CFTC Commissioner Goldsmith Romero Calls for Greater Enforcement Accountability

Ilan T. Graff Commentary by Ilan T. Graff

CFTC Commissioner Christy Goldsmith Romero called for regulators to stop routinely accepting "neither-admit-nor-deny" settlements and proposed a Heightened Enforcement Accountability and Transparency ("HEAT") test that would require firms to admit wrongdoing as a condition of settlements.

In a statement, Ms. Goldsmith Romero focused on achieving greater accountability in enforcement settlements and criticized the CFTC and other regulators for their "longstanding and routine practice of not seeking admissions of wrongdoing when settling the overwhelming majority of enforcement cases," even in instances where it would be beneficial to the public interest. She said that this practice is not unique to the CFTC and that it "undercuts a regulator's efforts to seek justice for victims" and "protect[s] defendants from the collateral consequences of admitting their unlawful conduct and fully accepting responsibility." She added that "[w]ithout full accountability, the deterrent effect for future violations of the law - by the defendant, and others - is significantly reduced."

Ms. Goldsmith Romero proposed instituting a HEAT test to help determine when it would be beneficial to require the defendant to admit to wrongdoing. The test would help determine if there is a need for elevated accountability, including cases (i) involving "egregious misconduct," (ii) perpetuating a criminal scheme or criminal obstruction of an investigation, (iii) posing significant risk to consumers or markets, (iv) involving repeat offenders or (v) that present a needed opportunity "to send a pronounced message about particular conduct or practices."

Ms. Goldsmith Romero said that certain cases will continue to merit the acceptance of "neither-admit-nor-deny" settlements, similar to how in certain cases accepting a guilty plea may be more appropriate than going to trial. But she argued that this practice should be the exception rather than the norm, and that regulators should be more willing to proceed to trial if firms do not accept settlement agreements without no-guilt clauses.

Commentary

Commissioner Goldsmith Romero situates her call for greater accountability as part of a broader enforcement trend surrounding admissions that began during the Obama administration and to which the SEC has signaled renewed commitment. Ms. Goldsmith Romero's extensive experience as an SEC enforcement attorney and SIGTARP Special Inspector General is evident in her ability to articulate clear guidance for when admissions under her HEAT framework will be required - though embracing her call for more trials against those unwilling to admit misconduct would likely force the CFTC to make difficult choices as to the allocation of finite agency resources.

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