CFTC Enforcement Division Adopts New Cooperation Policy

The CFTC's Division of Enforcement adopted a new cooperation policy that (i) defines when the Division will decline to recommend an enforcement action and (ii) sets the penalty reductions available to parties that self-report misconduct, cooperate, remediate, and pay restitution.

According to the Staff Advisory, the Division will not recommend an enforcement action when a party meets five conditions: a voluntary self-report, full cooperation, timely and appropriate remediation, full restitution or disgorgement where applicable, and no aggravating circumstances that preclude eligibility. The Advisory limits disqualifying aggravating circumstances to: (i) pervasive intentional or reckless misconduct by ownership or senior management, (ii) intentional or reckless misconduct over an extended period, (iii) recidivist intentional or reckless misconduct, and (iv) conduct that caused particularly egregious aggregate harm. The policy retains discretion to decline an action even when those circumstances are present.

The Division said that parties that fall short of a full declination may still receive penalty reductions. If a party provides full cooperation, remediation, and restitution, but its good-faith self-report did not qualify as a voluntary self-report, the Division will recommend a reduction of at least 50 percent from its good-faith calculated penalty. If the party is ineligible because of aggravating factors, the reduction is at least 25 percent, but not more than 75 percent. For parties not eligible under either path, the Division may still award cooperation credit where the party remediated and paid restitution, with the reduction limited to no more than 25 percent absent extraordinary circumstances.

The policy applies to both entities and individuals. All resolutions under it must be approved by the Director of Enforcement and, where applicable, submitted to the Commission.

The Division said the policy takes effect immediately and it supersedes all prior policies on those subjects, including the Division's February 2025 enforcement advisory (See prior coverage.)