The Commodity Futures Trading Commission (CFTC) put out an advisory on how the commission’s Division of Enforcement will evaluate self-reporting, cooperation, and remediation when recommending enforcement actions.
This marks the first time the Division will use a matrix to determine the appropriate mitigation credit to apply. Further, the advisory provides fair notice to the public and guidance that is designed to ensure due process in the Division’s investigations and enforcement actions.
“Today, the CFTC is finally making the improvements that I have long proposed are necessary to ensure lawful enforcement, and also implements the Administration’s Executive Order,” Acting Chairman Caroline Pham said. “From the beginning, I have encouraged firms to self-report to proactively take ownership, ensure accountability, and prevent future violations. By making the CFTC’s expectations for self-reporting, cooperation, and remediation more clear—including a first-ever matrix for mitigation credit—this advisory creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.”
Specifically, the advisory lays out he framework that the Division will use to assess self-reporting, cooperation, and remediation in investigations and enforcement actions.
“Critically, it will enable the CFTC to do more with less and free up enforcement resources to focus relentlessly on catching fraudsters and scammers, helping victims, and promoting market integrity. Today’s advisory gets back to basics by returning to decades of prior CFTC policy on self-reporting and is aligned with best practices for assessing penalties followed by the Department of Justice and other U.S. financial regulators. This ‘no-surprises’ approach is straightforward and demonstrates the CFTC’s renewed commitment to fair treatment under the law and principles of regulatory consistency, transparency, and clarity,” Pham added.
The Division will evaluate self-reporting on a three-tier scale: No Self-Report; Satisfactory Self-Report; and Exemplary Self-Report. To receive full credit, disclosures must be voluntary, made to the Commission, made in a timely manner, and complete. Reports can be made to either the Division of Enforcement or to one of the Commission’s other Divisions with oversight responsibility.
The Division will evaluate cooperation on a four-tier scale: No Cooperation; Satisfactory Cooperation; Excellent Cooperation; and Exemplary Cooperation. The Division will evaluate remediation as a part of its evaluation of cooperation and consider whether a party engaged in substantial efforts to prevent a future violation. Other CFTC Divisions will be involved in the assessment of remediation.
The advisory also includes a Mitigation Credit Matrix describing the presumptive mitigation credit that a party may be eligible for if that party has self-reported and/or cooperated. The presumptive Mitigation Credit ranges from 0 percent for no self-report and no cooperation to 55 percent for an exemplary self-report and exemplary cooperation.
“Our goal with this advisory is to obtain accountability while encouraging efficiency and conserving government resources by giving entities a clear reason to self-report and cooperate,” Division of Enforcement Director Brian Young said. “This advisory informs both staff and the public precisely how to do that. Based on my experience in criminal practice, I believe policies that encourage transparency and cooperation yield efficiencies and better justice outcomes.”