Washington, D.C. — The Commodity Futures Trading Commission today announced the Division of Enforcement has issued new guidance outlining factors the Division considers in recommending civil monetary penalties (CMPs) to the Commission to be imposed in CFTC enforcement actions. The guidance memorializes the existing practice within the Division and has been incorporated into the Division’s Enforcement Manual. This is the first Division CMP guidance issued publicly since the Commission published its penalty guidelines in 1994.
“This new guidance reflects my strong commitment to transparency and to the CFTC’s enforcement mission,” said CFTC Chairman Heath P. Tarbert, who in December announced additional efforts to promote transparency at the agency, including in enforcement actions. “Clarity about how our statutes and rules are applied is essential to deterring misconduct and maintaining market integrity.”
“An effective enforcement program must be tough on those who break the rules, but it must also be fair,” added Director of Enforcement James McDonald. “Transparency in our procedures, and in particular how we think about penalties, promotes fairness and enhances respect for the rule of law. Ultimately, we want our enforcement program to change behavior in a positive way. Explaining how and why we punish is a significant part of that effort.”
The staff guidance provides a three-pronged approach to evaluate the appropriate penalty to recommend to the Commission: (1) the “gravity of the violation;” (2) “mitigating and aggravating circumstances;” and (3) “other considerations.” In applying the various factors, staff will be guided by the overarching consideration of ensuring that any proposed penalty achieves the dual goals of specific and general deterrence.
Factors in considering the “gravity of the violation” may include the respondent’s role in the violations, the respondent’s state of mind, including whether the conduct was intentional or willful, and the nature and scope of any consequences flowing from the violations. Factors related to “mitigating and aggravating circumstances” may include the respondent’s conduct, such as self-reporting the misconduct, the extent of cooperation and remediation, or attempts to alleviate the violation by returning victim funds or improving a compliance program, or at the other end, any acts of concealment, obstruction, or prior misconduct. Among “other considerations,” the Division’s recommendation may take into account additional factors such as a timely settlement and remedies and sanctions to be imposed in parallel actions by other civil or criminal authorities or self-regulatory agencies.
Division of Enforcement staff members primarily responsible for this guidance are Margaret Aisenbrey, William Janulis, Edward Riccobene, Gretchen Lowe, and former staff member Matthew Rowland.