CFTC plans tougher stance, bigger fines

The U.S. Commodity Futures Trading Commission (CFTC) may seek tougher monetary penalties in regulatory settlements under new guidance issued by its enforcement division.

The derivatives regulator published an advisory setting out its recommendations to staff when crafting enforcement settlements, including guidance on determining:

• whether proposed monetary penalties are sufficient;
• when to require a corporate compliance monitor; and
• whether violators should be required to admit misconduct in a particular enforcement action.

The CFTC said its enforcement division is “recalibrating” how it is assessing proposed monetary penalties to ensure those penalties are adequate to achieve general and specific deterrence.

This may result in the enforcement division seeking “higher penalties in resolutions than may have been imposed in similar cases previously,” it said.

The advisory also noted the enforcement division will factor recidivism into the process of determining appropriate penalties. The enforcement division will recommend that independent compliance monitors be required in “cases involving the most significant and/or pervasive compliance and control failures reflecting a lack of sufficient commitment to effective compliance,” with compliance consultants recommended in “serious but less severe cases.”

The regulator said violators should stop assuming that no-fault settlements will be its default approach. Instead, it will consider whether admissions of misconduct are appropriate on a case-by-case basis.

“The advisory describes various factors relevant to the determination of whether admissions are appropriate,” it noted.

“Today, the division of enforcement announced steps showing how it will approach key terms of resolutions — civil monetary penalties, monitors, and admissions — to ensure greater transparency and answerability throughout the process,” said CFTC chairman, Rostin Behnam, in a release.

“Accountability and minimizing future misconduct are important commission and division objectives. We cannot keep seeing the same entities before us with the same problems,” added CFTC enforcement director, Ian McGinley. “This advisory provides staff the guidance to achieve these objectives and enables the public to understand how the division will operate.”