as a swap dealer effective December 31, 2012.
- From December 31, 2012 through at least 2018, the CFTC found that Commerzbank’s management routinely failed to supervise its swap-dealer activities, leading to thousands of regulatory violations.
- Commerzbank lacked an effective process to determine whether swaps with certain non-U.S. counterparties were subject to U.S. swap-dealer requirements.
- The bank failed to report swap transactions to swap data repositories and failed to satisfy real-time and swap data reporting duties.
- The bank failed to submit required Large Trader Reports for certain physical commodity swap positions.
- The bank failed to execute certain swaps subject to the trade-execution mandate on required trading venues.
- In 2014, a consultant’s review reportedly identified extensive compliance gaps, including multiple high-risk items that could cause noncompliance with swap-dealer requirements.
- In annual Chief Compliance Officer (CCO) reports for 2014 and 2015, Commerzbank omitted discussion of significant identified gaps and represented that policies and procedures were effective, which the CFTC found materially misleading.
- After becoming aware of the CFTC investigation, Commerzbank still did not effectively address many compliance issues; an internal audit in 2018 found remediation remained inadequate in certain areas.
- The matter was resolved by a CFTC administrative consent order based on an accepted settlement offer, without admissions or denials for purposes of the proceeding.

## Issues

1. Whether Commerzbank, as a registered swap dealer, failed to diligently supervise its swap-dealer activities in violation of CEA § 4s(h)(1)(B) and CFTC Regulation 23.602.
2. Whether Commerzbank violated swap reporting, large-trader reporting, trade execution, and external business-conduct requirements under the CEA and CFTC regulations.
3. Whether Commerzbank made material omissions or materially misleading statements to the CFTC in connection with swap-dealer compliance reporting, violating CEA § 6(c)(2).

## Decision

- The CFTC accepted Commerzbank’s Offer of Settlement and issued an order instituting proceedings, making findings, and imposing remedial sanctions.
- The CFTC found violations of the CEA and CFTC regulations, including provisions addressing supervision, swap reporting, large-trader reporting, execution requirements, external business conduct standards, and fraud based on material misstatements or omissions.
- The CFTC ordered Commerzbank to pay a $12 million civil monetary penalty.
- The CFTC imposed remedial undertakings, including retaining an independent outside consultant for two years and providing annual assessment and remediation reporting to the CFTC for two years.

## Legal Principles

- A swap dealer must maintain a supervisory and compliance system reasonably designed to ensure compliance with applicable CEA and CFTC requirements; pervasive operational failures may support a failure-to-supervise finding.
- Swap dealers must timely and accurately satisfy swap data reporting and real-time reporting obligations, including reporting to swap data repositories.
- Swap dealers with reportable physical commodity swap positions must timely file Large Trader Reports as required by CFTC regulations.
- Swaps subject to the trade-execution mandate must be executed on required trading venues consistent with CEA and CFTC execution rules.
- Required regulatory filings and communications, including CCO annual reports, must not contain material omissions or materially misleading statements regarding compliance program effectiveness or known compliance gaps.
- The CFTC may require structural remediation (e.g., independent consultant reviews and periodic reporting) in addition to monetary penalties to address persistent compliance deficiencies.

## Conclusion

The CFTC concluded that Commerzbank’s systemic supervisory breakdown caused widespread swap-dealer compliance failures and that the bank’s compliance reporting to the CFTC included material omissions and misleading assurances, warranting a $12 million penalty and multi-year independent review and reporting undertakings.


In re Commerzbank AG, CFTC Docket No. 19-03 (C.F.T.C. Nov. 8, 2018)