November 5, 2020

CFTC guides staff on the recognition of cooperation, remediation and self-reporting in enforcement orders

The Division of Enforcement of the Commodity Futures Trading Commission has published new information to guide enforcement staff regarding a respondent company’s cooperation, remediation or self-reporting in an enforcement order.  The CFTC emphasized that the new guidance does not change the existing practices of the Division of Enforcement in terms of how the agency evaluates self-reporting, cooperation or remediation, or even how the enforcement staff takes these factors into account when considering reductions in penalties; it merely clarifies how the recognition of these factors is to be reflected in CFTC enforcement orders.

Noting that the purpose of the CFTC’s enforcement program is to promote a culture of compliance within the markets it regulates, the agency has laid out the potential scenarios in which self-reporting, cooperation or remediation may be referenced:

  1. The respondent company has not self-reported, cooperated or demonstrated remediation – the Division of Enforcement will not recommend that the enforcement order publicly recognize these factors;
  2. The company did not self-report, but has since cooperated or remediated, but not extensively enough to warrant a reduction in penalty – the CFTC may nevertheless recommend recognition of these factors if cooperation or remediation have been cognizable, and have gone beyond what the law requires;
  3. There was no self-reporting, but the company has cooperated substantially, resulting in a reduced penalty – where the respondent’s cooperation has materially advanced the CFTC’s investigation, or the respondent has engaged in substantial remediation, the Division of Enforcement will recommend the inclusion of language in the enforcement order recognizing the conduct – even describing the acts of cooperation or remediation that merited recognition — and noting a reduced penalty;
  4. The respondent company has self-reported, cooperated substantially, and taken measures to remediate, resulting in a substantially reduced penalty – the Division will recommend the most significant reduction in the penalty (even reducing the penalty to zero in extraordinary circumstances), and will recommend that the same be acknowledged in the enforcement order, including a description of the meritorious acts of self-reporting, cooperation and remediation.

The new guidance has been published in the CFTC’s Enforcement Manual.  In recent months, the CFTC has updated its enforcement guidance on civil monetary penalties and the evaluation of corporate compliance programs.

CFTC press release | Memorandum | CFTC Enforcement Manual