CFTC Issues Enforcement Advisory on Criminal Referrals
Commentary by Kevin Harnisch
In an Enforcement Advisory, the CFTC outlined how it would handle potential criminal referrals to the Department of Justice ("DOJ").
The Division of Enforcement ("DOE") Advisory follows from Executive Order 14294, aimed at reducing overcriminalization of federal regulations. In the Advisory, the DOE described the factors staff should consider before referring cases involving possible violations of criminal regulatory offenses. These offenses are defined as violations of federal regulations that carry criminal penalties.
The factors include: (i) the harm or potential harm caused by the offense; (ii) any financial gain by the accused; (iii) whether the individual had industry expertise; (iv) signs of intent or awareness of wrongdoing; and (v) whether the person had a history of misconduct.
The DOE also restated that the CFTC is required to submit a report to the Office of Management and Budget by May 9, 2026, which must include a list of all criminal regulatory offenses enforceable by the CFTC or DOJ, the criminal penalties involved and the mental state required for conviction.
Commentary
The CFTC's enumerated factors for criminal referrals are not surprising. They are consistent with the DOJ's overall approach of focusing its prosecutorial resources on fact patterns involving more egregious conduct, including when the alleged perpetrator had specialized expertise or has engaged in a pattern of misconduct.