On February 25, 2025, the Commodity Futures Trading Commission (CFTC) issued an enforcement advisory describing how the CFTC’s Division of Enforcement will determine whether to grant mitigation credit for a company’s voluntary self-reporting, cooperation, and remediation. This is the first guidance issued by Acting Chairman Caroline D. Pham, as well as the first self-reporting guidance published by any federal agency under the second Trump Administration.
The Mitigation Credit Framework
The enforcement advisory establishes a matrix for applying mitigation credit – that is, the percentage discount that will be applied to any civil monetary penalty applied as part of an enforcement action – along two axes: self-reporting and cooperation. Available credit ranges from 0% (when there is no self-report and no cooperation) to 55% (when there is an “exemplary” self-report and “exemplary” cooperation). Mitigation credit will not be applied to disgorgement or restitution amounts, however. The advisory sets out the criteria that the division should apply to determine when a corporation or individual (referred to as a “person” in the advisory) falls within the matrix but notes that the division “retains the discretion to deviate from the Matrix … in its recommendation to the Commission given the unique facts and circumstances of a particular case.”
Self-reporting
The division’s new framework sets out three categories or “tiers” of self-reporting: no self-report, satisfactory self-report, and exemplary self-report, and the key criteria the division will apply in evaluating self-reports include the extent to which the self-report is:
- Voluntary – that is, “made prior to an imminent threat of exposure.” Self-reporting credit will not be available when the potential violation was already publicly known, already disclosed to another government actor, or when it “was reasonable to assume that the Division could learn of the potential violations directly from the other [government] actor as, for example, may occur in parallel investigations.” However, persons may receive self-reporting credit even if the person was under a preexisting regulatory obligation to disclose the information in a mandatory annual chief compliance officer report.
- Made to the CFTC – that is, to the division or to the CFTC operating division with primary responsibility for the interpretation and application of the regulation(s) applicable to the potential violation.
- Timely – that is, “reasonably prompt” following “efforts to determine whether there was a potential violation and its materiality in a timely manner, including discovery of the potential violation and escalation, investigation, management review, and governance requirements.”
- Complete – in that it includes “all material information regarding the potential violation known to the Person at the time of the self-report.” The advisory also establishes a safe harbor for inaccurate self-reports when the disclosure “was made in good faith and [] any inaccurate information in the self-report … is supplemented and corrected promptly after the discovery of the inaccurate information.” The advisory emphasizes that the “quality” of the self-report’s contents is more important than the quantity, and that the division should focus on whether the self-report enabled the CFTC to conserve its limited resources.
Cooperation
The division’s new framework also establishes four cooperation “tiers”: no cooperation, satisfactory cooperation, excellent cooperation, and exemplary cooperation. In evaluating cooperation, the division will focus on cooperation during the investigation as well as efforts to remediate the conduct and/or processes underlying the self-reported violation.
Key factors that the division will consider in evaluating a person’s cooperation for the purposes of applying mitigation credit include whether the cooperation:
- Resulted in “material assistance to the Division’s investigation.”
- Resulted in “a timely resolution” that conserved division resources.
- Was timely, including whether the person was the “first in the door” to report and/or offer cooperation.
- Was truthful, specific, complete, credible, and reliable.
- Was voluntary or was required by the terms of an agreement with another law enforcement or regulatory organization.
- Included the use of adequate resources, i.e., how thorough and high-quality the analyses, presentations, and submissions provided to the division were.
- Was extensive, including whether steps were taken to ensure the timely preservation of documents and records, whether high-quality cooperation by officers and employees was encouraged, and whether admissions were made that conserved the division’s resources.
Also included as part of the division’s cooperation evaluation is an assessment of a person’s remediation, including:
- Whether the person took immediate steps to address the potential violation, including corrective action.
- Whether the person performed a gap analysis to identify and remediate similar potential violations.
- Whether the person implemented an appropriate remediation plan and explained how it is reasonably designed to prevent a future violation.
Where the person falls on the cooperation axis of the matrix lies in the division’s discretion, but a comparison of the descriptions suggests that a person must promptly implement an appropriate remediation plan to qualify for “excellent cooperation,” whereas “exemplary cooperation” is reserved for situations when the person satisfied the criteria for Tiers 2 and 3 (“satisfactory” and “excellent”) at a “consistently high level throughout an investigation” and demonstrated “proactive engagement and [the] use of significant resources to provide material assistance” to the division. By contrast, “uncooperative” conduct such as untimely subpoena compliance, failure to preserve material information, bad-faith attempts to shape witness testimony, and willful blindness to red flags before the self-disclosure will undermine cooperation credit.
Key Takeaways
Actions in the earliest days of the new Administration have prompted many questions and much speculation about the extent to which corporate investigations and enforcement would continue in President Trump’s second term. While this new CFTC enforcement advisory does not answer all such questions, it indicates a few things, including:
- CFTC Investigations and Enforcement Aren’t Going Away. The advisory comes just days after the CFTC named Brian Young, a career federal prosecutor and former director of the CFTC’s Whistleblower Office, to be the director of enforcement, and it sends an unmistakable message of continued enforcement interest and activity, despite any reduction in resources that might be imposed upon the agency. Indeed, in announcing the advisory, Pham emphasized the CFTC’s commitment to “focus relentlessly on catching fraudsters and scammers, help[] victims, and promot[e] market integrity” and “do more with less,” which hardly sounds like an agency pulling back from an active enforcement profile in response to resource limitations.
- An Active CFTC Makes an Active DOJ More Likely. The announcement of Young as director of enforcement, coupled with the advisory’s alignment of CFTC and DOJ self-reporting incentives, positions both agencies to build further on the close cooperation and collaboration that has led to numerous significant enforcement actions in recent years. During the first Trump Administration, close collaboration between the leadership of the DOJ’s Criminal Fraud Section and the CFTC’s Division of Enforcement led to enforcement actions against numerous global financial institutions and traders.
- More Transparency Means Less Patience. The advisory’s commitment to “consistency, transparency, and clarity” is coupled with an expectation that self-reporting and cooperation will be expeditious; one need look no further than the advisory’s use of terms like “timely,” “prompt,” and “immediate” to understand that the CFTC clearly expects that in exchange for providing this transparent framework, persons will more quickly self-report and engage with the Division of Enforcement to investigate and resolve violations. Companies and individuals can expect less permissiveness and patience from division counterparts, and must prepare to engage with the division in an efficient and strategically sound manner from the outset of any discovery of potential violations.
- Compliance Investments Remain Essential. The advisory sends a muscular message from one of the most significant U.S. federal regulatory and enforcement agencies at the outset of the new Administration and is an important corrective to suggestions in certain quarters that corporate enforcement might be less robust over the next four years. The CFTC’s first applications of this new mitigation credit matrix will offer valuable additional guidance, but it is certain, even before then, that companies cannot safely deprioritize the resourcing of or attention to compliance.
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