CFTC Division of Enforcement "Sets Forth" Guidance on Civil Monetary Penalty Recommendations

The CFTC Division of Enforcement (the "Division") "set forth" guidance for staff to consider when recommending civil monetary penalties in an enforcement action. The guidance will be included in the CFTC Enforcement Manual.

According to the CFTC, the guidance incorporates many existing practices by the Division, and is intended to establish a framework for the Division to reference when recommending a civil monetary penalty amount to the CFTC. As outlined in the guidance, the Division will take into consideration the following factors:

  • The Gravity of the Violation. The Division stated that the gravity of the relevant violation(s) is the primary factor when determining a civil monetary penalty amount. When considering the gravity of the violation, the Division will evaluate (i) the nature and scope (e.g., the Respondent’s involvement, if Respondent acted alongside others and if efforts were made to conceal the violation(s)), (ii) whether the misconduct was intentional or willful, and (iii) the impact of the violation(s) (e.g., harm to victims, benefit reaped by the Respondent; and effect on market integrity, customer protection or the mission of the CFTC).

  • Mitigating and Aggravating Circumstances. The Division will continue to assess all relevant mitigating and aggravating factors surrounding each enforcement action. Specifically, the Division will examine (i) mitigating factors, such as self-reporting, cooperation, returning funds to victims or taking steps to improve compliance programs, and/or (ii) aggravating factors, such as recidivism and attempts to conceal misconduct or disrupt an investigation.

  • Other Considerations. The Division may choose to consider other factors, including (i) net remedies and monetary relief to be imposed on a Respondent, in addition to remedies imposed in parallel actions by criminal authorities or other regulators, (ii) monetary or non-monetary relief from analogous cases, and (iii) efforts to conserve CFTC resources (e.g., timely settlement).

Commentary

The new guidance is the first issued by the CTFC since 1994. While the guidance largely memorializes existing practice within the Division, it does provide some welcome transparency regarding how the CFTC decides on penalty amounts. It also provides a useful roadmap for companies facing CTFC investigations on the Division's expectation for post-violation conduct and how to best frame their arguments to minimize the amount of a civil money penalty if they do face an enforcement action.

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