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CFTC Rewards for Cooperation Should Continue in 2018

2017 saw big changes regarding the way the Commodities Futures Trading Commission (“CFTC”) considers and rewards cooperation. In January, 2017, the CFTC issued two Enforcement Advisories (one for companies and one for individuals) outlining the new factors the will consider in evaluating cooperation by those under investigation.

In late September, the CFTC updated those guidelines to “provide greater transparency about what the Division requires from companies and individuals seeking mitigation credit.” Distinguishing its new policy from the original advisories, the update clarified that “the Division will reserve its recommendations for the most substantial reductions in civil monetary penalty for those instances where a company or individual has self-reported the misconduct and fully cooperated with the Division’s investigation and remediated.”

Prerequisites to Earning Cooperation Credit

Voluntary Disclosure: To qualify for cooperation credit under the update, a respondent must promptly and voluntarily disclose the violations prior to any imminent threat of exposure. The disclosure must include “all relevant facts known.”

Cooperation: Throughout the course of the CFTC’s investigation, a party seeking cooperation credit must meet the criteria outlined in the original Advisories, including, but not limited to:

  • Providing material assistance to the Commission;
  • Reporting and assisting in a timely manner;
  • Providing truthful, specific, complete, and reliable information;
  • Encouraging high-quality cooperation of all involved; and
  • Preserving information, explaining corporate documents, and quickly responding to subpoenas.

Additionally, the provision of credit must serve as an example and encourage others to self-report and cooperate as well.

Remediation: Upon discovery of misconduct, a respondent must timely and appropriately remediate flaws in compliance and control problems.

“Cooperation Credit”

Under the Updated Advisory, the Commission will recommend a substantial reduction in the civil monetary penalties if the above described requirements are met. Additionally, in “exceptional circumstances” the Division may decline to prosecute. However, a cooperating company or individual still must disgorge profit or, where applicable, pay restitution.

CFTC Enforcement in 2018

James McDonald, the Director of the Division of Enforcement, remarked in a speech on the Advisories that companies and individuals are “entitled not to self-report, to hope they don’t get caught, and then to defend themselves if they do. Those are their rights.”

However, McDonald also said the CFTC hopes to “shift the incentive structure” moving forward. He foresees greater cooperation among the Commission and those it regulates. Commission enforcements (or non-enforcements) in 2018 will demonstrate the practical effect of the new policies.

© Copyright 2019 Squire Patton Boggs (US) LLP


About this Author

Elizabeth Weil Shaw attorney Squire Patton Boggs

Elizabeth Weil Shaw assists clients primarily with government enforcement actions and inquiries, as well as internal investigations and compliance reviews. Liz has analyzed matters involving investigations by the US Securities and Exchange Commission, Department of Justice and State Attorneys General. She is a contributor to the firm's Anticorruption Blog.

Thomas E. Zeno, Squire Patton Boggs, Healthcare Fraud Lawyer, Economic Crimes Attorney
Of Counsel

Thomas Zeno has more than 25 years of experience in the US Attorney’s Office for the District of Columbia. During that time, Tom investigated and prosecuted economic crimes involving healthcare, financial institutions, credit cards, computers, identity theft and copyrighted materials. As the office’s Healthcare Fraud Coordinator for the last eight years, Tom supervised investigation strategies of agents from the Federal Bureau of Investigation, the Department of Health and Human Services, the Drug Enforcement Administration and the Medicaid Fraud Control Unit regarding healthcare offenses. He also served as the liaison with the office’s civil division on joint proceedings. In addition, Tom served for several years as the Executive Assistant US Attorney for Operations, where he helped supervise the criminal division of the office.

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