CFTC Releases Enforcement Advisory on Penalties, Monitors, and Admissions to Enhance Compliance

The Commodity Futures Trading Commission's (CFTC) Division of Enforcement has taken a step toward achieving greater transparency and accountability in its enforcement resolutions. In a move aimed at enhancing compliance, preventing misconduct, and deterring future violations, the Division has issued an advisory to guide enforcement staff in making recommendations to the Commission. The advisory outlines key considerations related to civil monetary penalties, corporate compliance monitors, consultants, and admissions.

CFTC Chairman Rostin Behnam emphasized the importance of these steps in promoting market integrity and safeguarding the public interest. He stated, "As our guiding statute sets forth goals of preserving market integrity and protecting the public, it is our duty to ensure that every enforcement action aims to elevate compliance and optimize deterrence."

Enforcement Director Ian McGinley echoed these sentiments, highlighting the necessity of accountability and minimizing future misconduct. He stated, "This advisory provides staff the guidance to achieve these objectives and enables the public to understand how the Division will operate."

Key Highlights of the Enforcement Advisory

1. Deterring Misconduct Through Appropriate Penalties: The Division is reevaluating its approach to assessing civil monetary penalties (CMPs) to ensure they are sufficient to achieve both general and specific deterrence. This shift may result in the Division recommending higher penalties in resolutions compared to previous similar cases. The advisory also highlights the consideration of recidivism as a factor in determining appropriate penalties. The Division will consider whether a person or entity is a recidivist and evaluate various factors in this context.
2. Monitors and Consultants – Ensuring Remediation: The Division acknowledges the need for third-party intervention in cases where it lacks confidence that an entity can effectively remediate misconduct on its own. In such instances, the Division will require the entity to engage a third party approved by the Division to aid in the remediation process. This includes Monitors, who provide recommendations, conduct tests, and report their findings to the Division, and Consultants, who offer advice on compliance enhancements. The Division anticipates recommending a Monitor in cases involving significant and/or pervasive compliance and control failures, indicating a lack of sufficient commitment to effective compliance. Consultants will be recommended in less severe cases.
3. Admissions – Achieving Accountability and Deterrence: The Division no longer considers "no-admit, no-deny" resolutions as the default approach for companies and individuals under investigation. Instead, it will engage with respondents or defendants to discuss whether admissions are appropriate on a case-by-case basis. The advisory outlines various factors that will be relevant in determining whether admissions are suitable in a given context.

The newly released advisory builds upon previous advisories and guidance provided by the Division. It underscores the Division's commitment to achieving accountability, deterring future misconduct, and enhancing compliance when negotiating proposed resolutions for recommendation to the Commission.

These initiatives reflect the CFTC's dedication to maintaining the integrity of the financial markets and ensuring that all participants adhere to the highest standards of compliance, accountability, and transparency. The advisory offers clear guidance to enforcement staff and industry stakeholders, paving the way for a more robust and responsive enforcement process.