Bourne supremacy ends: CFTC charges him with fraudulently mismarking swaps
The CFTC Order requires Bourne to pay a $350,000 civil penalty and permanently bans Bourne from trading on exchange and seeking registration with the CFTC, among other prohibitions.
In connection with this action, the Division of Enforcement also issued its first public declination letter to Deutsche Bank AG and Deutsche Bank Securities Inc. (Deutsche Bank or the Bank) stating it is closing the related investigation into Deutsche Bank based, in part, on the Bank’s actions to identify the fraudulent activity, self-report the activity to the CFTC, fully cooperate, and proactively remediate.
The CFTC Order against Bourne finds that from June 15, 2017 to at least July 6, 2017, Bourne mismarked the valuations for inflation swap instruments in an attempt to hide from Deutsche Bank estimated trading losses of more than $16 million.
In doing so, Bourne ignored Deutsche Bank’s policy dictating the method for entering end-of-day marks into an internal spreadsheet used for internal asset valuations, according to the Order.
The Order also finds that after bank confronted Bourne about the discrepancies, Bourne attempted to conceal his misconduct by altering historical versions of the internal spreadsheet to create the appearance that he had complied with the policy.
The mismarked swaps were ultimately reported to swap counterparties and to the CFTC. The Order finds that this conduct constituted fraud under the federal commodities laws.
The Division of Enforcement notified Deutsche Bank that the CFTC’s related investigation of the Bank is being closed.
In its declination letter, Enforcement notes that its decision to close the investigation was based on a number of factors, including the Bank’s timely, voluntary self-disclosure of the matters described above, which the Bank discovered itself as part of its compliance program; full cooperation (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct); and proactive remediation efforts directed at strengthening and enhancing the Bank’s swap valuation process.
The CFTC Division of Enforcement staff members responsible for this case are Amanda Burks, Kara Mucha, Alison Wilson, James H. Holl, III, and Rick Glaser. ■