New CFTC Advisory Incentivizes Self-Reporting, Cooperation, and Remediation

Key Takeaways

• On February 25, 2025, the U.S. Commodity Futures Trading Commission’s (“CFTC”) Division of Enforcement (the “Enforcement Division”) issued an enforcement advisory (the “Advisory”) providing that Enforcement Division staff will evaluate self-reporting, cooperation, and remediation when recommending enforcement actions to the CFTC.
• The Advisory, which supersedes prior guidance on this topic, establishes that any company or individual who voluntarily reports potential misconduct and fully cooperates with an investigation may receive a discounted penalty (a “Mitigation Credit”) of up to 55% of the initial calculated penalty amount.
• The Advisory includes a detailed “Mitigation Credit Matrix” setting presumptive discounts corresponding to the extent of the company’s or individual’s self-reporting and cooperation. This marks the first time the CFTC has set forth a methodology for calculating a discounted penalty for cooperation.
• The Advisory provides that companies and individuals can self-report to the CFTC operating division responsible for monitoring the risk at issue; previous CFTC cooperation guidance required self-reporting to the Enforcement Division only.
• The Advisory is the CFTC’s latest attempt to incentivize self-reporting and cooperation. While the prospect of a discounted penalty may be appealing, the decision whether to voluntarily disclose to the CFTC and cooperate will continue to be sensitive and require a careful assessment of potential risks and benefits. 

The Mitigation Credit

The Advisory sets out factors that the Enforcement Division will use to rate self-reporting and cooperation. This rating places a company or individual within a “tier” used to determine the Mitigation Credit amount available. Charts describing the tiers for self-reporting and cooperation, including a non-exhaustive list of factors that exemplify each tier, are reproduced in the Appendix below.

Self-Reporting

To evaluate the quality of self-reporting, the Enforcement Division will use a three-tiered scale:

• Tier 1: “No Self-Report”—The company or individual fails to timely report a violation, the information reported was already known to the CFTC, or the report is unrelated to the final violation.
• Tier 2: “Satisfactory Self-Report”—The report notifies the CFTC of a potential violation but fails to include all material information known at the time of the report.
• Tier 3: “Exemplary Self-Report”—The report notifies the CFTC of a potential violation, includes all material information known at the time, and includes additional information that allows the CFTC to conserve resources in the investigation.

In assigning a tier, the Enforcement Division will evaluate, among other things: (i) the voluntariness of the self-report (e.g., made prior to an imminent threat of exposure of the potential violation); (ii) whether the self-report was made to the appropriate CFTC component; (iii) the timeliness of the self-report; and (iv) the completeness of the self-report.

The Advisory also provides that the CFTC, in its discretion, may apply a “safe harbor” for certain self-reports made initially in good faith and later found to contain inaccuracies, provided that any inaccurate information is promptly supplemented and corrected.

Cooperation and Remediation

Similarly, the Enforcement Division will use a four-tiered scale to evaluate the quality of cooperation:

• Tier 1: “No Cooperation”—The company or individual fails to do more than comply with compulsory processes like subpoenas.
• Tier 2: “Satisfactory Cooperation”—In addition to complying with compulsory processes, the company or individual provides “substantial assistance” by, among other things, providing documents and information, making presentations to Enforcement Division staff, and making witnesses available for testimony and interviews.
• Tier 3: “Excellent Cooperation”—In addition to the requirements for Tier 1 and 2, the company or individual performs an internal investigation, provides Enforcement Division personnel with thorough analysis of the potential violation, and consistently and voluntarily provides documents and information.
• Tier 4: “Exemplary Cooperation”— In addition to the above requirements, the cooperation results in “an exceptionally high degree of value” to the CFTC, including by using “significant resources” to materially assist the investigation and significantly remediating the underlying issue.

In determining which tier will apply, the Enforcement Division may consider, among other things: (i) whether the cooperation resulted in a timely resolution that conserved Enforcement Division resources; (ii) whether the cooperation was truthful, specific, complete, credible, and reliable; (iii) the cooperation’s voluntariness; (iv) the adequacy of the resources used for cooperation; and (v) the extent of the cooperation (e.g., timely preservation of documents and whether a company encouraged high-quality cooperation of directors, officers, and employees).

The Enforcement Division will also evaluate remediation efforts, including whether the violation’s root cause has been remediated and whether the remediation plan is designed to prevent future violations.

Additionally, the Advisory states that even in situations where a person’s actions warrant credit for cooperation, other actions, i.e., “uncooperative” conduct, may offset the Mitigation Credit a person might otherwise receive. Uncooperative conduct includes bad faith conduct that “unreasonably” impedes the Enforcement Division’s investigation or requires the use of significant Enforcement Division resources that would not have been needed but for the bad faith conduct. The Enforcement Division will employ a standard of objective reasonableness in evaluating whether conduct is uncooperative.

Following its rating of the self-reporting and cooperation, the Enforcement Division will determine the presumptive discount based on the Mitigation Credit Matrix, reproduced in full below.

Self-Reporting and Cooperation Considerations

As with any decision of whether to self-report to, and cooperate with, the government, companies and individuals should carefully analyze the risks and benefits of pro-active and voluntary cooperation with the CFTC. For example:

• The CFTC maintains sole discretion to award credit for cooperation, remediation, and self‑reporting and in what amount. The Advisory permits the CFTC to reduce or eliminate credit based its own views of culpability, the severity of the violation, and recidivism.
• A company or individual must satisfy stringent requirements to qualify for full voluntary self‑reporting credit, including timely self-reporting all “material” information that was not previously known to the CFTC and providing “additional information that assisted the [CFTC] with conserving resources.” These requirements create risk for companies and individuals, because even if they attempt to self‑report, they may not qualify for full credit for reasons beyond their control.
• Self-reporting and cooperation with the CFTC could lead to collateral consequences, such as private civil litigation or attracting scrutiny in a criminal investigation of the U.S. Department of Justice.
• It remains to be determined how the CFTC will apply the Advisory in practice. Future CFTC charges and resolutions will likely shed light on the practical consequences of the Advisory. 

Conclusion

The Advisory’s cooperation framework—and its simultaneous recission of prior policies—may signal a more standardized approach to enforcement and provides greater transparency on how cooperation can mitigate civil penalty amounts. However, companies and individuals should still conduct a careful risk and benefit analysis to determine whether to self-report and cooperate in a CFTC investigation.

Appendix

Self-Reporting Tier Calculation

Cooperation Tier Calculation