In a significant shift, the CFTC will begin assessing how companies or individuals accused of misconduct cooperate with investigations before imposing penalties. This new policy is designed to incentivize entities to come forward voluntarily and facilitate quicker case resolutions with balanced penalties.
This initiative is part of a broader regulatory approach that aligns with a directive from the Trump administration aimed at reducing regulations deemed excessive. Caroline Pham, who is serving as the acting chair of the CFTC, emphasized that this change allows the agency to fulfill an executive order mandating the rollback of certain regulations perceived as burdensome.
Regulatory bodies frequently consider the proactive steps taken by companies to rectify issues internally when deciding on penalties. In line with this practice, Pham has previously criticized the CFTC for not adequately acknowledging efforts of self-reporting and cooperation in its penalty decisions.
Under the newly announced directive, the CFTC’s enforcement division will categorize self-reporting into three distinct levels: no self-reporting, satisfactory self-reporting, and exemplary self-reporting. To qualify for full credit under this system, disclosures must be voluntary, timely, and comprehensive. Reports can be submitted to the enforcement division or any other supervising entity within the agency.
The determination of an entity’s cooperation level will span from ‘uncooperative’ to ‘exemplary,’ which will influence the penalties assessed. This directive is expected to enable the CFTC to optimize its resources, allowing a more relentless focus on tackling fraud and scams, thereby enhancing market integrity.
However, not every member agrees with this change. CFTC Commissioner Kristin Johnson expressed reservations, pointing out the need for caution and consistency with legal mandates when implementing new processes. Her concern underscores the importance of aligning new guidelines with existing statutory and regulatory frameworks.
The CFTC’s revised enforcement tactics reflect a strategic move to encourage transparency and cooperation. By offering incentives for self-reporting, the agency aims to streamline case management and direct its resources more efficiently. Despite some dissent, this approach could foster a more collaborative regulatory environment.
