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Wells Fargo Must Pay $14.5 Million After Violating Swap Dealer Business Conduct Rules

The U.S. Commodities Futures Trading Commission (CFTC) recently ordered Wells Fargo Bank to pay $14.5 million as a result of multiple violations of swap dealer business conduct standards.

According to the CFTC, Wells Fargo “failed to deal with a counterparty in a fair and balanced manner based on principles of fair dealing and good faith,” and “also failed to implement and monitor systems to ensure compliance with policies and procedures regarding communicating with counterparties in a fair and balanced manner.”

The penalty includes a civil fine of $10 million, with the remainder being restitution of money lost as a result of Wells Fargo’s actions. The CFTC also issued a cease and desist order to Wells Fargo to stop violating the commission’s business conduct standards.

Case background

The case has its roots going back to August 27, 2014, when Wells Fargo entered into a foreign exchange forward contract with another party to exchange $4 billion American for $4.347 Canadian. This exchange was to be priced at the weighted average spot rate of the Canadian dollars Wells Fargo acquired in the spot market, with an adjustment added.

Employees of Wells Fargo were aware at the time that the deal would require the bank to give a weighted average rate based on spot trades that actually occurred. However, the bank did not have any system in place that would accurately track trades that were used to fill the other party’s order. This meant the bank did not properly communicate relevant information about the transaction in a manner that could be considered “fair and balanced” for these purposes.

For example, instead of calculating the weighted average price (which is what had been agreed), Wells Fargo picked a rate it thought would be within range of the true weighted average, which would make it acceptable to the other party.

The lawsuit also alleged that for a period of nearly four years between August 2014 and May 2018, Wells Fargo did not implement or monitor policies that would have prevented such communication failures from happening again.

For more information about filing a whistleblower claim with the CFTC, contact an experienced whistleblower lawyer at Kardell Law Group.

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