Key Points
- On March 11, 2025, CFTC Acting Chair Caroline D. Pham announced a new 30-day “enforcement sprint” during her keynote address at the Futures Industry Association’s 50th annual conference, a unique approach to resolving matters which may be of interest to registrants with open investigations or matters to self-report which meet certain criteria.
- Under this initiative, the CFTC is seeking expedited resolution—within 30 days—of investigations involving compliance issues, such as recordkeeping or reporting violations, where there is no customer harm, fraud or market abuse. One of the CFTC’s aims is to free up the Division of Enforcement’s resources so that it can focus on fraud and manipulation cases—which have historically been among the agency’s highest enforcement priorities.
- Firms that wish to participate must contact CFTC staff within two weeks of March 11, 2025, the date of the speech. Acting Chair Pham explained that when evaluating potential resolutions, the CFTC would apply the newly announced February 25, 2025 enforcement advisory to determine reasonable civil monetary penalties.
Background
On February 25, 2025, the U.S. Commodity Futures Trading Commission (CFTC) released an enforcement advisory regarding the impact of self-reporting, cooperation and remediation in enforcement cases (the “Enforcement Advisory”). The Enforcement Advisory aims to enhance transparency regarding the benefits of self-reporting and cooperation by providing market participants with a matrix (described in more detail below) that explains how these factors will be incorporated into a credit-based system. The CFTC will use the matrix as part of a presumptive discount when determining appropriate penalty reductions.
Separately, on March 11, 2025, Acting Chair Pham delivered a keynote address at the Futures Industry Association’s (FIA) 50th Annual International Futures Industry Conference. During her remarks, Acting Chair Pham announced a 30-day “compliance and remediation initiative or enforcement sprint” to reach resolutions in pending enforcement actions. She reported that, in the six weeks since she assumed the role of Acting Chair, the CFTC has identified “over 200 open and pending matters,” some of which were many years old, and “has completed or addressed about a fifth of our open matters and dispositioned about a third of our open investigations.” The 30-day sprint offers the potential for the agency to resolve a significant number of additional pending investigations.
30-Day Compliance and Remediation Initiative
As outlined by Acting Chair Pham, the 30-day initiative is designed to encourage market participants to resolve non-fraud matters, including investigations regarding reporting and recordkeeping violations with no customer harm or market abuse. Firms that “provide a new self-report of a violation” are also eligible for the program.
Firms that wish to participate should prepare written materials for Division of Enforcement staff, copied to Brian Young, Director of Enforcement, and Chuck Marvine, Acting Chief of the Retail Fraud and General Enforcement Task Force, that include: (1) an update on the market participant’s remediation efforts and (2) a reasonable settlement offer based on the facts of the case and the guidance in the Enforcement Advisory.
In her remarks at the FIA conference, Acting Chair Pham signaled that the CFTC may be amenable to settling for lower penalties than has been the case in recent years. She alluded to past “heated debate” over penalties and criticized a recent trend in which “the CFTC has drastically increased” its penalties, “sometimes 10 or 20 times more” than prior penalties in similar cases. As part of the 30-day initiative, Acting Chair Pham stated that the CFTC will now take a “more holistic approach” to determining penalties by considering precedents “over the last 10 years, not just the last few years.”
Application of the Enforcement Advisory
As outlined in the Enforcement Advisory, the CFTC will apply a new mitigation credit matrix that describes the “presumptive Mitigation Credit” for which a party will be eligible if it has self-reported and/or cooperated. The matrix contains detailed percentages ranging from 0% reduction on the otherwise applicable penalty for no self-report and no cooperation, to a maximum of 55% reduction for an exemplary self-report and exemplary cooperation.
Mitigation Credit Matrix
Self-Reporting. The mitigation credit matrix includes a three-tiered scale for self-reporting: “No Self-Report,” “Satisfactory Self-Report” and “Exemplary Self-Report.” To receive credit, disclosures “must be voluntary, made to the Commission, made in a timely manner, and complete.” The key distinction between a Satisfactory Self-Report and an Exemplary Self-Report appears to be that in the former, the self-report “did not include all material information reasonably related to the potential violation that was known” to the party at the time of the self-report, whereas in the latter, the self-report provided all known material information and also “provided additional information that assisted the Division with conserving resources in the Division’s investigation.”
Of particular note, under the Enforcement Advisory, market participants can receive self-reporting credit for reports made to an operating division of the CFTC, provided it is “the primary division that is responsible for the interpretation and application of each regulation, as applicable, that is the subject of the potential violation.” This is a significant change from prior guidance from the CFTC, which limited self-reporting credit to situations where a party made the report to the Division of Enforcement.
Cooperation. The matrix establishes a four-tier scale for cooperation credit: “No Cooperation,” “Satisfactory Cooperation,” “Excellent Cooperation” and “Exemplary Cooperation.” The criteria for the various tiers include familiar considerations such as making presentations, performing internal reviews, analyzing violations and root causes, and taking corrective remedial actions. To qualify for Exemplary Cooperation, a party must cooperate “at a consistently high level throughout an investigation,” which is “frequently typified by proactive engagement and use of significant resources to provide material assistance to the Division’s investigation.”
Takeaways
- The CFTC’s new 30-day enforcement sprint to resolve compliance-related matters provides a unique opportunity for qualifying market participants to seek a resolution of ongoing investigations or qualifying new matters.
- Firms that seek to participate should make sure to meet the expedited timetable set forth in Acting Chair Pham’s speech. In doing so, they should apply the CFTC’s new cooperation credit matrix, grading their own cooperation and self-reporting in a manner consistent with the guidance.
- With respect to penalties, the CFTC has invited parties to rely on enforcement precedents going back ten years, which will likely open the door to lower penalties than have been imposed in recent years.
