The CFTC’s Division of Enforcement (“Enforcement”) is tasked with investigating and prosecuting alleged violations of the CEA and the CFTC’s regulations.
Enforcement obtains information regarding potential violations through a number of sources, including other divisions at the CFTC, other governmental authorities, SROs, whistleblowers, cooperating witnesses, self-reports, customer complaints, or members of the public. Upon receiving information indicating a potential violation of the CEA or CFTC regulations may have occurred, Enforcement will conduct a preliminary inquiry to assess the viability of the lead. If it determines that the information requires further investigation, it will launch an in-depth investigation into the matter to understand the facts and determine (i) whether any rule violation occurred, and (ii) whether an enforcement action should be recommended.
During an investigation, Enforcement has broad powers it can utilize to obtain relevant information. Enforcement can obtain evidence through: voluntary statements; the inspection of records required to be maintained by registrants; information provided by other agencies or SROs; analyzing market data; and by compelling testimony and/or the production of documents through administrative subpoenas.
Ultimately, if Enforcement believes a violation has occurred, it will bring the matter before the CFTC. The CFTC must authorize Enforcement to file or settle any enforcement actions. Enforcement actions may be filed in federal court or in administrative proceedings. If Enforcement instead believes the action should be settled, it will circulate a memorandum to the CFTC setting forth its reasons for recommending settlement. An enforcement proceeding may only be settled by order of the CFTC.
Enforcement may recommend a variety of sanctions as a result of an enforcement action, including both monetary and remedial relief. Specifically, sanctions may include restitution, disgorgement, the payment of a civil monetary penalty, burdensome remedial actions such the imposition of a third-party monitor, heightened reporting requirements, or the suspension, denial, revocation, or restriction of registration and trading privileges.
If, during its investigation, Enforcement has reason to suspect criminal violations of the CEA have occurred, it may refer the matter to the Department of Justice or the appropriate state authority.