The Commodity Futures Trading Commission's (CFTC) Division of Enforcement has released an advisory notice designed to offer its enforcement staff clear guidance on recommendations for future enforcement resolutions to the Commission.

CFTC's Focus on Reducing Repeat Offenders

This advisory bullettin addresses key aspects of enforcement, including civil monetary penalties, corporate compliance monitors, consultant appointments, and the consideration of admissions in specific cases.

The CFTC's Chairman, Rostin Behnam emphasized the importance of transparency and accountability in enforcement actions: "Today, the Division of Enforcement announced steps showing how it will approach key terms of resolutions — civil monetary penalties, monitors, and admissions — to ensure greater transparency and answerability throughout the process.”

“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."

The Enforcement Director, Ian McGinley echoed this sentiment: "Accountability and minimizing future misconduct are important Commission and Division objectives.”

“We cannot keep seeing the same entities before us with the same problems. This advisory provides staff the guidance to achieve these objectives and enables the public to understand how the Division will operate."

Statement of @CFTCcgr on @CFTC Enforcement Division Advisory Regarding Penalties, Monitors and Consultants, and Admissions: https://t.co/7JPS1GLCoh

— CFTC (@CFTC) October 17, 2023

Revising the Approach: Assessing Civil Monetary Penalties

The advisory notice focuses on several key topics:

Deterring Misconduct through Appropriate Penalties:

The Division is revising its approach to assessing proposed civil monetary penalties to ensure they are sufficient for achieving both general and specific deterrence.

This may result in the Division recommending higher penalties than previously imposed in similar cases. The advisory bulletin also noted that the Division will consider recidivism when determining appropriate penalties, detailing the factors it will take into account.

Monitors and Consultants – Ensuring Remediation:

In cases where the Division lacks confidence that an entity will remediate misconduct independently, it may require the entity to engage a third party approved by the Division to assist in remediation.

This includes Monitors who make recommendations, test them, and report on their results, and Consultants who advise entities on compliance enhancements. Monitors will be recommended in cases of severe compliance and control failures, indicating a lack of commitment to effective compliance. However, consultants will be suggested in less severe cases.

Admissions – Achieving Accountability and Deterrence:

The advisory challenges the assumption that no-admit, no-deny resolutions are the default option. Instead, in each case, the Division will engage with respondents or defendants to discuss whether admissions are appropriate. The advisory outlines factors relevant to determining the suitability of admissions.

The advisory notice complements prior advisory updates and guidance issued by the Division. It underscores the Division's focus on accountability and the prevention of future misconduct when negotiating proposed resolutions recommended to the Commission. This proactive approach is aimed at promoting greater transparency and achieving a higher standard of integrity and public protection in the financial markets.