CFTC issues first public guidance on determining civil monetary penalties - 26 May 2020

The Division of Enforcement’s memorandum represents the first such guidance since the agency published penalty guidelines over 25 years ago.

Staff of the CFTC’s Division of Enforcement has issued new guidance outlining the factors the division considers in recommending the civil monetary penalties to be imposed by the agency in CFTC enforcement actions. The guidance, which generally reflects the existing practice within the division, represents the first public guidance on the topic since the CFTC published its penalty guidelines in 1994. The guidance will be set forth in the division’s enforcement manual and will be binding on all division staff.

The guidance sets forth a tripartite approach to evaluating the appropriate penalty to recommend to the CFTC: (1) the gravity of the violation; (2) mitigating and aggravating circumstances; and (3) other considerations. The memorandum states that each of these factors may be more or less relevant to the facts and circumstances of a particular matter and the type of violation at issue.

Gravity. The guidance observes thatthe Commodity Exchange Act and the CFTC’s guidelines make the gravity of the violation the primary consideration in determining the appropriate civil monetary penalty. Although no one factor summarized below is dispositive, the division staff will consider, among other things:


the nature and scope of the violations;


the respondent’s state of mind; and


the nature and scope of any consequences flowing from the violations.

Mitigating and aggravating circumstances. Division staff will also continue to consider all relevant mitigating and aggravating circumstances in making a monetary penalty recommendation to the agency. These circumstances include:


post-violation conduct;


whether the respondent self-reported the misconduct, as well as any cooperation and remediation;


the timeliness of remediation;


the existence and effectiveness of the company’s compliance program;


prior misconduct;


the pervasiveness of misconduct within the company; and


the nature of any disciplinary action taken by the company with respect to the individuals involved.

Other considerations. Other factors considered by the division in making a penalty recommendation to the CFTC will include:


the total mix of remedies and monetary relief to be imposed on the respondent, including remedies and relief in parallel cases;


monetary and non-monetary relief in analogous cases; and


conservation of CFTC resources, including timely settlement.

Commitment to transparency. "This new guidance reflects my strong commitment to transparency and to the CFTC’s enforcement mission," said CFTC Chairman Heath P. Tarbert in a news release. "Clarity about how our statutes and rules are applied is essential to deterring misconduct and maintaining market integrity."

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