Recent CFTC Guidance: Cooperation, Self-Reporting, and Remediation in Enforcement Matters

November.18.2020

On October 29, 2020, the CFTC’s Division of Enforcement (DOE) issued guidance to the enforcement staff in considering whether to recommend that a respondent receive recognition for cooperation, self-reporting, and remediation in CFTC orders in enforcement actions.  The guidance does not change the DOE’s practice with respect to how it evaluates self-reporting, cooperation or remediation, but is intended to provide transparency related to when and how the DOE will recommend that these assessments be reflected and recognized in enforcement orders.

The memorandum sets out four potential scenarios: (1) where a respondent has not self-reported, cooperated or remediated, DOE will not recommend that the enforcement order publicly recognize self-reporting, cooperation or remediation; (2) where a respondent has not self-reported but has cognizable cooperation and/or remediation, DOE will recommend recognition but not a reduction in penalty; (3) where a respondent has not self-reported but has engaged in substantial cooperation and/or remediation resulting in a reduced penalty, DOE will recommend that certain language be included in the summary of the order recognizing such cooperation and/or remediation; and (4) where a respondent has self-reported, provided substantial cooperation and has remediated, DOE will recommend “the most significant reduction penalty,” and the inclusion of certain language in the summary of the order.  For each scenario, the main factor in determining whether to recognize cooperation is whether the respondent’s actions materially assisted the DOE’s investigation and whether it meets the criteria set out in other DOE self-reporting and cooperation advisories.  If the specific criteria are met, the DOE will recommend to the Commission that certain language reflecting the level of cooperation be included in the enforcement order.  The DOE points out that a determination that a respondent did not self-report, cooperate or remediate is not a determination that the respondent was uncooperative or obstructive.  The Guidance will be incorporated into the CFTC’s Enforcement Manual and is binding on DOE staff.