Release Number 8808-23

CFTC Releases Enforcement Advisory on Penalties, Monitors and Admissions

October 17, 2023

— The Commodity Futures Trading Commission’s Division of Enforcement today issued an advisory designed to give enforcement staff guidance on future enforcement resolution recommendations to the Commission. In particular, the advisory provides guidance on determining whether proposed civil monetary penalties are sufficient; when the imposition of a corporate compliance monitor or consultant is appropriate; what the duties and responsibilities of monitors and consultants should be; and whether admissions should be recommended in a particular enforcement action.

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,” said CFTC Chairman Rostin Behnam. “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.”

“Accountability and minimizing future misconduct are important Commission and Division objectives.  We cannot keep seeing the same entities before us with the same problems.,” said Enforcement Director Ian McGinley. “This advisory provides staff the guidance to achieve these objectives and enables the public to understand how the Division will operate.”

Specifically, the advisory gives staff guidance on the following topics:

  • Deterring Misconduct Through Appropriate Penalties: The Division is recalibrating how it is assessing proposed CMPs to ensure the CMPs are at the level necessary to achieve general and specific deterrence, which may result in the Division recommending higher penalties in resolutions than may have been imposed in similar cases previously. The advisory also notes the Division will factor recidivism in determining appropriate penalties to recommend to the Commission and details several of the factors the Division will consider in determining whether a person or entity is a recidivist.
  • Monitors and Consultants – Ensuring Remediation to Reduce Likelihood of Future Misconduct: The Division notes that in cases where it lacks confidence that an entity will remediate misconduct on its own, it will require the resolving entity to engage a third-party approved by the Division to assist in remediation. This will include Monitors—third parties engaged to make recommendations, test those recommendation, and report on the results of their work to the Division—and Consultants, third parties to advise the entities regarding compliance enhancements. Going forward, the Division anticipates recommending to the Commission that a Monitor be imposed in cases involving the most significant and/or pervasive compliance and control failures reflecting a lack of sufficient commitment to effective compliance, and a Consultant will be recommended in serious but less severe cases.
  • Admissions – Achieving Accountability and Deterrence: Companies and individuals under investigation should no longer assume no-admit, no-deny resolutions are the default. Rather, in each case, the Division will discuss with respondents or defendants whether admissions are appropriate. The advisory describes various factors relevant to the determination of whether admissions are appropriate.

The advisory supplements previous advisories and guidance the Division issued. The advisory announced today reflects the Division’s focus on achieving accountability and minimizing future misconduct when negotiating a proposed resolution that it may recommend to the Commission.