Reed Smith Client Alerts

On September 25, 2017, the U.S. Commodity Futures Trading Commission (“CFTC”) released an Updated Advisory on Self-Reporting and Full Cooperation (the “Updated Advisory”) to supplement the cooperation advisories that it released earlier this year.1 That evening, the recently-appointed Director of the Enforcement Division James McDonald presented remarks and fielded questions on the Updated Advisory at New York University.2 He made clear that companies and individuals that self-report misconduct and cooperate throughout the investigation process will receive a substantial reduction in the civil monetary penalties that otherwise would be applicable. During the question-and-answer period following his prepared remarks, McDonald revealed that a company that self-reports and cooperates can expect to receive “in the neighborhood” of a 50 percent to 75 percent reduction in penalties. Alternatively, if a company fails to self-report and the misconduct is uncovered, the company will be met with vigorous and aggressive prosecution. The CFTC’s new policy is designed to tip the scales in favor of self-reporting.

Aim of the Updated Advisory

In his speech, McDonald stated that the purpose of the CFTC’s new policy is to encourage market participants to work together with regulators to achieve an optimal outcome for all parties. He explained that in order to “achieve optimal deterrence,” the Division “needs[s] the buy-in from the communities [it] police[s].” By achieving buy-in from commodities market participants, the Director hopes to place the Division of Enforcement in a better position to identify wrongdoing after it has occurred, and to deter or prevent future violations. Under the Updated Advisory, self-reporting is no longer under the cooperation umbrella, but rather its own separate category.