Acting Director ("Director") of CFTC Division of Enforcement (the "Division") Vincent A. McGonagle issued guidance to staff on when to recommend that a respondent's self-reporting, cooperation or remediation be recognized in Commission enforcement orders.

In his Memorandum, the Director stated that "this guidance will be set forth in the Enforcement Manual, and it will be binding on Division staff." He outlined four circumstances, each meriting a different level of recognition:

  • "No self-reporting, cooperation or remediation": The Director stated that staff will not publicly recognize self-reporting, remediation or cooperation when the respondent has not engaged in such actions. He explained that a lack of recognition does not mean a respondent was "uncooperative or obstructive"; rather, the respondent did not cooperate in a manner that "materially advanced" the investigation.
  • "No self-reporting, but cognizable cooperation and/or remediation that warrants recognition, but not a recommended reduction in penalty": The Director stated that the Division will recognize a non-self-reporting respondent's cooperation or remediation if the respondent has done more than what is "merely . . . required by law," and specified that this level of recognition applies when a respondent has cooperated to some extent consistently with the factors set out by the CFTC, but the respondent's actions have not "materially advanced" the investigation enough to result in a reduced penalty.
  • "No self-reporting, but substantial cooperation and/or remediation resulting in a reduced penalty": The Director stated that if a non-self-reporting respondent's cooperation has "materially advanced" the Division's investigation and/or the respondent's remediation has substantially addressed the misconduct, staff will recognize such actions and further reflect them in a reduced penalty.
  • "Self-reporting, substantial cooperation and remediation, resulting in a substantially reduced penalty": The Director stated that if a self-reporting respondent has (i) substantially cooperated so as to "materially advance" the investigation and (ii) remediated in accordance with the self-reporting and cooperation advisories issued in 2017, the staff will recognize such actions and recommend the most significant reduction in penalty.

The Director emphasized that the Memorandum does not change the evaluation of a respondent's self-reporting, cooperation or remediation; instead, it clarifies how these assessments will be reflected in the enforcement action.

Commentary Kyle DeYoung

The guidance is the latest in a series of efforts by the CFTC to provide more transparency into its enforcement decisions. It follows recent CFTC guidance for evaluating compliance programs, guidance on civil money penalties, and the publication of its enforcement manual. While the new guidance does not change the way that the CFTC evaluates self-reporting and cooperation, it does provide some welcome clarity to respondents about how cooperation will be described in the CFTC's enforcement orders.

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