CFTC Announces Further Incentives For Self-Reporting, Cooperation For Unregistered Individuals And Entities, While Highlighting Focus On Foreign Corruption
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  • CFTC Announces Further Incentives For Self-Reporting, Cooperation For Unregistered Individuals And Entities, While Highlighting Focus On Foreign Corruption
    On March 6, 2019, the head of the U.S. Commodity Futures Trading Commission’s (“CFTC’s”) Enforcement Division, James McDonald, announced a new policy related to the benefits of self-reporting foreign corrupt practices-related violations of the Commodity Exchange Act by market participants who are not registered with the agency.  McDonald announced that, absent aggravating circumstances, the enforcement division will recommend a deal without civil financial penalties for companies and individuals who self-report misconduct, cooperate with the agency, and reform the bad behavior at issue (including payment of disgorgement and restitution).[1]

    Unlike unregistered market participants, CFTC-registered entities have existing obligations to self-report such conduct.  They therefore are not eligible for the newly announced presumptive recommendation of “no penalty” set forth by the CFTC’s new policy, but, consistent with the CFTC’s focus on encouraging self-reporting and cooperation, they enjoy the benefit of substantial reductions in penalty for cooperating with the agency and demonstrating a commitment to preventing the problematic conduct from recurring.  Registered entities that do not initially self-report, but do otherwise fully cooperate with regulators and implement reforms, are also eligible for certain reduction in penalty, though less so than had they self-reported the conducted. 

    In his announcement of the new policy, McDonald emphasized the potentially integrated nature of regulatory enforcement of foreign corrupt practices-related violations of the CEA across the CFTC, the Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”), acknowledging the reality that certain conduct may violate both the CEA and the Foreign Corrupt Practices Act.  In consideration of this, the CFTC pledged it would not “pile on” to the investigations conducted by the DOJ or SEC, but rather work closely with other enforcement authorities to avoid duplicative investigative steps and, where monetary penalties are levied, work to ensure its penalty appropriately accounts for any imposed by another enforcement body.  The CFTC also committed to give dollar-for-dollar credit for disgorgement or restitution payments made in connection with related actions with other enforcement agencies.   

    On the one hand, McDonald’s remarks can be seen as a continuation of the trend by regulatory agencies to explicitly incentivize the disclosure of misconduct, cooperation with authorities, and implementation of pragmatic preventative reforms by companies and individuals operating in the domestic and global markets.  On the other hand, his remarks can be seen as laying down a marker to remind market participants that the CFTC has jurisdiction to investigate certain types of foreign corruption.  Regardless of how it is viewed, however, the speech serves as a reminder of the multiple regulators whose potential interests must be considered in connection with any corruption investigation.
    [1] See U.S. Commodity Futures Trading Commission, Remarks of CFTC Director of Enforcement James M. McDonald at the American Bar Association’s National Institute on White Collar Crime, available at: see also U.S. Commodity Futures Trading Commission, Enforcement Advisor: Advisory on Self Reporting and Cooperation for CEA Violations Involving Foreign Corrupt Practices (Mar. 6, 2019).