CFTC division of enforcement issues civil monetary penalty guidance
On May 20, 2020, the Commodity Futures Trading Commission (“CFTC”) Division of Enforcement (the “Division") issued new guidance (the “Guidance”) on the factors it will consider in recommending civil monetary penalties for CFTC enforcement actions, namely, the gravity of the violation, mitigating and aggravating circumstances, and other considerations such as the total mix of remedies and monetary relief, among others. While not necessarily breaking new ground, the guidance updates past guidance issued in 1994 to improve transparency in CFTC enforcement and clearly communicates expectations to the market.
In the announcement, CFTC Chairman Heath P. Tarbet explained that “[t]his new guidance reflects my strong commitment to transparency and to the CFTC’s enforcement mission,” echoing previous statements he made on the importance of “clarity about how our statutes and rules are applied.”
The Guidance, which is binding on all Division staff, is designed to “facilitate the Division’s efforts to be tough on those who break the rules while striving for fair and consistent outcomes in doing so.”The factors outlined in the Guidance are not novel, but instead reflect Division practice that has been “refined over time as a result of changes to relevant legal authorities and precedents, as well as lessons learned from the Commission’s enforcement actions.”
Three-pronged Approach to Evaluating Civil Monetary Penalties
The Division will consider a number of factors in evaluating an appropriate penalty to recommend to the Commission, which the Guidance divides into three broad groups: (1) the gravity of the violation; (2) any mitigating and aggravating circumstances; and (3) “other considerations.”
While the publication of these factors does not indicate a significant shift in the CFTC’s approach to assessing civil monetary penalties, it does provide helpful clarity and guidance to the market on how the CFTC’s analysis will be framed in future enforcement actions. It also provides an analytical framework that companies and their counsel can use to advocate for the imposition of an appropriate remedy in future negotiations with the CFTC.