CFTC Offers New Incentives for Companies to Report Their Own Wrongdoing
The derivatives market regulator clarifies criteria and credit it will give to companies that voluntarily report misconduct
The Commodity Futures Trading Commission said it would give companies that voluntarily report potential misconduct more lenient penalties under a new enforcement advisory.
In a memo published on Tuesday, the derivatives market regulator issued new guidelines clarifying how it would give credit to a company that reports its own potential misconduct, cooperates with an agency investigation and addresses a reported issue.
A company that voluntarily reports potential wrongdoing and fully cooperates can receive a discount from the CFTC cutting the cost of a penalty to less than half the initially calculated amount in some cases.
Giving a grade
The CFTC’s enforcement division will assign a company’s efforts one of three rankings—“no self-report,” “satisfactory self-report” or “exemplary self-report”—based on information the company submits. The agency said a company can receive full credit if its disclosure is voluntary, timely, complete and made directly to the CFTC. The agency is also giving companies “a safe harbor” from further penalties if initial self-reporting is inaccurate but promptly corrected.
The CFTC’s enforcement division will evaluate the quality of a company’s cooperation with one of four rankings: “no cooperation,” “satisfactory cooperation,” “excellent cooperation” or “exemplary cooperation.”
The regulator will also assess a company’s mitigation efforts as part of a cooperation evaluation, including efforts to prevent a future violation and whether an outside compliance monitor or consultant might be recommended.
The benefits of cooperation
Under the new advisory, a company meeting the criteria for exemplary self-reporting and cooperation can receive a discount of up to 55% of an initial calculated penalty.
The CFTC said its efforts to provide cooperation credit aren’t new but weren’t applied consistently in the past.
Acting CFTC Chairman Caroline Pham said the new guidelines are “creating meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.”
The guidelines will free up the regulator’s resources to focus on implementing the Trump administration’s goals of combating fraud and scams, Pham said.
“From the beginning, I have encouraged firms to self-report to proactively take ownership, ensure accountability and prevent future violations,” she said in a statement.
The advisory follows guidelines from other law enforcement agencies and regulators that aim to encourage companies to report misconduct.
The Justice Department, under the Biden administration, expanded its leniency policies to persuade companies to report their misconduct to prosecutors. A policy announced in 2023 said companies that disclose wrongdoing to the Justice Department won’t be prosecuted if they fully cooperate with investigators and fix underlying problems, including shortcomings in compliance programs. Department officials have said more companies were choosing to voluntarily disclose misconduct because of the policy.