On Feb. 25, the U.S. Commodity Futures Trading Commission's Enforcement Division issued an advisory aiming to provide consistency, transparency and clarity regarding what companies and individuals can expect to receive from the CFTC for self-reporting violations of the Commodity Exchange Act and cooperating with the Enforcement Division's investigations.
The advisory boldly establishes the exclusive division policy on self-reporting, cooperation and remediation. In doing so, the CFTC declared that the six enforcement advisories issued by the CFTC between 2017 and 2023, as well as the guidance in the division's enforcement manual — all relating to the same topics of self-reporting and cooperation — are "no longer the policy of the Division."
A close review of the advisory, however, reveals that although it has some new ideas, it is not necessarily groundbreaking as a matter of enforcement policy or radically different from the legacy approach of the CFTC. This article examines the new and not-so-new aspects of the advisory so that registrants and market participants can determine how to shift their thinking — or not — when it comes to self-reporting and cooperation with the CFTC.
What's New?
There are several aspects of the advisory — at least four by our count — that are new.
First, in issuing the advisory, the division has for the first time quantified the amount of credit a company or individual can expect to receive for self-reporting and/or cooperating, although as discussed later in this article, there are practical limits to the advisory's guidance.
The advisory presents three tiers of self-reporting and four tiers of cooperation, and then sets forth the following mitigation credit matrix specifying the percentage discount "from the initial civil monetary penalty calculated by the Division."
The advisory also provides specific examples of the three tiers of self-reporting and four tiers of cooperation, as well as what constitutes uncooperative conduct. Disgorgement and restitution are not eligible for mitigation credit.
Second, the advisory breaks with past precedent by stating that companies and individuals can now self-report to any of the operating divisions of the CFTC, not just the Enforcement Division. Previously, and as specified in the CFTC's advisory dated Sept. 25, 2017, self-reports had to be made to the Enforcement Division.
Now, under the new advisory, self-reporting will be recognized and credited even if it is made to the divisions at the CFTC that registrants interact with more regularly such as the Division of Clearing and Risk, the Division of Market Oversight, and the Market Participants Division. This change is now the official policy of the CFTC, notwithstanding the current lack of criteria for when the CFTC's different divisions should refer a matter to the Enforcement Division.
CFTC Commissioner Kristin N. Johnson took a critical view of this aspect of the advisory. In her statement, Johnson noted that "[a]ny effort to adopt new reporting processes, particularly processes that require inter-division guidelines and infrastructure, must be consistent with the mandates of our statute and regulation."[1]
Third, the advisory arguably breaks with past precedent by making it clear that a self-report will be eligible for mitigation credit even if the reported violation is made by a regulated entity in its annual chief compliance officer report, provided the self-report is still timely.
The confusion on this point stems from the division's March 6, 2019, advisory on self-reporting and cooperation for CEA violations involving foreign corrupt practices. Although arguably applicable only to self-reports about foreign corruption, that advisory noted that registrants would not be eligible for a potential credit of no civil monetary penalty.
Finally, the advisory makes no mention of the division recommending higher penalties than may have been imposed in similar cases to achieve deterrence. Nor does it criticize the CFTC's long-standing practice of settling cases on a no-admit, no-deny basis. In this way, the CFTC is abandoning two of the principles set forth in its enforcement advisory dated Oct. 17, 2023.
What's Not New?
On the other hand, certain aspects of the advisory are remarkably similar in language and function to prior Enforcement Division advisories on self-reporting and cooperation.
In the original advisories on cooperation credit issued on Jan. 19, 2017, the division used the same concepts and the same language as in the current advisory to describe the quality of cooperation during an investigation. Those 2017 advisories also set forth examples of uncooperative conduct, with nearly identical language as the current advisory.
Unsurprisingly, it is still the division's policy that the type of cooperation that results in credit for both companies and individuals involves timely and truthful disclosures that provide material assistance to the division's investigations. It also continues to be the division's policy not to require a company or individual to waive the attorney-client privilege or work product protection to be entitled to cooperation credit.
The advisory is also strikingly similar to guidance provided in an Oct. 29, 2020, memorandum issued to the Enforcement Division staff by then-acting Enforcement Director Vincent A. McGonagle. The guidance in the McGonagle memo was also incorporated into the CFTC's enforcement manual.
Although Footnote 3 of the new advisory declares this guidance "no longer the policy of the Division," it is difficult to parse the differences between the legacy guidance and the concepts in the new advisory. Like the new advisory, the McGonagle memo sought to clarify how a combination of self-reporting and cooperation — or the lack thereof — would result in different outcomes including reduced civil monetary penalties.
Although the advisory is now the division's exclusive policy on self-reporting, cooperation and remediation, the division will maintain the discretion to consider other factors when making recommendations to the CFTC — including "the culpability of the actors; recidivism, if any, with respect to the same specific violation and facts and circumstances not involving fraud, manipulation, or other abuse; and the severity of the violation." Notably, recidivism was a key factor discussed in the legacy Oct. 17, 2023, enforcement advisory when determining appropriate penalties to recommend to the CFTC.
Practical Implications for Market Participants
The advisory claims to bring transparency to market participants that are considering the potential benefits of self-reporting and cooperation. The new mitigation credit matrix brings a degree of clarity by specifying that market participants could achieve up to a 55% discount from "the initial civil monetary penalty calculated by the Division."
Practically speaking, however, the open question now is the same as it has always been: 55% off of what? Civil monetary penalties are negotiated down from the statutory amounts in any settled matter, regardless of self-reporting and cooperation. Accordingly, it remains unclear what the actual tangible benefits might be for a company or individual trying to determine if self-reporting and cooperation are really worth it.
Moreover, the May 20, 2020, civil monetary penalty guidance issued by the division — which remains in effect — provides that the division considers three categories of factors when assessing the civil monetary penalty:
1. The gravity of the violation, e.g., the nature, duration and degree of the violation;
2. The presence of mitigating or aggravating circumstances, e.g., self-reporting, cooperation and remediation; a history of violations; a preexisting compliance program; and post violation conduct such as concealment of a violation; and
3. Other considerations, e.g., remedies from analogous cases and remedies imposed in a parallel matter brought by the criminal authorities, other regulatory entities or self-regulatory organizations.
As self-reporting, cooperation and remediation are already existing mitigating factors the division considers when recommending appropriate civil monetary penalties, the question remains as to how the mitigation credit matrix will be applied and how it will differ from prior consideration of mitigating factors.
Going forward, market participants can get credit for self-reporting to the divisions at the CFTC other than the Enforcement Division, and the advisory notes that the CFTC "will be developing a future public enforcement advisory to set forth transparent and consistent criteria for enforcement referrals by an Operating Division to the Division of Enforcement." Although market participants may be more comfortable reporting to a division they deal with regularly on more routine matters, we recommend that market participants take a cautious approach to such reporting until the CFTC publishes additional guidance on the topic.
We also recommend that registrants be cautious about self-reporting violations in their CCO annual reports. Over the years, the CFTC defense bar has taken the conservative view that registrants should not self-report in their annual CCO reports regardless of the subject matter of the self-report. Going forward, however, this apparently will be an acceptable practice as long as waiting to disclose in the annual report does not render the self-report untimely.
Finally, market participants should use the advisory's rejection of prior division policies to their advantage when resolving enforcement matters. Companies and individuals facing enforcement actions with the CFTC can point to the advisory's explicit rejection of the prior enforcement advisories as a basis to insist on similar penalties for similar cases, for example, as well as not providing admissions that would harm their reputations.
"What's Old And New In The CFTC's Self-Reporting Advisory," by Jennifer L. Achilles, Andrew P. Cross, Alexandra Clark was published in Law360 on March 19, 2025.
