CFTC’s Division of Enforcement Issues New Advisory on Self-Reporting, Cooperation and Remediation

On February 25, 2025, the Commodity Futures Trading Commission (CFTC)’s Division of Enforcement (“Division”) issued an Enforcement Advisory providing new guidance on self-reporting, cooperation and remediation (“Advisory”) for companies and individuals (“Persons”). In a public statement on the Advisory, Acting CFTC Chair Caroline Pham stated, “By making the CFTC’s expectations for self-reporting, cooperation, and remediation more clear — including a first-ever matrix for mitigation credit — this advisory creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.” Significantly, the Advisory sets forth a three-tier scale for evaluating self-reporting and a four-tier scale for evaluating cooperation. The Advisory provides a matrix chart using the tiers for determining the amount of mitigation credit the Division would presumptively apply to a potential civil penalty.

HIGHLIGHTS

Matrix of Presumptive Discounts

For self-reporting and/or cooperation, a Person may be eligible for mitigation credit. (Mitigation credit will not apply to disgorgement of profits or restitution obligations.)
The matrix below shows the presumptive mitigation credit against the civil penalty.

The matrix is based on an evaluation of self-reporting and cooperation, as summarized below.

Evaluation of Self-Reporting

Factors Evaluated

The Division will evaluate (1) voluntariness; (2) submission to the appropriate CFTC division; (3) timeliness; and (4) completeness.

Two important points made in the Advisory:

• The Division will now allow disclosure to an operating division that is responsible for the interpretation and application of the regulation(s) at issue. This will likely encourage more self-reporting as market participants may feel more comfortable reaching out to operating divisions other than the Division of Enforcement.
• A safe harbor provision provides the Division will not recommend charges for any self-report that is later found to be inaccurate by the Person if the self-report was made in good faith and the inaccurate information is promptly corrected. This safe harbor applies to Sections 6(c)(2) (wash or fictitious sales), 9(a)(2) and 9(a)(3) (assessment of monetary penalties) of the Commodity Exchange Act; 7 U.S.C. §§ 9(2) (making materially false statements), 13(a)(2) (price manipulation), or 13(a)(3) (making materially false statements); or Regulation 180.1 (prohibition on fraud and deceit).  

Three-Tier Scale

• Tier 1: No Self-Report
• There was no self-report or the information self-reported was already known to the Division from other sources (however, a self-report that provides new analysis or insight about facts already known to the Division is eligible for self-reporting consideration).
• Tier 2: Satisfactory Self-Report
• Self-report did not include all material information reasonably related to the potential violation.
• Tier 3: Exemplary Self-Report
• Self-report included all material information reasonably related to the potential violation, along with additional information that assisted the Division with conserving resources in their investigation.

Evaluation of Cooperation

Factors Evaluated

The Division will evaluate (1) whether cooperation resulted in material assistance and timely resolution; (2) timeliness; (3) nature of the cooperation; (4) voluntariness; (5) thoroughness and quality of the analysis, presentations, or submissions to the Division; and (6) the extent of the cooperation, including preservation of documents and records, timely disclosure of relevant facts, and encouraging cooperation by employees.

Four-Tier Scale

• Tier 1: No Cooperation
• Person complied fully with subpoenas or other compulsory process but did not provide substantial assistance to the Division.
• Tier 2: Satisfactory Cooperation
• Person complied fully with subpoenas or other compulsory process and provided substantial assistance by doing the following, where applicable: (1) voluntarily providing documents to the Division; (2) making presentations to the Division; and (3) making witnesses available for interviews or testimony where consistent with applicable law.  
• Tier 3: Excellent Cooperation
• Person consistently provided substantial assistance to the Division’s investigation by doing the following, where applicable: (1) performing internal investigations or reviews and (2) providing the Division with a thorough analysis of the potential violation, root cause, and corrective action for remediation, including use of internal or external expert resources or consultants as appropriate, and consistently providing documents and information voluntarily.
• Tier 4: Exemplary Cooperation
• Person consistently provided substantial assistance, and the cooperation provided an exceptionally high degree of value. Exemplary Cooperation includes taking most or all of the steps in the Satisfactory and Excellent Cooperation tiers, along with proactive engagement and use of significant resources to provide material assistance to the Division’s investigation, significant completion of remediation, and use of accountability measures, as appropriate.

Evaluation for Remediation

In evaluating remediation, the Division will consider whether the Person engaged in substantial efforts to prevent a future violation, including whether (1) immediate steps were taken to address the potential violation; (2) a gap analysis was performed to identify and remediate similar potential violations: (3) an appropriate remediation plan was implemented; and (4) an explanation was provided on how the remediation plan will prevent future potential violations.

Fifth Amendment Rights

In evaluating cooperation, the Division will not consider as a factor either the waiver or the invocation of the Fifth Amendment by the company’s employees or agents.

Uncooperative Conduct

The Advisory also provides that even where a Person can demonstrate other factors that warrant cooperation credit, certain actions may offset that credit, including bad faith conduct, untimely subpoena compliance, failure to preserve or produce material information, or bad faith attempts to improperly shape testimony of a company’s agents through the use of suggestive questionnaires.

In addition, failure to self-report a violation that a Person has determined to be material to an appropriate division and that involves willful misconduct, harm to a client or customer, or significant financial losses will be deemed uncooperative for purposes of receiving a mitigation credit.

Declinations

In extraordinary circumstances, where there was self-reporting of pervasive fraud, manipulation or abuse involving multiple parties, and Exemplary Cooperation, the Division may recommend a declination.

CONCLUSION

The Advisory is a new policy, and it is not yet clear how it will be implemented, especially in light of the changes to CFTC leadership.¹ But what is clear is that the policy has been framed to encourage more self-reporting and cooperation by market participants as part of an overall shift in the CFTC’s enforcement approach to focus on core investor harm and market abuse.

This is also the first time the CFTC has provided a matrix to determine mitigation credit. The CFTC is now also allowing self-reporting to other divisions such as the Division of Clearing and Risk and the Division of Market Oversight—not just the Division of Enforcement. Both of these measures will likely result in increased self-reporting.

Given that this is a new enforcement advisory and any self-reporting conduct could come under the purview of other regulatory agencies, it is important to understand and consider the potential benefits and risks of self-reporting in light of the broader regulatory environment. 

In sum, the Advisory reflects a more focused and transparent approach to encouraging self-reporting, cooperation, and remediation.

¹ The President has nominated former CFTC Commissioner Brian Quintenz to be the Chair of the CFTC and his nomination is pending. Commissioner Caroline Pham, currently the Acting Chair, recently appointed Brian Young to be Director of Enforcement. Mr. Young was previously the Director of the Whistleblower Office.