CFTC Guidance on Factors Used in Evaluating Corporate Compliance Programs in Enforcement Matters

September 22nd | 2020

The CFTC recently issued guidance on how the factors it will consider when evaluating compliance programs in connection with enforcement matters. The guidance, which will be published in the agency’s Enforcement Manual and follows the recent update of the agency’s civil monetary penalty guidance, which was released in May.

The guidance takes an initial three-pronged approach to evaluate what kind of penalty CFTC staff will recommend to the Commission. Combined with the overarching goals of general and specific deterrence, the initial three factors consider whether a compliance program was reasonably designed and implemented to:

  1. prevent the underlying misconduct at issue;

  2. detect the misconduct; and

  3. remediate the misconduct.

Some of the notable factors in evaluating a compliance program’s ability to prevent misconduct may include:

  1. the written policies and procedures in effect;

  2. the training of staff;

  3. a failure to cure any previously identified deficiencies;

  4. adequate resources; and

  5. the structure, oversight, and reporting of the compliance function.

Some of the notable factors in evaluating a compliance program’s effective detection of the underlying misconduct may include:

  1. internal surveillance and monitoring efforts;

  2. the organization’s internal-reporting system and handling of complaints; and

  3. procedures for identifying and evaluating unusual or suspicious activity.

Some of the notable factors in evaluating remediation efforts include whether the company:

  1. effectively addressed the impact of the misconduct;

  2. appropriately disciplined the individuals responsible for the misconduct; and

  3. identified and addressed any deficiencies in the compliance program itself

The guidance is helpful in putting oneself in the shoes of the CFTC’s Enforcement staff and follows through on Chairman Heath P. Tarbert’s “commitment to transparency and clarity” announced last December. Similarly, Director of Enforcement James McDonald added that “Explaining how and why we punish is a significant part of that effort.”

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