by Nicola M White
The US Commodity Futures Trading Commission will formally evaluate how companies or individuals accused of wrongdoing cooperate or self-report before levying fines, the latest signal the derivatives regulator is shifting its approach to enforcement.
The new advisory intends to create “meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties,” CFTC Acting Chairman Caroline Pham said in a statement Tuesday.
Pham said the measure also allows the agency to comply with a Trump administration executive order to roll back regulations perceived by the White House as overly “burdensome.”
Financial regulators often cite company cooperation or attempts to fix internal issues as reasons to reduce sanctions over any alleged wrongdoing. On several occasions, Pham has criticized the CFTC for not doing enough to recognize cooperation or self-reporting.
Under the new directive, the agency’s enforcement division will grade self-reporting across three levels: no self-report, satisfactory self-report and exemplary self-report. To receive full credit, disclosures to the agency must be voluntary, timely and complete. Reports can be made to either agency’s enforcement division or any other arm of the regulator with oversight responsibility, according to the CFTC.
The agency will make a similar call about how cooperative the individual or business is, ranging from “uncooperative” to “exemplary.”
“Critically, it will enable the CFTC to do more with less and free up enforcement resources to focus relentlessly on catching fraudsters and scammers, helping victims, and promoting market integrity,” Pham said of the advisory in the statement.
The directive also lays out how the agency should calculate credit for cooperation and self-reporting to set penalties.
CFTC Commissioner Kristin Johnson, a Democrat, objected to the publication of the advisory, saying the agency had to exercise caution shaking up its practices.
“Any effort to adopt new reporting processes, particularly processes that require intra-division guidelines and infrastructure, must be consistent with the mandates of our statue and regulation,” Johnson said in a statement.
Trump chose Pham to serve as interim head of CFTC, which oversees the $400 trillion swaps market and investigates and prosecutes commodities fraud and manipulation. Trump has since named Brian Quintenz, currently the head of policy at Andreessen Horowitz’s a16z crypto business, to lead the agency.
Pham this month announced a reorganization of the enforcement division, breaking it down into two sections: complex fraud and retail fraud.
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