Morgan Stanley fined $5m for LEI and swaps reporting failures
08 October 2020 Washington
Image: JHVEPhoto / Adobestock.com
The Commodity Futures Trading Commission (CFTC) has settled charges against Morgan Stanley Capital Services, a provisionally-registered swap dealer, for failing to comply with swap data reporting obligations.
The charges were brought after it was found that Morgan Stanley had inaccurately reported transaction data for approximately 3 million swaps since 31 December 2012.
The charges, settled last week, required Morgan Stanley to pay a $5 million civil monetary penalty and to retain a qualified outside consultant to verify its remediation of the root causes of the 29 swap data violations set forth in the order.
The errors included failures to report accurate primary economic terms data fields, including legal entity identifier (LEI), unique swap identifier, notional amount, execution venue LEI, and price notation.
In addition, Morgan Stanley reported nearly half of its swaps for one asset class outside of the time parameters required by CFTC Regulation Part 43.
In its order, CFTC recognises Morgan Stanley’s cooperation with the Division of Enforcement’s investigation in the form of a reduced civil monetary penalty.
Darragh Hayes, director of LEI Worldwide, tells SLT: “Upon further investigation, we realised that Morgan Stanley Capital Services had a lapsed LEI between 2013 and 2018. It is quite simple to renew the LEI, and it is possible they did not realise it had lapsed.”
LEIs require annual renewal. When an LEI has been renewed within the last year the status shows as ‘active’ if it has not been renewed it will show as ‘lapsed’.
“Having a lapsed LEI can have profound consequences,” explains Hayes. “It means the data may be out of date, and therefore cannot be relied upon by regulators.”
Morgan Stanley was unable to immediately offer further comment on the LEI lapse or shed light on who the qualified outside consultant would be.
The charges were brought after it was found that Morgan Stanley had inaccurately reported transaction data for approximately 3 million swaps since 31 December 2012.
The charges, settled last week, required Morgan Stanley to pay a $5 million civil monetary penalty and to retain a qualified outside consultant to verify its remediation of the root causes of the 29 swap data violations set forth in the order.
The errors included failures to report accurate primary economic terms data fields, including legal entity identifier (LEI), unique swap identifier, notional amount, execution venue LEI, and price notation.
In addition, Morgan Stanley reported nearly half of its swaps for one asset class outside of the time parameters required by CFTC Regulation Part 43.
In its order, CFTC recognises Morgan Stanley’s cooperation with the Division of Enforcement’s investigation in the form of a reduced civil monetary penalty.
Darragh Hayes, director of LEI Worldwide, tells SLT: “Upon further investigation, we realised that Morgan Stanley Capital Services had a lapsed LEI between 2013 and 2018. It is quite simple to renew the LEI, and it is possible they did not realise it had lapsed.”
LEIs require annual renewal. When an LEI has been renewed within the last year the status shows as ‘active’ if it has not been renewed it will show as ‘lapsed’.
“Having a lapsed LEI can have profound consequences,” explains Hayes. “It means the data may be out of date, and therefore cannot be relied upon by regulators.”
Morgan Stanley was unable to immediately offer further comment on the LEI lapse or shed light on who the qualified outside consultant would be.
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