CFTC provides guidance on compliance evaluations in connection with enforcement matters - 15 September 2020

The guidance is designed to assist both Commission staff and companies in evaluating compliance programs and cultivating corporate cultures of compliance.

The CFTC Division of Enforcement staff has issued new guidance outlining factors that it will consider while evaluating compliance programs in connection with enforcement activities. In the-first-of-its-kind guidance issued by the division, the staff noted that effective corporate compliance programs are necessary to deter misconduct and ensure future compliance. The guidance notes that the CFTC staff will conduct risk-based analyses, taking into consideration a variety of factors, including market roles and potential effects on the markets or customers.

"It’s in both the agency’s interest and the interest of compliance personnel that the Commission is clear about how and what we’ll evaluate," said CFTC Chairman Heath Tarbert.

Evaluation factors. In the guidance, the staff states that it will consider whether compliance programs are reasonably designed and implemented to prevent, detect, and remediate misconduct. The staff also notes factors to guide evaluations of compliance programs, including (1) written policies and procedures; (2) staff training; (3) uncured, yet previously identified, deficiencies; (4) resources; and (5) structure and oversight of compliance efforts. Further, according to the guidance, the staff will consider issues related to detection of underlying misconduct, including internal monitoring and reporting efforts and procedures for identifying and evaluating suspicious activity. The guidance directs Enforcement Division staff to consult with other divisions as appropriate.

However, the guidance states, CFTC staff should account for remedial measures to address misconduct and deficiencies. The staff will focus on whether the company effectively addressed the impact of the problems, disciplined those responsible, and addressed deficiencies in the individual compliance programs.

The guidance will be published in the CFTC’s Enforcement Manual.

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