CFTC Issues Enforcement Advisory Regarding Impact of Self-Reporting, Cooperation, and Remediation on Potential Enforcement Actions
Client Alert | March 5, 2025
This alert provides a high-level summary of the Advisory and related considerations for participants facing potential enforcement actions.
On February 25, 2025, the Commodity Futures Trading Commission’s (the “CFTC”) Division of Enforcement (the “Division”) issued an enforcement advisory (the “Advisory”) regarding the evaluation of a company’s or an individual’s (a “Person”) self-reporting, cooperation, and remediation when recommending enforcement actions to the CFTC and setting forth the factors the Division will consider in determining proposed penalty reductions in cases involving self-reporting, cooperation, and remediation.[1] The Advisory sets out a credit-based system that the Division will use to determine appropriate penalty reductions based on a Person’s self-reporting, cooperation, and remediation in enforcement actions and investigations.[2] The Advisory replaces prior policies, including the Division’s May 2020 Enforcement Manual, and is now the sole policy of the Division.
Overview
The Advisory provides a mechanism for achieving the Division’s goals of promoting compliance with the law and ensuring accountability for those who violate the law by attempting to incentivize self-reporting, cooperation, and remediation.
- Regulatory Consistency. The Advisory indicates that it is consistent with the CFTC’s broader regulatory scheme. Thus, the Division will recognize self-reports made to the pre-existing operating division, such as the Division of Clearing and Risk, the Division of Market Oversight, and the Market Participants Division, as applicable (the “Operating Division”).
- Transparency. The Advisory contains tiered scales to evaluate self-reporting and cooperation (including remediation) and provides examples and explanations of activities that would fall into each tier.
- Clarity. The Advisory aims to provide those who might seek a reduced penalty based on their self-reporting, cooperation, and remediation (“Mitigation Credit”) a clear understanding of the potential benefits of such activities by providing a matrix outlining the credit that may be applied to reduce a civil monetary penalty and details factors that may contribute to the recommendation of a public declination.
Self–Reporting
The Advisory indicates that Mitigation Credit may be awarded when a Person self-reports a potential violation and that the Division will apply a three-tier scale in evaluating such reporting. The factors that underlie the tier system are discussed below.
- Voluntariness. The self-report must be a voluntary disclosure, rather than made on account of an imminent threat of negative enforcement action or exposure. The Division will consider the likelihood that it could have learned of the violation independently of the self-report.
- Made to the CFTC. The self-report must be made to an appropriate division of the CFTC. A division will be considered appropriate if it is the primary division that is responsible for the potentially violated regulation. The Division of Enforcement is considered an appropriate division for all reports. If a potential violation relates to multiple divisions, a report to a single appropriate division will suffice. The Advisory notes that “[t]he Division, together with the Operating Divisions, 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.”
- Timeliness. The self-report must be prompt, considering the facts and circumstances of the potential violation.
- Completeness. The disclosure must include all material information known to the Person at the time the report is made. To encourage early disclosure, the Division will consider a report to be complete if the Person made best efforts to determine relevant facts before reporting, continued to investigate, and disclosed additional relevant facts as they were identified.
- Safe Harbor for Good Faith. The Division will provide a safe harbor for good-faith self-reporting if a Person voluntarily self-reports, the report is later found to be inaccurate after further investigation by the Person, the report was made in good faith, and the inaccurate information is promptly supplemented and corrected.
The Advisory contained the following chart, setting forth the self-reporting tiers and a non-exhaustive description of the self-reporting that exemplifies each tier.
| Tier | Self-Reporting |
| Tier 1: No Self-Report | No timely self-report
Self-report was information already known from other sources Self-report that was not reasonably related to the potential violation or not reasonably designed to notify the CFTC of the potential violation |
| Tier 2: Satisfactory Self-Report | Self-report to an appropriate division
Notified the CFTC of the potential violation Did not include all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report |
| Tier 3: Exemplary Self-Report | Self-report to an appropriate division
Notified the CFTC of the potential violation Included all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report Included additional information that assisted the Division with conserving resources in the Division’s investigation |
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Cooperation
The Advisory indicates that Mitigation Credit may be awarded for cooperation in the Division’s investigation and that the Division will apply a four-tier scale in evaluating such cooperation. In determining which tier to apply, the Division noted that it will consider all relevant facts and circumstances, including whether the cooperation materially assisted the investigation, whether the cooperation conserved the Division’s resources, the timeliness of the cooperation, and the quality and extent of cooperation. Other factors that the Division said that it will consider include truthfulness, specificity, credibility, completeness, reliability, and voluntariness.
However, even if a Person has cooperated with the Division, uncooperative action may offset the Mitigation Credit awarded. The Division said that it will employ a standard of objective reasonableness in evaluating whether conduct is uncooperative. Examples of conduct that may be considered uncooperative include impeding the Division’s investigation in bad faith, untimely subpoena compliance, failure to preserve material information after its discovery, and bad faith attempts to shape the testimony of a Person’s agent. Failure to self-report a violation that involves willful misconduct or abuse of a party, harm to a client, counterparty, or customer, or significant financial losses will be deemed uncooperative. Significantly, the Division indicated that the discovery of a material violation without subsequent corrective action or a self-report, as appropriate, may suggest the absence of acceptance of responsibility and could be deemed uncooperative.
The Advisory contained the following chart, setting forth the cooperation tiers and a non-exhaustive description of the cooperation that exemplifies each tier.
| Tier | Cooperation |
| Tier 1: No Cooperation | No substantial assistance beyond required legal obligations |
| Tier 2: Satisfactory Cooperation | Provided substantial assistance
Voluntary production of documents and information Arranging for voluntary witness interviews Basic presentations on legal and factual issues |
| Tier 3: Excellent Cooperation | Meet the expectations for Satisfactory Cooperation
Consistently provided substantial assistance Internal investigations or reviews Thorough analysis of potential violation, root cause, and corrective action for remediation Use of internal or external expert resources and consultants as appropriate |
| Tier 4: Exemplary Cooperation | Meet the expectations for Excellent Cooperation
Consistently provided material assistance Proactive engagement and use of significant resources Significant completion of remediation Use of accountability measures, as appropriate |
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Remediation
The Division will only recommend Mitigation Credit where the Operating Division, in consultation with the Division, has concluded that the potential violation and its root cause have either been remediated or that there is a remediation plan in place that is appropriate given the facts and circumstances.
In evaluating remediation, the Division will consider whether a Person has engaged in substantial efforts to prevent a future violation. Actions that will positively impact this analysis include performing a gap analysis to identify similar violations in the future, implementing an appropriate remediation plan that prevents future violation through procedural changes, personnel accountability measures, and providing the Division with an explanation as to how the remediation plan is reasonably designed to prevent a future violation.
Mitigation Credit
If a matter is eligible for Mitigation Credit for self-reporting and/or cooperation, the Advisory indicates that the Division will presumptively recommend a discount from its initial civil monetary penalty calculation based on the following matrix:
| Tier 1: No Cooperation | Tier 2: Satisfactory Cooperation | Tier 3: Excellent Cooperation | Tier 4: Exemplary Cooperation | |
| Tier 1: No Self- Report | 0% | 10% | 20% | 35% |
| Tier 2: Satisfactory Self-Report | 10% | 20% | 30% | 45% |
| Tier 3: Exemplary Self Report | 20% | 30% | 40% | 55% |
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Departure from Previous Policy.
The Advisory represents a significant shift in the Division’s approach to enforcement. Previous guidance, as articulated in the Division’s 2023 Advisory Regarding Penalties, Monitors and Consultants, and Admissions in CFTC Enforcement Actions (the “2023 Advisory”) emphasized imposing penalties that would serve as strong deterrents to future violations.[3] In the 2023 Advisory, the Division expressed the view that civil monetary penalties would be seen as the rational cost of doing business if not severe enough to outweigh the potential benefit of misconduct, providing guidance on determining whether such penalties are sufficient and emphasizing the importance of admissions of fault in deterring future violations.
The Advisory evinces a departure from the adversarial approach of the 2023 Advisory in favor of a collaborative process, a shift that some in the industry have characterized as a change from “stick to carrot.”[4]
CFTC Comments
Acting Chairman Caroline D. Pham praised the policy changes, stating that the clear expectations described in the Advisory will incentivize firms to self-report and resolve cases faster with reasonable penalties and emphasized that this approach will enable the CFTC to “do more with less.”[5] However, Commissioner Kristin N. Johnson released a statement announcing her lack of support for the Advisory, expressing trepidation with respect to the departure from prior guidance and emphasizing that such changes must be consistent with the CFTC’s mandates.[6]
Conclusion
The Advisory marks a significant shift in the CFTC’s enforcement policy and provides market participants with clear information on the potential benefits of proactive self-reporting, cooperation and remediation in CFTC investigations.
[1] CFTC Press Release, CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9054-25.
[2] The Advisory notes that it provides only internal guidance regarding the Division’s recommendations to the CFTC and does not bind the CFTC.
[3] CFTC Press Release, CFTC Releases Enforcement Advisory on Penalties, Monitors and Admissions (Oct. 17, 2023), available here.
[4] Jessica Corso, Trump CFTC Shifts Enforcement Stance From Stick to Carrot, Law360.com (Feb. 26, 2025, 90:08 PM) available here.
[5] CFTC Press Release, CFTC Releases Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (Feb. 25, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9054-25.
[6] Statement of Commissioner Kristin N. Johnson on the Enforcement Advisory on Self-Reporting, Cooperation and Remediation (Feb. 25, 2025), available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Derivatives practice group, or any of the following:
Jeffrey L. Steiner, Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)
David P. Burns, Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Amy Feagles, Washington, D.C. (+1 202.887.3699, afeagles@gibsondunn.com)
Adam Lapidus, New York (+1 212.351.3869, alapidus@gibsondunn.com)
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