Commodity Futures Trading Commission
Division of Enforcement
Enforcement Manual
May 20, 2020
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DISCLAIMER
This Manual was prepared by the CFTC Division of Enforcement’s Office of Chief Counsel, and
is property of the United States Government.
The Manual reflects the views and policies of the Division of Enforcement and does not
necessarily reflect the position or views of the CFTC or any of the individual Commissioners.
The Manual is not intended to, does not, and may not be relied upon to create any rights,
substantive or procedural, enforceable by any party in any matter, civil or criminal.
The Division also is not intending to waive any applicable privilege or protection, including the
attorney-client privilege, the attorney work-product protection, and the deliberative process
privilege through the public posting of the Manual.
Division staff should consult with the Office of Chief Counsel if they have any questions about
the Manual.
The Manual will be periodically revised and updated.
This Manual is available on the web at www.cftc.gov.
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THE CFTC DIVISION OF ENFORCEMENT – ENFORCEMENT MANUAL
1. Introduction ............................................................................................................................. 1
2. The Commodity Futures Trading Commission ...................................................................... 1
2.1 Mission, Vision and Values of the CFTC ....................................................................... 1
2.2 Overview of the CFTC and Its Markets .......................................................................... 1
2.3 Commodity Exchange Act and Regulations ................................................................... 2
3. The Division of Enforcement .................................................................................................. 2
3.1 Mission of the Division ................................................................................................... 2
3.2 Organization of the Division ........................................................................................... 2
3.3
Overview of Division Enforcement Program
.............................................................. 3
3.4 Division Investigations ................................................................................................... 3
3.5 Life Cycle of an Enforcement Matter ............................................................................. 5
3.6 Commission Consideration of Enforcement Matters ...................................................... 6
4. Leads: Tips, Complaints, and Referrals ................................................................................. 6
4.1 Triage Function ............................................................................................................... 6
4.2 Sources ............................................................................................................................ 7
4.2.1 Customer Complaints................................................................................................ 7
4.2.2 Congress .................................................................................................................... 7
4.2.3 Market Surveillance .................................................................................................. 7
4.2.4 Data Analytical Tools ............................................................................................... 7
4.2.5 Bank Secrecy Act Information.................................................................................. 7
4.2.6 Whistleblowers ......................................................................................................... 7
4.2.7 Cooperating Witnesses and Self-Reports.................................................................. 8
4.2.8 National Futures Association .................................................................................... 8
4.2.9 Self-Regulatory Organizations.................................................................................. 8
4.2.10 Other Federal, State, or Local Governmental Agencies ........................................... 8
4.2.11 Foreign Governmental Agencies and Foreign Futures Authorities .......................... 9
5. Preliminary Inquiries and Investigations ................................................................................ 9
5.1 Preliminary Inquiries ...................................................................................................... 9
5.2 Investigations .................................................................................................................. 9
5.2.1 No Targets or Subjects of Investigations .................................................................. 9
5.2.2 Investigative Planning ............................................................................................... 9
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5.3 Statute of Limitations and Tolling Agreements ............................................................ 10
5.4 Obtaining Information – In General ............................................................................. 10
5.4.1 Voluntary Statements and Productions ................................................................... 10
5.4.2 Use of Compulsory Process / Formal Order of Investigation ................................. 10
5.4.2.1 Request To Examine and/or for a Copy of the Formal Order ......................... 11
5.4.2.2 Subpoena Enforcement Action ........................................................................ 11
5.4.2.3 Service of Subpoenas....................................................................................... 11
5.4.2.4 Compelling Production of Documents in Foreign Jurisdictions ..................... 12
5.4.3 Required Records Under the CEA and the Regulations ......................................... 12
5.4.3.1 Inspection Powers ............................................................................................ 12
5.4.3.2 Recordkeeping Obligations of Registrants, Registered Entities, and Reportable
Traders 12
5.4.4 Data Delivery Standards ......................................................................................... 13
5.5 Statutory Protections and Privileges ............................................................................. 14
5.6 Bank Secrecy Information and Handling ...................................................................... 14
5.7 Witness Interviews ........................................................................................................ 14
5.8 Customer Surveys ......................................................................................................... 15
5.9 Sworn Investigative Testimony .................................................................................... 16
5.9.1 General Provisions Regarding Investigative Testimony......................................... 16
5.9.2 Background Questionnaires .................................................................................... 17
5.9.3 Witness Assertions of the Right Against Self-Incrimination and Other Refusals To
Provide Testimony ................................................................................................................ 17
5.9.4 Going “Off the Record” .......................................................................................... 18
5.9.5 Transcript Availability ............................................................................................ 18
5.10 Litigation Holds and Preservation Demands ................................................................ 18
5.11 Informal Procedure Relating to the Recommendation of Enforcement Proceedings ... 19
5.11.1 Notice of Proposed Enforcement Action (“Wells Notices”) .................................. 19
5.11.2 Wells Submissions and Other Submissions (“White Papers”) ............................... 19
5.11.3 Wells Timing and Settlement Discussions ............................................................. 20
5.11.4 Post-Wells Process .................................................................................................. 21
5.12 Closing Investigations ................................................................................................... 21
5.12.1 Closing Letters ........................................................................................................ 21
6. Litigation ............................................................................................................................... 22
6.1 Litigation in General ..................................................................................................... 22
6.2 Types of Actions Authorized Under the CEA .............................................................. 22
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6.2.1 Civil Injunctive Actions in Federal Court ............................................................... 23
6.2.2 Administrative Enforcement Proceedings .............................................................. 23
6.2.3 Statutory Disqualification Proceedings Against Registrants .................................. 24
6.2.4 Administrative Disbarment Proceedings Against Attorneys or Accountants ......... 24
6.2.5 Seeking Preliminary Relief in Federal Court .......................................................... 24
6.2.5.1 Issues Related to Foreign-Held Assets ............................................................ 25
6.3 Ongoing Investigation During Related Litigation ........................................................ 25
6.4 Discovery in Enforcement Actions ............................................................................... 25
6.5 Settlement ..................................................................................................................... 25
6.5.1 Settling an Administrative Enforcement Proceeding or Amending a Commission
Order Accepting an Offer of Settlement ............................................................................... 25
6.5.2 Settling a Civil Injunctive Action or Amending a Consent Order Previously
Approved by the Commission .............................................................................................. 26
6.5.3 Settlement Conferences in Federal Court ............................................................... 26
6.5.4 Settlement Terms and Considerations .................................................................... 26
6.5.4.1 Settlement Terms – General ............................................................................ 26
6.5.4.3 Equal Access to Justice Act Considerations .................................................... 27
6.5.4.4 Small Business Regulatory Enforcement Fairness Act Considerations .......... 27
6.6 Appeals of Orders ......................................................................................................... 28
6.6.1 Appeals in Administrative Proceedings .................................................................. 28
6.6.2 Appeals in Federal Court Litigation ....................................................................... 28
6.7 Receivers ....................................................................................................................... 28
6.7.1 Monitoring Receivers and Their Fee Petitions ....................................................... 28
6.7.1.1 In General ........................................................................................................ 28
6.7.1.2 Fee Petitions .................................................................................................... 29
6.8 Civil Monetary Penalties............................................................................................... 29
6.8.1 Civil Monetary Penalty Guidance ........................................................................... 29
6.8.2 Collection of Civil Monetary Penalties................................................................... 32
7. Consideration of Self-Reporting, Cooperation, and Remediation ........................................ 32
7.1 Cooperation Advisories ................................................................................................ 32
7.1.1 Cooperation Factors in Enforcement Division Sanction Recommendations for
Companies and Individuals ................................................................................................... 32
7.1.2 Advisory on Self-Reporting and Full Cooperation ................................................. 33
7.1.3 Advisory on Self Reporting and Cooperation for CEA Violations Involving
Foreign Corrupt Practices ..................................................................................................... 33
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7.2 Cooperation Tools ......................................................................................................... 34
7.2.1 Division Cooperation Agreement ........................................................................... 34
7.2.2 Deferred Prosecution Agreement ............................................................................ 35
7.2.3 Non-Prosecution Agreement ................................................................................... 35
7.3 Additional Provisions Regarding Cooperation ............................................................. 36
7.3.1 Immunity ................................................................................................................. 36
7.3.2 Acknowledgement of Cooperation in an Administrative Consent Order ............... 36
8. Cooperative Enforcement ..................................................................................................... 36
8.1 Domestic Cooperative Enforcement ............................................................................. 36
8.1.1 Referring Matters to Other Government Agencies ................................................. 36
8.1.2 Sharing Information ................................................................................................ 37
8.1.2.1 Access to the Investigative Files of Other Government Agencies, Registered
Futures Associations, and Self-Regulatory Organizations ............................................... 37
8.1.2.2 Access to the Investigative Files of the CFTC by Other Government Agencies,
Registered Entities, Registered Futures Associations, and SROs..................................... 37
8.1.2.3 Parallel Proceedings ........................................................................................ 38
8.1.2.3.1 Testimony of CFTC Employees in Other Proceedings ............................... 38
8.1.2.4 Immunity ......................................................................................................... 38
8.2 International Cooperative Enforcement ........................................................................ 39
8.2.1 Obtaining Information from Foreign Sources......................................................... 39
8.2.1.1 Assistance from Foreign Authorities ............................................................... 39
8.2.2 Issuing and Serving an Investigative or Administrative Subpoena on Persons
Located Outside of the United States .................................................................................... 40
8.2.3 Obtaining Local Counsel in Foreign Jurisdictions.................................................. 40
8.2.4 Providing Assistance to Foreign Authorities .......................................................... 40
9. Privileges and Confidentiality ............................................................................................... 41
9.1 Preservation and Assertion of Privileges ...................................................................... 41
9.1.1 Attorney-Client Privilege ........................................................................................ 41
9.1.1.1 Corporate Clients ............................................................................................. 41
9.1.1.2 Multiple Representations ................................................................................. 41
9.1.1.3 Advice-of-Counsel Defense ............................................................................ 42
9.1.1.4 Crime-Fraud Exception ................................................................................... 42
9.1.2 Attorney Work-Product Doctrine ........................................................................... 42
9.1.3 The Fifth Amendment Privilege Against Self-Incrimination ................................. 42
9.1.4 Governmental Privileges that May Be Asserted by the CFTC ............................... 43
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9.2 Inadvertent Production of Privileged or Non-Responsive Documents ......................... 43
9.3 Waiver of Privilege ....................................................................................................... 44
9.3.1 Privilege Non-Waiver Agreements ......................................................................... 44
9.4 Confidentiality .............................................................................................................. 44
9.4.1 The Privacy Act of 1974 ......................................................................................... 45
9.4.2 The Freedom of Information Act ............................................................................ 45
9.4.3 The Right to Financial Privacy Act of 1978 ........................................................... 46
9.4.4 The Electronic Communications Privacy Act of 1986 ........................................... 47
9.5 Statement to Persons Providing Information About Themselves to the CFTC ............ 48
10. Other ................................................................................................................................. 49
10.1 Ethics............................................................................................................................. 49
10.1.1 General Principles and Standards ........................................................................... 49
10.2 Records Management and Document Control .............................................................. 50
10.2.1 General Policies ...................................................................................................... 50
10.2.2 The Division’s Recordkeeping Systems ................................................................. 51
10.2.3 Historically Significant Matters .............................................................................. 51
10.3 Closing an Enforcement Matter .................................................................................... 51
10.4 Press Releases ............................................................................................................... 51
10.5 Reparations Program ..................................................................................................... 52
11. Whistleblower Program .................................................................................................... 52
11.1 General Description of the Whistleblower Program ..................................................... 52
11.2 Qualifying as a Whistleblower...................................................................................... 53
11.3 Protecting the Identity of Whistleblowers .................................................................... 53
11.3.1 Handling of Information and Documents ............................................................... 53
11.3.1.1 Referrals and Requests to Domestic or Foreign Authorities ........................... 54
11.3.1.2 Investigations ................................................................................................... 54
11.3.1.3 Litigation ......................................................................................................... 54
11.4 Additional Whistleblower Protections .......................................................................... 54
11.5 Whistleblower Awards.................................................................................................. 55
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1. Introduction
This Enforcement Manual (“Manual”) provides an overview of the Commodity Futures Trading
Commission (“CFTC” or “Commission”) and the Division of Enforcement (“Division” or
“Enforcement”) of the CFTC, and it sets forth certain general policies and procedures that guide
the work of Division staff in detecting, investigating, and prosecuting violations of the
Commodity Exchange Act (“CEA”) and the Commission Regulations (“Regulations”).
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2. The Commodity Futures Trading Commission
2.1 Mission, Vision and Values of the CFTC
The mission of the CFTC is to promote the integrity, resilience, and vibrancy of the U.S.
derivatives markets through sound regulation. Through its commitment to this mission, the
CFTC aims to be the global standard for sound derivatives regulation and endeavors to achieve
this goal by upholding the following core values:
Commitment - Bringing our best to work every day and holding ourselves to the highest
professional standards.
Forward-thinking - Challenging ourselves to stay ahead of the curve.
Teamwork - Valuing diverse skill sets and backgrounds to achieve our mission.
Clarity - Providing transparency to market participants about our rules and processes.
2.2 Overview of the CFTC and Its Markets
The CFTC is overseen by a Commission consisting of five Commissioners appointed by the
President, with the advice and consent of the Senate, to serve staggered five-year terms.
The President designates one of the Commissioners to serve as Chairman. No more than
three Commissioners at any one time may be from the same political party. The
Commission has offices in Washington, D.C., Chicago, Kansas City, and New York.
Established in 1974, the CFTC oversees the U.S. derivatives markets, which include futures,
options, and swaps. These markets have existed since the 1860s, beginning with
agricultural commodities such as wheat, corn, and cotton. The markets grew to include
energy and metal commodities, such as crude oil, heating oil, gasoline, copper, gold, and
silver. Over time, market participants developed financial instruments based on interest
rates, stock indexes, foreign currency, and other products, which today exceed agricultural
contracts in trading volume. In the aftermath of the 2008 financial crisis, the CFTC’s
mandate was significantly expanded to include most over-the-counter (“OTC”) derivatives
markets and swaps.
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The Manual provides general guidance only. Decisions about specific investigations, recommendations, and
litigations are made based on the facts and circumstances of the particular matter.
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The futures and swaps markets are essential to the U.S. and global economies and the way
that businesses and individuals manage risk. Farmers, ranchers, producers, commercial
companies, municipalities, pension funds, and others use these markets to lock in a price or
a rate. This helps them focus on what they do best: innovating, producing goods and
services for the economy, and creating jobs. The CFTC works to ensure these hedgers and
other market participants can use the markets with confidence.
The CFTC also works to protect the retail customers who too often are subject to
unscrupulous fraudsters who fraudulently solicit and often misappropriate their money
based on claims of quick riches and successful trading.
2.3 Commodity Exchange Act and Regulations
The CFTC is charged with the administration and enforcement of the CEA, 7 U.S.C. §§ 1–
26, and the Regulations, 17 C.F.R. pts. 1–190, which it issues pursuant to its statutory
authority. Under the CEA, the CFTC has exclusive jurisdiction over futures, commodity
options, and leverage contracts, with certain exceptions. The CFTC also has exclusive
jurisdiction over certain swaps contracts and broad-based security index products.
Certain
anti-fraud and other specified provisions of the CEA apply to retail forex transactions and retail
commodity transactions entered into on a leveraged, margined, or financed basis.
In addition,
the CFTC has authority to prosecute fraud and manipulation in connection with
commodities in interstate commerce.
3. The Division of Enforcement
3.1 Mission of the Division
The mission of the Division is to protect the public and preserve market integrity by
detecting, investigating, and prosecuting violations of the CEA and the Regulations.
3.2 Organization of the Division
The Division is led by the Director, who reports to the Chairman. The Director leads an
Enforcement staff that includes attorneys, paralegals, investigators, forensic economists,
surveillance analysis, and administrative staff located in each of the four CFTC offices.
The Division has five teams of attorneys and investigators dedicated to the investigation and
litigation of matters, each led by a Deputy Director (“Deputy”), with one team in each
CFTC regional office, and two in the Washington, D.C. office. The work of Enforcement is
supported by the Office of the Director, which includes the Principal Deputy Director, the
Office of Chief Counsel (“OCC”) (responsible for review of legal, policy and programmatic
issues), and a Special Counsel to the Director. The work of the Division is further supported
by the Office of Cooperative Enforcement (provides coordination with and assistance to
the
Division’s federal and state partners)
, Office of Forensic Economists (provides analytical
support to specific matters), and Litigation, Intake and Triage (led by a Deputy Director and
conducts the review and analysis of leads and provides general litigation guidance). The
Division also houses the Surveillance group, led by a Deputy Director, which monitors
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markets and market participants for potential unlawful conduct.
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Finally, the Whistleblower
Office also sits in the Division, and is responsible for administering the Whistleblower
Program established under the CEA and Regulations. See Section 11 of the Manual
(Whistleblower Program).
3.3
Overview of Division Enforcement Program
The Division may pursue, with the approval of a majority of the Commission, enforcement
actions against individuals and companies whose conduct violates the CEA or the
Regulations. The Division may file these enforcement actions either in federal court or in
administrative proceedings.
The Division may obtain information relevant to its investigations through a number of
avenues, including other CFTC Divisions, industry self-regulatory organizations, other
governmental authorities, whistleblowers, victims, cooperating witnesses, self-reports,
customer complaints, and members of the general public, as well as through the use of tools,
means, and methods the Division has developed internally.
At the conclusion of an investigation, the Division may recommend that the Commission
initiate administrative proceedings or seek injunctive and ancillary relief in federal court.
Sanctions may include civil monetary penalties; the suspension, denial, revocation, or
restriction of registration and trading privileges; and injunctions or cease-and-desist orders.
In addition, the Division may recommend pursuing other remedies such as restitution or
disgorgement.
When the Division obtains evidence that gives it reason to suspect criminal violations of the
CEA may have occurred, it may refer the matter to the Department of Justice or the
appropriate state authority for prosecution. Criminal activity involving commodity-related
instruments can result in prosecution for criminal violations of the CEA and for violations of
other federal criminal statutes, including mail fraud, wire fraud, and conspiracy.
3.4 Division Investigations
Authority
: The statutory authority for the Division to conduct investigations
into potential
violations of the CEA or the
Regulations is found in Sections 6(c)(5), 8(a)(1), and 12(f) of the
CEA, 7 U.S.C. §§ 9, 15, 12(a)(1), 16(f). The authority to conduct investigations is
delegated to the Director of the Division of Enforcement under Part 11 of the Regulations,
17 C.F.R. pt. 11.
Additionally, Section 12(f) of the CEA, 7 U.S.C. § 16(f), authorizes the
Division to conduct investigations on behalf of foreign futures authorities even if such
investigations do not involve a violation of the CEA or the Regulations.
Investigative Powers: The Division has broad powers to conduct such investigations. These
investigative powers include obtaining relevant information and evidence through, among other
avenues:
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This Manual focuses on the Division’s investigations and prosecutions of violations of the CEA and Regulations.
The Division’s Surveillance function is not addressed herein.
4
voluntary statements, submissions, and productions of documents by customers, industry
participants, and the general public;
inspections of required records of boards of trade, intermediaries, reporting traders, and
other entities and persons required by law to register with the CFTC;
information provided by other federal and state departments or agencies, or self-
regulatory organizations, such as the National Futures Association, boards of trade, or
swaps execution facilities;
analysis of market data;
compelled testimony and/or production of documents through administrative subpoenas;
and
whistleblowers.
Confidentiality
:
Non-public information and documents received by the CFTC during the
course of an investigation must be treated by the CFTC as confidential in accordance with
Section 8(a) of the CEA, 7 U.S.C. §12(a), and Regulation 11.3, 17 C.F.R. §11.3. See
Section 9.4 of the Manual (Confidentiality).
Summary of Types of Prohibited Conduct Subject to Investigation
: Conduct prohibited
under the CEA and the Regulations includes, among other things:
fraud, including fraudulent solicitation, concealment and misappropriation;
false statements to the CFTC;
price manipulation;
use of a manipulative or deceptive device;
misappropriation of material, confidential, non-public information;
disruptive trading practices, including disregard of orderly execution during the
closing period and spoofing;
fraudulent trade allocation;
trade-practice violations (trading ahead, prearranged trading, bucketing, trading at
other than bona-fide prices, wash sales, and position limits);
false reporting;
undercapitalization;
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failure to segregate customer funds;
registration violations;
failure to maintain or produce required records;
failure to make required reports;
a registrant’s failure to supervise;
failure to comply with business conduct standards; and
illegal off-exchange activity.
In addition, under the CEA and Regulations, some market participants may be held liable
for the acts and/or violations of others.
3.5 Life Cycle of an Enforcement Matter
Each enforcement matter has four potential phases. A matter is tracked through each phase
in the Division’s Case Management System. The Director of the Division, along with other
members of the Office of the Director, regularly reviews the docket of matters assigned to
each Deputy with the responsible Deputy to ensure consistency in approach and proper
allocation of Division resources. Deputies also routinely meet with the teams assigned to
each matter. Regular review also ensures that investigations are proceeding on course,
adjustments to the investigative approach or plan are made, as appropriate, target deadlines
are established, and major open issues are brought to the attention of the Director. The life
cycle of an enforcement matter may include:
Lead
. Information concerning a possible enforcement matter can come to the
Division from many different sources. After initial assessment, a lead may be closed,
converted to a preliminary inquiry or investigation for further evaluation, or referred
to another agency (e.g., where the CFTC lacks jurisdiction). See Section 4 of the
Manual (Leads: Tips, Complaints, and Referrals).
Preliminary Inquiry
. In the preliminary inquiry (“PI”) stage, Division staff conduct
an initial review, take some investigatory steps to further assess the viability of the
lead, and determine whether to commit additional Division resources. See Section
5.1 of the Manual (Preliminary Inquiries).
Investigation.
During this phase, Division staff conduct an in-depth investigation to
confirm jurisdiction, if necessary, and to obtain full understanding of the facts and
determine whether enforcement action should be recommended, including whether
emergency action is needed to protect customers from further harm or to protect the
integrity of the markets, or whether the matter should instead be closed.
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Staff may recommend to the Commission that it file an action, either on an
emergency or non-emergency basis. For non-emergency matters, staff may give
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proposed defendants notice of the recommendation and an opportunity to submit
a written statement addressing any relevant factual, legal, or policy issues. If the
Commission authorizes the filing of an action, the matter proceeds to the
litigation phase. See Section 5.2 of the Manual (Investigations).
Litigation.
If the Division determines that the conduct violates the CEA and/or the
Regulations, and the Division obtains Commission authorization, staff may file an
injunctive action in federal court or an administrative action, under Section 6(c) and
6(d) of the CEA, 7 U.S.C. §§ 9, 13b.
See Section 6.1 of the Manual (Litigation).
3.6 Commission Consideration of Enforcement Matters
The Commission authorizes certain actions of the Division, including authorizing the Division to
file and settle enforcement actions. The Division ordinarily prepares a written recommendation
setting out the factual and legal basis for the proposed action. The Commission considers
Division recommendations either through a seriatim process or at a closed meeting of the
Commission. Through the seriatim process, the Commission considers and votes by written
procedure pursuant to which the recommendations are considered separately by each
Commissioner in turn (i.e., in seriatim). Each participating Commissioner will report her or his
vote on the recommendation to the Secretary of the Commission. The Commission may also
consider and vote on Division’s recommendations in “closed meetings,” which are meetings that,
pursuant to exemptions in the Government in the Sunshine Act (“Sunshine Act”), 5 U.S.C.
§ 552b, the Commission has voted to close to the public. At a closed meeting, Division staff
may orally present the recommendation to the Commission and answer any questions of the
Commissioners before the Commission votes on the matter.
4. Leads: Tips, Complaints, and Referrals
4.1 Triage Function
The Division’s Litigation, Intake, and Triage Unit (“Triage”) processes referrals and leads
received by the Division. Triage conducts an initial analysis of each referral or lead to determine
whether it merits closer scrutiny. For those matters that warrant further inquiry, Triage forwards
the lead to a Deputy for further assessment and staffing, if appropriate.
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If the Deputy
determines that no further information or work is required to determine that no violations
have occurred, the lead is closed. Otherwise, if the Deputy determines that the initial
information indicates potential violations of the CEA or Regulations, the matter is opened as
either a PI or an Investigation.
If a matter appears to fall outside the jurisdiction of the CFTC,
but within the jurisdiction of another federal or state agency, a referral may be made at this time.
See Section 8.1.1 of the Manual (Referring Matters to Other Government Agencies).
3
If the referral or lead relates to an existing matter, it is generally forwarded to the staff assigned to the existing
matter.
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4.2 Sources
The Division receives leads from a wide variety of sources. Among the most significant sources
of leads are those listed below.
4.2.1 Customer Complaints
Information provided by the public is an important source on which the Division relies for
initiating and developing investigations of potentially unlawful activities. To assist the public in
reporting possible violations, the Division has prepared a form, which appears on the CFTC
website at http://www.cftc.gov/ConsumerProtection/FileaTiporComplaint/index.htm and may be
submitted by email or mail.
4.2.2 Congress
The CFTC may receive complaints and other information from members of Congress on behalf
of the constituents whom they represent. This information can produce new leads for the
Division or information relating to an on-going investigation or litigation.
4.2.3 Market Surveillance
Suspicious activity discovered by Market Surveillance may be referred to the Division for
investigation and prosecution of possible violations of the CEA and Regulations.
4.2.4 Data Analytical Tools
The Division also develops leads using data analytical tools developed internally, including by
Market Surveillance, to identify suspicious activity that could indicate a violation of the CEA or
Regulations.
4.2.5 Bank Secrecy Act Information
The Bank Secrecy Act (“BSA”), 31 U.S.C. §§ 5311–5332, is designed to prevent, detect, and
prosecute international money laundering and the financing of terrorism. The BSA and related
regulations require certain registrants to establish anti-money laundering (“AML”) programs,
report suspicious activity in Suspicious Activity Reports (“SARs”), verify the identity of
customers, and apply enhanced due diligence to certain types of accounts involving foreign
persons.
BSA information can provide valuable leads in investigations.
4.2.6 Whistleblowers
The Division also relies on information from whistleblowers to uncover possible misconduct, as
whistleblowers may possess intimate knowledge of a business’s inner workings or specialized
market knowledge, often enabling the Division to conduct more efficient investigations. The
CFTC’s Whistleblower Program provides monetary incentives and anti-retaliation protections to
individuals who come forward to report to the CFTC possible violations of the CEA and the
8
Regulations. See generally 17 C.F.R. pt. 165. See Section 11 of the Manual (Whistleblower
Program).
4.2.7 Cooperating Witnesses and Self-Reports
Under the Division’s cooperation and self-reporting programs, the Division may receive
information about misconduct from individual cooperating witnesses or through voluntary self-
reports by companies or individuals. This information could be used to generate new leads for
the Division. See Section 7 of the Manual (Consideration of Cooperation, Self-Reporting, and
Remediation).
4.2.8 National Futures Association
National Futures Association (“NFA”) is a self-regulatory organization whose members include
CFTC registrants, commercial firms, and banks. NFA is responsible—under CFTC oversight—
for certain aspects of the regulation of registrants, such as Futures Commission Merchants,
Commodity Pool Operators, Commodity Trading Advisors, Introducing Brokers, Retail Foreign
Exchange Dealers, Swaps Dealers, and their associated persons. NFA focuses primarily on
CFTC registration and on the qualifications and proficiency, financial condition, retail sales
practices, and business conduct of these futures professionals. NFA administers its own
disciplinary program for violations of its rules by its members, and may refer information to the
Division regarding potential violations of the CEA and the Regulations.
NFA maintains a database of registration and disciplinary history, as well as copies of
registration applications, required notifications, and audit results. See
https://www.nfa.futures.org/basicnet/. For additional information, see the NFA website,
www.nfa.futures.org.
4.2.9 Self-Regulatory Organizations
Each registered entity, e.g., Designated Contract Market, Designated Clearing Organization, or
Swap Execution Facility, is responsible for monitoring its respective markets and taking
disciplinary actions for violations of its rules and regulations. When these self-regulatory
organizations (“SROs”) discover potentially illegal activities that fall outside the scope of their
regulatory authority or that also violates the CEA or the Regulations, they may refer such
activities to the Division. At times, the SRO and the Division may engage in parallel
investigations and disciplinary/enforcement actions. In addition, each SRO maintains records
that could be relevant to an enforcement investigation.
4.2.10 Other Federal, State, or Local Governmental Agencies
When other federal, state or local government agencies discover potentially illegal activity that
might fall within the CFTC’s jurisdiction, they may refer the matter to the Division. The
Division can seek and gain access to their files. When their jurisdiction overlaps the jurisdiction
of the CFTC, the Division and the other governmental authorities may initiate parallel
enforcement efforts. See Section 8.1 of the Manual (Domestic Cooperative Enforcement).
9
4.2.11 Foreign Governmental Agencies and Foreign Futures Authorities
The Division may receive a referral or information concerning cross-border violations from
foreign governmental agencies or foreign futures authorities. Staff work closely with OCC in
such matters. See Section 8.2 of the Manual (International Cooperative Enforcement).
5. Preliminary Inquiries and Investigations
5.1 Preliminary Inquiries
A PI may be opened when a lead has sufficient viability to merit further investigatory steps to
evaluate whether there are potential violations of the CEA or the Regulations. Deputies are
responsible for approving the opening of a PI.
5.2 Investigations
An investigation may be opened either when a PI is converted to an investigation (i.e., where
evidence has been developed suggesting that further investigation is warranted), or
independently (i.e., directly from a lead, including a referral). Deputies are responsible for
approving the opening of an investigation. Part 11 of the Regulations, 17 C.F.R. pt. 11, sets forth
rules relating to investigations, which also govern the preliminary inquiry stage.
5.2.1 No Targets or Subjects of Investigations
The CFTC’s investigative process does not designate “targets” or “subjects” of preliminary
inquiries or investigations. Moreover, Division staff are not required to, nor do they, provide any
type of target notification when issuing subpoenas to parties for document production or to
witnesses for testimony in nonpublic investigations of possible violations of the CEA or the
Regulations. This differs from the criminal grand jury process in which targets of an
investigation are often identified.
4
5.2.2 Investigative Planning
At the outset of a matter, Division staff develop an investigatory approach or plan and
throughout the matter modify the approach as necessary, depending upon the facts and
circumstances of each
matter. For any matter, the investigatory approach includes an
assessment of potential violations of the CEA and the Regulations; identification of
necessary documents and information, and the means and timing of obtaining such
documents and information; identification of any legal issues, including any statute of
limitations issues; and coordination with any related investigations by other government
agencies or SROs.
4
Cf. SEC v. O’Brien, 467 U.S. 735, 750 (1984) (noting that “the imposition of a notice requirement on the SEC
would substantially increase the ability of persons who have something to hide to impede legitimate investigations
by the Commission,” and citing the SEC’s broad investigatory responsibility under the federal securities laws,
finding no statutory, due process, or other standard regarding judicial enforcement of such subpoenas to support the
proposition that notice is required).
10
5.3 Statute of Limitations and Tolling Agreements
Title 28 U.S.C. § 2462 states that “[e]xcept as otherwise provided by Act of Congress, an action,
suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or
otherwise, shall not be entertained unless commenced within five years from the date when the
claim first accrued if, within the same period, the offender or the property is found within the
United States in order that proper service may be made thereon.” Some courts have held that the
five-year statute of limitations in § 2462 applies to certain claims brought by the CFTC under the
CEA and the Regulations. The statute of limitations is an affirmative defense that is waived if it
is not raised in timely fashion, or may be waived by agreement.
If there is a potential statute of limitations issue, Division staff may ask the potential defendant
or respondent to sign a “tolling agreement.” By signing a tolling agreement, the potential
defendant or respondent agrees to the suspension of the running of any statute of limitations
period for an agreed upon length of time. The use of a tolling agreement in a particular matter
must be approved by the Director or a Deputy who also must sign the tolling agreement.
Division staff should consult with OCC concerning any statute of limitations or tolling
agreement issues that arise.
5.4 Obtaining Information – In General
5.4.1 Voluntary Statements and Productions
Division staff may obtain documents or statements from any person or entity willing to provide
them voluntarily. In preparing to take a statement from a witness, Division staff consider
whether to take the statement as part of an interview or in the form of voluntary testimony
recorded by an official reporter. The taking of non-subpoenaed voluntary testimony recorded by
an official reporter is governed by Part 11 of the Regulations, 17 C.F.R. pt. 11. See Section 5.10
of the Manual (Investigative Testimony). Staff provide the Statement to Persons Providing
Information about Themselves to the CFTC to any witness providing information about
themselves. See Section 9.5 of the Manual (Statement to Persons).
5.4.2 Use of Compulsory Process / Formal Order of Investigation
The CFTC’s power to subpoena testimony and documents in connection with its investigatory
proceeding derives from Section 6(c)(5) of the CEA, 7 U.S.C. § 9(5). That provision, in
pertinent part, states:
[F]or the purpose of any investigation . . . under this Act, and for the purpose of any
action taken under section 12(f), any member of the Commission . . . or other officer
designated by the Commission . . . may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence, and require the production of any
books, papers, correspondence, memoranda, or other records that the Commission deems
relevant or material to the inquiry.
Id. Pursuant to Section 6(c)(6) of the CEA, the Commission can require the attendance of
subpoenaed witnesses or the production of subpoenaed records “from any place in the United
11
States, any State, or any foreign country or jurisdiction.” Id. § 9(6). The Division’s authority to
issue subpoenas is pursuant to Regulation 11.4, 17 C.F.R. § 11.4.
5.4.2.1 Request To Examine and/or for a Copy of the Formal Order
Pursuant to Regulation 11.7(a), 17 C.F.R. § 11.7(a), any person upon whom a subpoena has been
served compelling her or him to furnish documentary evidence or testimony in an investigation
shall, upon her or his request, be permitted to examine a copy of the Commission’s order
pursuant to which the subpoena has been issued. However, a copy of the order shall not be
furnished for her or his retention except with the approval of the Director or other senior officers
in the Division. Approval shall not be given unless it has been shown by the person seeking to
retain a copy that her or his retention of a copy would be consistent both with the protection of
the privacy of persons involved in the investigation and with the unimpeded conduct of the
investigation. Such request should be made in writing.
5.4.2.2 Subpoena Enforcement Action
Whether seeking to compel testimony, the production of documents, or both, CFTC investigative
subpoenas are not self-enforcing. Pursuant to delegated authority, the Director of the Division,
with the concurrence of the General Counsel or her or his designee, may bring an action in an
appropriate district court of the United States to enforce any subpoena issued as part of a
Division investigation. See 7 U.S.C. § 9(8); 17 C.F.R. § 11.4(e). Such an action may be used to
enforce subpoenas issued during an investigation and those issued to compel testimony or
documents at an administrative hearing.
5.4.2.3 Service of Subpoenas
Service of Commission subpoenas issued for investigatory purposes is governed by Regulation
11.4(c), 17 C.F.R. § 11.4(c). If the subpoena names a natural person, service can be
accomplished by:
handing a copy of the subpoena to the person;
leaving a copy at her or his office with the person in charge of the office or, if there is no
one in charge, in a conspicuous place within the office;
leaving a copy at her or his dwelling place or usual place of abode with a person of
suitable age and discretion; or
any other method that results in actual notice being given.
If the subpoena names a person other than a natural person (for example, a business entity),
service can be accomplished by:
handing a copy of the subpoena to a registered agent for service, or to any officer,
director, or agent in charge of any office of the person subpoenaed;
delivering a copy by registered or certified mail to any such representative at her or his
last known address; or
any other method whereby actual notice is given to the representative.
12
See also Regulation 15.05, 17 C.F.R. § 15.05 (allowing service upon the U.S. intermediary of
foreign traders or brokers, and the customers of such brokers). If an individual or entity is
represented by counsel, the lawyer may be authorized to accept service on behalf of the
individual or entity.
Section 6(c)(6) of the CEA, 7 U.S.C. § 9(6), provides that the attendance of witnesses and
production of records can be required from any place in the United States, any State, or any
foreign country or jurisdiction at any designated place of hearing.
5.4.2.4 Compelling Production of Documents in Foreign Jurisdictions
A number of special considerations apply to the service of investigative subpoenas in foreign
countries or jurisdictions. In general, there are two avenues open to Division staff who need to
compel the production of documents by individuals or entities located abroad: through a
Memorandum of Understanding or the procedure set out in Section 6(c) of the CEA, 7 U.S.C.
§ 9. Division staff should consult with OCC in connection with any request to compel the
production of documents located abroad. See Section 8.2 of the Manual (International
Cooperative Enforcement).
5.4.3 Required Records Under the CEA and the Regulations
5.4.3.1 Inspection Powers
Registrants, registered entities, and reportable traders are required to make certain filings with
and disclose certain information to the CFTC, and keep a variety of books, records, and other
information on their commodity interest-related activities open to inspection by CFTC
representatives. These filings, disclosures, books, and records are required to be readily
available to the Division without compulsory process.
The Division typically obtains copies of these required documents by written request, pursuant to
the applicable recordkeeping provisions of the CEA. Division staff can send a document request
to entities (typically to a custodian of records) required to make records available describing the
types of documents or information requested, as well as the time frame for production and the
format of the records to be produced. See Section 5.4.4 of the Manual (Data Delivery
Standards), Section 9.5 of the Manual (Statement to Persons). With approval, Staff also on
occasion may inspect required records by visiting the premises where they are kept.
5.4.3.2 Recordkeeping Obligations of Registrants, Registered Entities, and Reportable
Traders
The CFTC has statutory authority to inspect books and records that registrants, registered
entities, and reportable traders are required to make and/or keep under the following provisions
of the CEA and the Regulations:
The general recordkeeping provision regarding all books and records required to be kept
under the CEA and the Regulations is Regulation 1.31, 17 C.F.R. § 1.31.
13
Futures Commission Merchants, Retail Foreign Exchange Dealers, Introducing
Brokers, Floor Brokers and Floor Traders. The recordkeeping obligations are
primarily found in Sections 4f and 4g of the CEA, 7 U.S.C. §§ 6f, 6g, as well as in a
number of separate provisions in the Regulations, including in particular Regulations
1.35, 5.14, and 22.12, 17 C.F.R. §§ 1.35, 5.14, 22.12.
Commodity Trading Advisors and Commodity Pool Operators. The recordkeeping
obligations are primarily found in Section 4n of the CEA, 7 U.S.C. § 6n, and Regulations
4.23 and 4.33, 17 C.F.R. §§ 4.23, 4.33.
Designated Contract Markets. The recordkeeping obligations are primarily found in
Section 5(d)(18) of the CEA, 7 U.S.C. § 7(d)(18), and Regulation 38.950, 17 C.F.R.
§ 38.950.
Derivatives Clearing Organizations. The recordkeeping obligations are primarily
found in Section 5b(c)(2)(J) of the CEA, 7 U.S.C. § 7a-1(c)(2)(J), and Regulation 39.20,
17 C.F.R. § 39.20.
Swap Dealers and Major Swap Participants. The recordkeeping obligations are
primarily found in Section 4s of the CEA, 7 U.S.C. § 6s, and Regulation 23.201–.202,
17 C.F.R. §§ 23.201–.202.
Swap Execution Facilities. The recordkeeping obligations are primarily found in
Section 5h(f)(10) of the CEA, 7 U.S.C. § 7b-3(f)(10), and Regulation 37.1001, 17 C.F.R.
§ 37.1001.
Swap Data Repositories. The recordkeeping obligations are primarily found in Section
21(c)(3) of the CEA, 7 U.S.C. § 24a(c)(3), and Regulation 49.12 and Part 45 of the
Regulations (regarding swap data reporting), 17 C.F.R. § 49.12, pt. 45.
Traders Holding Reportable Futures Or Options Positions On Commission-
Designated Contract Markets, or Reportable Swaps Positions. The recordkeeping
requirements are primarily found in Sections 4i and 4s of the CEA, 7 U.S.C. §§ 6i, 6s,
and Regulations 18.05 and 20.6, 17 C.F.R. §§ 18.05, 20.6.
5.4.4 Data Delivery Standards
The Commission has developed Data Delivery Standards, which are available on the CFTC
website at https://www.cftc.gov/sites/default/files/2019-05/enfdatadeliverystandards.pdf, and
which identify the required format for production of electronic records, including those for:
Native File Production
o Emails
o Account Statements
o Instant Messages (IMs)
o Audio Files
14
o Video Files
o Transcripts
Imaged Collections
o Images
o Concordance Image® Cross-Reference File
o Data File
o Text
o Linked Native Files
Productions of Adobe PDF Files
Productions of Website Content
Productions of Forensic Images of Computer Media
Productions of Forensically Acquired Mobile Device Data
FTP (File Transfer Protocol) Submission
Moreover, Regulation 1.31(a), 17 C.F.R. § 1.31(a), provides that a request to a records entity for
electronic regulatory records should specify a reasonable form and medium in which the records
entity must produce such regulatory records. The Data Delivery Standards are periodically
revised; Division staff provide a copy of the standards to persons requested to provide electronic
data, and parties producing such data should consult with staff as necessary when making a
production.
5.5 Statutory Protections and Privileges
In connection with any request for document production, the Division complies with relevant
law, including the Privacy Act of 1974 (“Privacy Act”), the Right to Financial Privacy Act of
1978 (“RFPA”), and the Electronic Communications Privacy Act of 1986 (“ECPA”), when
applicable. For a comprehensive discussion of statutory protections and legal privileges
available in CFTC investigations, see Section 11 of the Manual (Privileges and Confidentiality).
5.6 Bank Secrecy Information and Handling
BSA information often contains sensitive data or Personally Identifiable Information (“PII”), and
thus is sensitive and must be safeguarded. In addition, SARs are protected by the BSA and
related regulations that prohibit improper disclosure. The Division’s BSA Review Team
addresses staff questions concerning BSA issues that may arise.
5.7 Witness Interviews
Witness interviews are an important tool for developing relevant evidence in investigations.
15
Division staff may take written notes of the interview. With the witness’s consent, staff
also may make an audio recording of the interview.
In connection with any witness interviews or testimony, staff must comply with the
Privacy Act. See Section 9.5 of the Manual (Statement to Persons).
A witness may seek information about the investigation. Because CFTC investigations
are non-public and confidential, staff may refer a witness to publicly available
information, but cannot offer any non-public information developed in the investigation.
A witness may request immunity for her or his testimony. See Section 10.1.2.4 of
Manual (Immunity).
Division staff do not give legal advice. If asked, staff will state that they are prohibited
from giving legal advice and that the individual may wish to consult with a private
attorney. Division staff may also refer a witness asserting losses resulting from violations
of the CEA or the Regulations by a registrant to the CFTC’s Reparations Program. See
Section 10.5 of the Manual (Reparations Program).
5.8 Customer Surveys
As part of an investigation, or even during litigation, staff may seek to conduct written customer
surveys to gather additional information regarding possible violations of the CEA or the
Regulations. The Paperwork Reduction Act of 1980 (“PRA”), 44 U.S.C. §§ 3502–3507, and
implementing regulations issued by the Office of Management and Budget (“OMB”), 5 C.F.R.
§§ 1320.3–.5, require surveys “obtaining or soliciting of information by an agency from ten or
more persons by means of identical questions” to be submitted to and approved by OMB prior to
their use. However, collections of information made during a civil action to which a government
agency is a party or during an administrative action or investigation involving an agency against
specific individuals or entities are specifically exempted from the PRA. 44 U.S.C.
§ 3518(c)(1)(B). To comply with the PRA exception, before a survey of ten or more customers
can be conducted without submission to OMB, there must be a documented open investigation,
or a pending litigation.
Before survey forms are distributed, staff must obtain signed approval to conduct the survey
from the Deputy supervising the investigation or litigation. All survey forms must be
accompanied by a cover letter also signed by the supervising Deputy. Staff also must provide
the Statement to Persons Providing Information about Themselves to the CFTC to requested
customers. See Section 9.5 of the Manual (Statement to Persons). All customer responses
become part of the Division’s investigation or litigation files.
16
5.9 Sworn Investigative Testimony
5.9.1 General Provisions Regarding Investigative Testimony
Part 11 of the Regulations, 17 C.F.R. pt. 11, governs the taking of sworn investigative testimony.
Those regulations address matters such as the rights of witnesses, access to transcripts, oaths and
false statements, and the possible sequestration of witnesses or counsel.
Regarding the right to counsel in particular, Regulation 11.7(c)(1), 17 C.F.R. § 11.7(c)(1),
provides as follows:
(c) Right to counsel. A person compelled to appear, or who appears in person by
request or permission of the Commission or its staff during an investigation, may
be accompanied, represented, and advised by counsel. Subject to the provisions
of §11.8(b) of this part, he may be represented by any attorney-at-law who is
admitted to practice before the highest court in any State or territory or the
District of Columbia, who has not been suspended or disbarred from appearance
and practice before the Commission in accordance with the provisions of part 14
of this title, and who has not been excluded from further participation in the
particular investigatory proceeding for good cause established in accordance with
paragraph (c)(2) of this section.
(1) The right to be accompanied, represented and advised by counsel shall
mean the right of a person testifying to have an attorney present with him
during any aspect of an investigative proceeding and to have this attorney
advise his client before, during and after the conclusion of such
examination. At the conclusion of the examination, counsel may request
the person presiding to permit the witness to clarify any of his answers
that may need clarification in order that his answers not be left equivocal
or incomplete on the record. For his use in protecting the interests of his
client with respect to that examination counsel may make summary notes
during the examination.
Any person making false statements under oath during the course of a Commission investigation
is subject to the criminal penalties for perjury in 18 U.S.C. § 1621. Any person who knowingly
and willfully makes false or fraudulent statements, whether under oath or otherwise, or who
falsifies, conceals or covers up a material fact, or submits any false writing or document,
knowing it to contain false, fictitious or fraudulent information, is subject to the criminal
penalties set forth in 18 U.S.C. § 1001. In addition, Section 6(c)(2) of the CEA, 7 U.S.C. § 9(2),
states:
It shall be unlawful for any person to make any false or misleading statement of a
material fact to the Commission, including in any registration application or any
report filed with the Commission under this chapter, or any other information
relating to a swap, or a contract of sale of a commodity, in interstate commerce, or
for future delivery on or subject to the rules of any registered entity, or to omit to
state in any such statement any material fact that is necessary to make any
17
statement of a material fact made not misleading in any material respect, if the
person knew, or reasonably should have known, the statement to be false or
misleading.
Accordingly, any person making false or misleading statements of material fact to the Division
during investigative testimony violates the CEA, and may be subject to enforcement action and
imposition of civil penalties and other relief.
Before any substantive questioning, the witness should be provided the appropriate “Statement to
Persons Providing Information about Themselves to the CFTC” with the applicable perjury, false
statements, and Privacy Act warnings, along with provisions addressing a witness’s right to
counsel and other matters relating to her or his testimony. See Section 9.5 of the Manual
(Statement to Persons).
5.9.2 Background Questionnaires
Division staff may use a background questionnaire in advance of testimony in order to expedite
the taking of testimony. The questionnaire solicits certain personal information from the
witness, including, among other things, the witness’s date and place of birth, the names and
account numbers for all commodity interest and other financial accounts, a list of all educational
institutions attended and degrees received, and an employment history. The information
solicited in the background questionnaire is routinely otherwise asked for in testimony.
The witness is not required as a matter of law to comply with the staff’s request to complete the
background questionnaire. Disclosure of the information is voluntary on the witness’s part.
There are no sanctions and thus no effects for failing to provide all or any part of the requested
information. However, this information may then be asked for in testimony. If the witness
chooses to provide a background questionnaire, Division may examine the witness about the
document and have it entered as an exhibit to investigative testimony.
5.9.3 Witness Assertions of the Right Against Self-Incrimination and Other Refusals To
Provide Testimony
If a witness is appearing voluntarily, the staff cannot compel the witness to answer any
questions. A witness appearing to testify pursuant to a subpoena is compelled to testify, but may
refuse to answer questions by invoking her or his right against self-incrimination. Regulation
11.7(d)(1), 17 C.F.R. § 11.7(d)(1), provides as follows:
Except as provided in paragraph (d)(2) of this section [regarding
immunity], a witness testifying or otherwise giving information in an
investigation may refuse to answer questions on the basis of the right
against self-incrimination granted by the Fifth Amendment of the
Constitution of the United States.
See Section 9.1.3 of the Manual (The Fifth Amendment Privilege Against Self-Incrimination).
Other grounds for refusal to answer questions may include asserting various evidentiary or
testimonial privileges. See Section 9.1 of the Manual (Preservation and Assertion of Privileges).
18
However, if an assertion of the right against self-incrimination or other privileges is not valid, a
witness may be subject to subpoena enforcement proceedings in federal court to obtain the
information. See Section 5.4.2.2 of the Manual (Subpoena Enforcement Action). Division staff
ordinarily require the person taking the Fifth Amendment to do so on the record in response to
specific questions.
5.9.4 Going “Off the Record”
Division staff taking investigative testimony control the record. The purpose of taking testimony
is to make a record of what the witness says. Thus, as a general rule, Division staff keep
discussions with the witness or counsel on the record. If a witness desires to go off the record,
the witness must indicate this to Division staff taking the testimony, who will then determine
whether to grant the witness’s request.
If Division staff agree to go “off-the-record,” staff typically summarize any substantive “off-the-
record” conversations when the record is reopened. If no such discussions occurred, the fact that
no substantive discussions concerning the matter occurred is made on the record.
5.9.5 Transcript Availability
Regulation 11.7(b), 17 C.F.R. § 11.7(b), provides that a witness is entitled to retain or procure
(upon payment of the appropriate fees) a copy or transcript of her or his own testimony, unless
the Commission has “good cause” to limit the request, in which case the witness may only
inspect the official transcript of her or his testimony. The decision to grant or deny a witness a
copy of the transcript of her or his investigative testimony shall be made by the staff attorney
conducting the investigation in consultation with, and with the approval of, her or his immediate
supervisor and Deputy.
5.10 Litigation Holds and Preservation Demands
At certain times, Division may need to ensure preservation of records for litigation with respect
to records held within the CFTC and records held by third parties.
A “litigation hold” is a directive to witnesses and document custodians at the CFTC to preserve
documents (including electronically stored information (“ESI”)) and any other information
relevant to litigation or potential litigation. Failure to preserve relevant documents and
information can result in court sanctions in litigation. Division staff issue litigation holds to
anyone at the CFTC who possesses, at that time, relevant records and information, and also to
any individuals who later become involved in the matter.
A preservation letter may be delivered to third parties that may have relevant documents or
information during the preliminary inquiry or investigation phase of an enforcement matter, as
well as in litigation. Division staff may make follow-up inquiries on those demands, seeking
assurances that they are being complied with along with explanations of the steps being taken to
ensure such compliance.
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5.11 Informal Procedure Relating to the Recommendation of Enforcement Proceedings
5.11.1 Notice of Proposed Enforcement Action (“Wells Notices”)
Appendix A to Part 11 of the Regulations, 17 C.F.R. pt. 11 app. A, gives the Division authority
to inform persons who may be named in a proposed enforcement action of the nature of the
allegations against them before the action is filed. This process is often referred to as a “Wells
Notice,” because it was patterned after a similar notification process having that name at the
SEC. Appendix A does not make this disclosure mandatory, and the Division has the discretion
whether and to whom to issue a Wells Notice. The Director of the Division must approve
issuance of a Wells Notice in any particular matter.
To determine whether, when, and to whom to issue a Wells Notice, staff consider all of the
relevant facts and circumstances, including, but not limited to:
whether the investigation is substantially complete as to the recipient of the Wells Notice;
whether immediate enforcement action is necessary;
whether providing a Wells Notice may alert potential defendants to a possible asset
freeze or otherwise put at risk funds that the recommendation is intended to protect;
whether there is a parallel criminal investigation that may be adversely affected by
providing a Wells Notice; and
whether a Wells Submission would be useful to the Division and Commission in
evaluating complicated factual, legal or policy issues.
Although the particulars of the Wells Notice will vary based on the facts and circumstances of
each case, in general the Wells Notice will inform the potential respondent or defendant, or her
or his counsel, of the nature of the allegations pertaining to them.
5.11.2 Wells Submissions and Other Submissions (“White Papers”)
Appendix A to Part 11 also sets forth a procedure that allows persons who have been provided a
Wells Notice by the Division to submit a written statement, setting forth their views on any
factual, legal, or policy matters relevant to the particular investigation or proposed enforcement
action. Similarly, persons who become involved in an investigation may submit written
statements on their own initiative, which are often referred to as White Papers. Regardless of
whether they are submitting a Wells Submission or a White Paper, potential respondents or
defendants must follow the applicable procedures described in Appendix A and summarized
below.
If a potential respondent or defendant chooses to file a written statement, the statement must:
20
be submitted to the Division within fourteen days after the potential respondent or
defendant or her or his counsel has been informed of the nature of the allegations against
them;
be double spaced on 8.5
x 11 inch paper and not exceed twenty pages;
be addressed to the Director of the Division with copies to the staff conducting the
investigation;
clearly identify the investigation to which the statement pertains;
include affidavits or other sworn affirmations as to each statement of fact by a person
with personal knowledge of that fact; and
contain a specific request that the statement be forwarded to the Commission if the
potential respondent or defendant, or her or his counsel, wants the Commission to review
and consider the submission.
Any statement that does not comply with the requirements set forth in Appendix A may be
rejected and not otherwise considered or forwarded to the Commission by the Division. If a
request is made to forward a statement to the Commission, the Division will do so only at such
time as the Division recommends the commencement of an enforcement action against a
potential respondent or defendant, along with the Division’s response.
A statement as described in this subsection is not required, but, if one is made, may be used as an
admission, or in any other permissible manner in an administrative or judicial proceeding by the
Division, as well as by another governmental agency, self-regulatory organization, or private
party who may obtain the submission under the Freedom of Information Act.
5.11.3 Wells Timing and Settlement Discussions
The fourteen-day period within which to make a submission will continue to apply in instances
where the potential respondent or defendant, or her or his counsel is discussing with Division
staff possible settlement, or expresses a desire to begin such discussions. In such cases, staff
should inform the person that the fourteen-day period will not be tolled due to ongoing
settlement discussions. However, extensions of the fourteen-day period may be approved in
instances where settlement discussions are in progress and the staff participating in the
discussions believes that the extension will facilitate those discussions.
5
5
The procedure does not preclude the Division from conducting settlement discussions with a person who may be
the subject of a proposed enforcement action before notifying that person of the opportunity to file a submission,
especially in those instances where the person or her or his counsel previously has indicated a desire to discuss
possible settlement.
21
5.11.4 Post-Wells Process
Recipients of Wells Notices may request meetings with Division staff to discuss the substance of
staff’s proposed recommendation to the Commission. It is at the discretion of the Division
whether to hold such a meeting. Assigned staff should consult with their Deputy if a request is
made. A Wells Notice recipient generally will not be accorded more than one post-Wells Notice
meeting. The staff may engage in appropriate settlement discussions with the recipient of the
Wells Notice. See Section 6.5 of the Manual (Settlement).
With consultation and approval of the supervising Deputy and depending upon the facts and
circumstances of the matter, Division staff may continue to investigate after providing Wells
Notice to an individual or entity and after receiving any Wells Submission or White Paper.
5.12 Closing Investigations
Closing an enforcement matter, including an investigation, triggers other CFTC operations and
duties, including recordkeeping and record destruction mechanisms, and sanction reporting and
collection efforts. See Section 10.3 of the Manual (Closing an Enforcement Matter). For these
reasons, how and when Division staff closes a matter carry significant consequences and staff
must use the appropriate documentation procedures in a timely fashion.
Generally, factors that should be considered in deciding whether to close an investigation
include:
the seriousness and scope of the conduct and potential violations;
the sufficiency and strength of the evidence;
the extent of potential harm if an action is not commenced;
the applicable statute of limitations; and
whether there are any prior enforcement actions by the CFTC or other governmental
agency or SRO or criminal prosecutions of the individual or entity;.
5.12.1 Closing Letters
The Division may send a Closing Letter to notify individuals and entities as early as practicable
when staff has decided to close an investigation as it relates to them and thus not to recommend
an enforcement action against them to the Commission. The staff may send closing letters to
certain individuals or entities before the entire investigation is closed and before a determination
has been made as to every potential defendant or respondent. Closing Letters may be sent
regardless of whether the investigation was conducted pursuant to a Formal Order. Whether to
send a Closing Letter will depend on the particular facts and circumstances of each case; in
general, the Division will consider sending a Closing Letter to anyone who:
is identified in the caption of a formal order;
22
submitted or was solicited to submit a Wells Submission;
asks for such notice (assuming staff has decided no enforcement recommendation will be
recommended against that person or entity); or
to the staff’s knowledge, reasonably believes that the staff was considering
recommending an enforcement action against them.
The Deputy supervising the matter must approve the Closing Letter, as well as any decision not
to send a Closing Letter to individuals or entities that fall into any of these categories. It is the
Division’s determination and within its discretion whether to issue Closing Letters in any
particular matter.
A Division Closing Letter will state that the Division is closing the investigation as to that
individual or entity; however, it will also make clear that the Division retains the discretion to
reopen the investigation at any time in the future, and that an enforcement action could result
from any reopened investigation. A Closing Letter will also note that receipt of the Closing
Letter does not imply that the conduct at issue was lawful or otherwise in compliance with the
Act and Regulations.
6. Litigation
6.1 Litigation in General
The CFTC may bring enforcement actions either in federal court or as administrative
proceedings. Section 6c of the CEA, 7 U.S.C. § 13a-1, authorizes the CFTC to bring actions in
federal court for violations of the CEA, the Regulations, or Commission orders. Sections 6(c),
6(d), and 8a of the CEA, 7 U.S.C. §§ 9, 13b, 12a, authorize various administrative proceedings.
6.2 Types of Actions Authorized Under the CEA
Under the CEA and the Regulations, the Commission must authorize all enforcement actions.
See Section 3.6 of the Manual (Commission Authorization). The CEA grants the CFTC the
power to bring enforcement actions in federal court and before Administrative Law Judges
(“ALJs”) or other appointed Presiding Officers. The kinds of relief available in federal court and
in the various administrative proceedings differ to some extent, and accordingly, Division
recommendations to the Commission for enforcement actions must specify which forum is
recommended and the nature of relief that will be sought.
23
6.2.1 Civil Injunctive Actions in Federal Court
Section 6c of the CEA, 7 U.S.C. § 13a-1, authorizes the CFTC to bring actions in federal court
for violations of the CEA, the Regulations, or Commission orders. The relief available in federal
court generally includes the remedies expressly authorized under the CEA as well as those
available under a federal court’s general equitable powers. The relief available in federal court
actions includes, but is not limited to:
preliminary and permanent injunctions barring future violations of the CEA and the
Regulations and enforcing compliance with the CEA and the Regulations;
an ex parte restraining order;
imposition of civil monetary penalties;
appointment of a receiver to administer a defendant’s estate;
disgorgement of ill-gotten gains;
restitution;
rescission of all contracts entered into by a defendant related to the enforcement action;
an accounting of the defendant’s estate;
pre-judgment or post-judgment interest on any monetary sanctions as appropriate;
an award to the CFTC of its fees and costs;
imposition of commodity trading, solicitation, and registration bans;
remediation, including the imposition of a monitor to oversee remedial efforts; and
such other and further relief as the court may deem necessary and appropriate under the
circumstances.
6.2.2 Administrative Enforcement Proceedings
Complaints initiating an administrative enforcement action pursuant to Sections 6(c) and 6(d) of
the CEA, 7 U.S.C. §§ 9, 13b, are conducted under the CFTC’s Rules of Practice contained in
Part 10 of the Regulations, 17 C.F.R. pt. 10. The relief available in administrative actions
includes, but is not limited to:
an order directing a respondent to cease and desist from violating the CEA or the
Regulations;
imposition of civil monetary penalties;
24
restitution;
pre- and post-judgment interest;
prohibition from trading on, or subject to the rules of, any contract market and requiring
all contract markets to refuse such person all trading privileges thereon for a specified
period of time;
suspension (for a period not to exceed six months), revocation, or restriction of a
respondent’s registration with the CFTC; and
an order directing a respondent to comply with undertakings regarding, for example,
commodity trading, solicitation, and registration bans; the disgorgement of any ill-gotten
gains; or remediation, including the imposition of a monitor to oversee remedial efforts.
6.2.3 Statutory Disqualification Proceedings Against Registrants
Statutory disqualification proceedings against registrants can be brought pursuant to Section 8a
of the CEA, 7 U.S.C. § 12a, and Subpart C of Part 3 of the Regulations, 17 C.F.R. §§ 3.50–.64.
The remedies available in statutory disqualification proceedings are limited to the denial,
conditioning, suspension, restriction, or revocation of registration. The CFTC has delegated to
NFA the authority to take adverse registration actions against all categories of CFTC registrants
and applicants, and thus, in addition to CFTC authority, NFA may also bring such actions.
6.2.4 Administrative Disbarment Proceedings Against Attorneys or Accountants
Under certain circumstances, the CFTC can suspend or disbar a person from appearing and/or
practicing before the Commission as an attorney or accountant. Part 14 of the Regulations,
17 C.F.R. pt. 14, sets forth the rules governing when such a suspension or disbarment may be
appropriate and the procedures to be followed in a suspension or disbarment action. Examples of
circumstances supporting an action for suspension or debarment include, but are not limited to:
the finding by the Commission or a court of competent jurisdiction that the person
violated, caused, or aided and abetted any violation of the CEA or the Regulations;
a criminal conviction of that person;
disbarment or suspension of the person by the appropriate professional licensing
authority; and
the finding by the Commission, by a preponderance of the evidence, that the person lacks
the requisite qualifications to represent others, lacks character or integrity, or has engaged
in unprofessional conduct that was unethical or improper.
6.2.5 Seeking Preliminary Relief in Federal Court
In appropriate circumstances where there is good cause for concern about the possible
dissipation of customer funds and/or destruction of relevant records, the Division may seek ex
25
parte relief in federal court pursuant to Section 6c of the CEA, 7 U.S.C. § 13a-1, and in
accordance with Rule 65 of the Federal Rules of Civil Procedure. Under Section 6c of the CEA,
the CFTC may seek an ex parte restraining order: (1) prohibiting any person from destroying,
altering or disposing of, or refusing to permit authorized representatives of the CFTC to inspect,
when and as requested, any books and records or other documents; (2) prohibiting any person
from withdrawing, transferring, removing, dissipating, or disposing of any funds, assets, or other
property; and (3) appointing a temporary receiver to administer such restraining order. Id.
The Division may request additional temporary relief, such as orders for an accounting and
repatriation of assets held overseas, when seeking a restraining order on notice or a preliminary
injunction.
6.2.5.1 Issues Related to Foreign-Held Assets
When staff suspects that a defendant in a civil enforcement action is maintaining assets abroad, a
provision should be added to the proposed restraining order or preliminary injunction that freezes
property under the court’s control wherever the property is located. A federal district court with
personal jurisdiction over a party has the authority to freeze all assets under that party’s control,
even if held in a foreign country. In some jurisdictions, the foreign regulator has the power to
freeze assets on behalf of a counterpart regulator (such as the CFTC) under certain
circumstances. See also Section of the Manual 8.2.1.1 (Assistance from Foreign Authorities).
6.3 Ongoing Investigation During Related Litigation
Division Staff may continue to investigate and issue investigative subpoenas pursuant to a
Commission order of investigation while simultaneously litigating a related civil enforcement
action if there is an independent, good-faith basis for the continued or related investigation. An
independent, good-faith basis may include the possible involvement of additional persons or
entities in the violations alleged in the complaint or related thereto, or additional potential
violations by one or more of the defendants in the litigation. However, staff may not use such
subpoenas solely to conduct discovery for pending litigation.
6.4 Discovery in Enforcement Actions
In federal court enforcement cases, the Federal Rules of Civil Procedure set out the general rules
for discovery and specific procedures for production of relevant factual information to parties in
litigation. In CFTC administrative enforcement cases, Part 10 of the Regulations, 17 C.F.R. pt.
10, entitled the “Rules of Practice,” sets out the provisions regarding disclosure of information to
respondents.
6.5 Settlement
6.5.1 Settling an Administrative Enforcement Proceeding or Amending a Commission
Order Accepting an Offer of Settlement
Administrative enforcement proceedings can only be settled by order of the Commission. See
Section 3.6 of the Manual (Commission Authorization). Further, Commission settlement orders
can only be amended by further order of the Commission. Id. The Division recommends the
26
settlement of an administrative complaint, or the amendment of a settlement, by circulating a
memorandum setting forth the reasons for the recommendation as well as a recommended order,
and attaching the respondent’s offer of settlement. Id.
6.5.2 Settling a Civil Injunctive Action or Amending a Consent Order Previously
Approved by the Commission
Commission authorization is required to settle a civil injunctive case in federal district court, or
to amend a Consent Order previously authorized by the Commission. See Section 3.6 of the
Manual (Commission Authorization). Similar to an administrative enforcement proceeding, a
memorandum ordinarily must be sent to the Commission. Id.
6.5.3 Settlement Conferences in Federal Court
During a civil injunctive proceeding, a district court may schedule a settlement conference and
require attendance by parties possessing ultimate decision-making authority with respect to
settlement. Because the Commission itself is the ultimate decision maker with respect to
settlement offers in these proceedings, the Division must apprise the Court of the CFTC’s
structure, rules, and procedures in connection with settlements to determine how to proceed.
In particular, staff should notify the Court that, although the CFTC prosecutes actions through
the Division, the Division does not possess independent settlement authority. Rather, the
Division presents executed offers of settlement to the Commission with specific
recommendations that any such offer be accepted or declined, and in the case of federal
litigation, to grant the Division authority to enter into the proposed settlement. Counsel should
then request that the Division be allowed to work within this administrative framework, and be
allowed to participate in the settlement conference with a Division attorney possessing authority
to negotiate the terms of a settlement, which the Division will affirmatively recommend the
Commission accept. The Director, or her or his designee, must approve proposed settlement
terms. Similar considerations apply in the case of court-ordered mediation.
6.5.4 Settlement Terms and Considerations
6.5.4.1 Settlement Terms – General
For purposes of discussing proposed settlement terms for recommendation to the Commission,
the Division may consider any of the monetary and remedial relief available in civil injunctive
actions and administrative proceedings, respectively. See Section 6.2.1 of the Manual (Civil
Injunctive Actions in Federal Court), Section 6.2.2 of the Manual (Administrative Enforcement
Proceedings), Section 6.8.1 of the Manual (Civil Monetary Penalty Guidance).
6.5.4.2 Financial Analysis of Ability To Pay
Settlements of proposed or pending enforcement actions may include restitution, disgorgement,
and a civil monetary penalty, in addition to an injunction (or cease-and-desist order) and
ancillary relief. If a respondent or defendant claims either a partial or total inability to pay,
Division staff will confirm this information, and ascertain the maximum amount that can be paid
27
at the time of settlement, as well as over time using various sources of information. The
following materials could be used to assess a respondent or defendant’s claim of inability to pay:
credit reports (authorized by the respondent/defendant);
a completed Division Financial Disclosure Statement, which requires a
respondent/defendant to provide substantial personal information and financial history,
including an extensive detailing of assets and liabilities, and income and expenses;
attachments to a completed Division Financial Disclosure Statement, including specific
document requests to support claims made in the Financial Disclosure Statement, such as
bank statements, brokerage statements, etc.;
a copy or transcript of taxes filed with the IRS; and
database searches, including, e.g., of real property, vehicle ownership, corporate interests,
UCC searches, stock ownership (10% ownership), bankruptcies, liens, and judgments.
The Division will not recommend a proposed settlement to the Commission where a respondent
or defendant is claiming an inability to pay the monetary sanctions unless the respondent or
defendant has provided a completed Financial Disclosure Statement with attachments, or, with
the approval of the Director, the Division has obtained other comparable, detailed, and verifiable
information supporting the claims of inability to pay.
6.5.4.3 Equal Access to Justice Act Considerations
The Equal Access to Justice Act (“EAJA”), 5 U.S.C. § 504 and 28 U.S.C. § 2412, allows a court
to award legal fees and expenses to a prevailing party if the court finds that the position of an
agency was not “substantially justified” or if the demand for relief is “unreasonable.” The CFTC
typically requires a respondent or defendant settling with the CFTC to waive any and all claims
under EAJA. The CFTC’s rules for EAJA claims arising out of administrative enforcement
cases can be found at Part 148 of the Regulations. 17 C.F.R. pt. 148.
6.5.4.4 Small Business Regulatory Enforcement Fairness Act Considerations
The Small Business Regulatory Enforcement Fairness Act (“SBREFA”), Pub. L. No. 104-121,
tit. II, §§ 201–253, 110 Stat. 847, 857–74 (codified as amended at 28 U.S.C. § 2412 and in
scattered sections of 5 U.S.C. and 15 U.S.C.), is an amendment to the Regulatory Flexibility Act
of 1980, which requires that each agency regulating the activities of small entities establish a
policy or program to reduce and, when appropriate, to waive civil penalties for violations of
statutory or regulatory requirements by small entities. SBREFA § 223, 110 Stat. at 862. The
CFTC established such a program through its CFTC Policy Statement Relating to the
Commission’s Authority to Impose Civil Monetary Penalties and Futures Self-Regulatory
Organization’s Authority to Impose Sanctions Guidelines; Penalty Guidelines, [1994-1996
Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,265 (Nov. 1, 1994) (“Penalty Guidelines”).
Division attorneys perform a SBREFA analysis any time they are making a recommendation to
28
impose a civil penalty as part of a proposed settlement. The CFTC typically requires a
respondent or defendant settling with the CFTC to waive any and all claims under SBREFA.
6.6 Appeals of Orders
Appeals in CFTC enforcement actions are handled differently depending on whether they arise
in administrative proceedings or federal court litigation.
6.6.1 Appeals in Administrative Proceedings
OCC represents the Division in initiating or responding to appeals from initial decisions in
administrative enforcement proceedings. In administrative proceedings, appeals are taken to the
Commission. After the Commission issues its decision, the respondent may appeal to the United
States Court of Appeals for the circuit in which he or she is doing business. 7 U.S.C. § 9.
Appeals to a Court of Appeals are handled by OGC.
6.6.2 Appeals in Federal Court Litigation
OGC represents the CFTC in initiating and responding to appeals taken from all United States
District Court decisions. Affirmative appeals of a ruling adverse to the CFTC require
Commission approval. After an appealable order or judgment is entered in a civil injunctive
action, the responsible Division staff and OCC coordinate with OGC regarding, in the case of an
affirmative appeal, whether to recommend that the Commission authorize appeal of an adverse
ruling, and in the case of a defendant’s appeal, how to respond.
6.7 Receivers
In appropriate circumstances, a court-appointed receiver can maximize restitution for injured
customers. A receiver can do this through a number of avenues, including by seizing control of
and managing a business, marshaling assets held in domestic and foreign financial institutions
and other third parties, liquidating receivership assets through auctions or other sales, initiating
actions against third parties, negotiating with third parties and creditors to limit the depletion of
assets, taking responsibility for filings required under state and federal tax law, and providing the
court with an independent perspective on the receivership defendant’s operation, receipts, and
expenditures. The CFTC typically recommends the appointment of receivers in cases where the
defendants have engaged in fraud or are otherwise not competent to manage assets. However, a
receiver may not be appropriate in every case, and the decision whether to seek appointment of a
receiver requires careful analysis of the specific facts and circumstances present. Division staff
typically nominate one or more potential receivers, with ultimate selection and appointment
made by the Court. Division staff are also responsible for monitoring the activities and
effectiveness of a receiver.
6.7.1 Monitoring Receivers and Their Fee Petitions
6.7.1.1 In General
Division staff should monitor receivers to encourage them to perform their duties in a diligent
and cost-effective manner. To that end, Division staff should maintain regular contact with the
29
receiver to, among other things, ensure that the receiver is focused on the case and diligently
pursuing assets, and promptly provide the receiver with new information that will assist the
receiver in discharging her or his duties (such as discovery responses regarding a defendant’s
assets).
The proposed order appointing the receiver typically will require the receiver to file periodic
reports and keep written records itemizing receipts and expenditures of the receivership estate.
These accounts should be open to inspection by the CFTC.
6.7.1.2 Fee Petitions
The district court appointing a receiver has discretion over who will pay the costs of the receiver.
Typically, however, receiver fees and expenses are paid out of funds controlled by the receiver
and any compensation plan proposed to the court should provide this.
To help ensure that fees are reasonable and thus do not deplete the pool of frozen assets, Division
staff should address compensation in the proposed order appointing the receiver. The order
should create a billing procedure that requires court approval of all fees and costs, permits the
receiver to be compensated only for those services that benefit the estate, and requires the
receiver to provide detailed monthly billing statements to the court and the CFTC.
Division staff should review the receiver’s fee applications and raise concerns regarding fee
petitions directly with the receiver, and staff should explore ways to reduce fees and expenses
before the petition is filed with the court.
6.8 Civil Monetary Penalties
The Division may obtain civil monetary penalties among other forms of relief, in both
administrative and district court proceedings. Other remedies and monetary relief available in
Commission enforcement proceedings include restitution and disgorgement, statutory
disqualification from registration, bans on certain forms of trading, bans on registration with the
Commission, as well as other appropriate undertakings and equitable remedies. Division staff
make recommendations to the Commission about appropriate remedies and monetary relief to
impose or seek in particular matters.
6.8.1 Civil Monetary Penalty Guidance
Civil monetary penalties are imposed in enforcement proceedings to further the CEA’s remedial
purposes. The CEA authorizes civil monetary penalties for each violation of the CEA and
Regulations, and it sets the maximum penalty per violation. See Sections 6(c)(10), 6b, and 6c(d)
of the CEA, 7 U.S.C. §§ 9(10), 13a, 13a-1(d).
6
Generally, penalties may be determined on a per
violation basis or up to triple the monetary gain to the Respondent,
7
whichever is greater.
The
6
See also https://www.cftc.gov/LawRegulation/Enforcement/InflationAdjustedCivilMonetaryPenalties/index.htm.
7
The Commission brings charges against “respondents” in administrative enforcement actions before the
Commission and against “defendants” in civil enforcement actions in U.S. District Courts. For purposes of Section
6.8.1 of the Manual (Civil Monetary Penalty Guidance), “Respondent” is used as a generic descriptor for a person
charged.
30
CEA and Commission precedent require that penalties be assessed in relation to the gravity of
the violation. See, e.g., Sections 6(e)(1), 6b of the CEA, 7 U.S.C. §§ 9a(1), 13a.
In 1994, the Commission published guidelines listing factors that influence its assessments of
civil monetary penalties (“Commission Guidelines”). See CFTC Policy Statement Relating to
the Commission’s Authority To Impose Civil Money Penalties, [1994 Transfer Binder] Comm.
Fut. L. Rep. (CCH) ¶ 26,265 (Nov. 1, 1994). The Commission Guidelines remain in place today.
In formulating recommendations for the Commission, Division staff are guided by the statute,
the Commission Guidelines, and relevant case law, among other things, and considers how those
precedents and authorities apply to the facts and circumstances of each case. The factors set
forth below are informed by and consistent with these authorities.
The list of factors below provides a framework through which Division staff will evaluate the
appropriate penalty to recommend to the Commission. Specifically, in recommending civil
monetary penalties to the Commission, Division staff will take into account, as enumerated
below, the gravity of the violation, any mitigating and aggravating circumstances, and other
considerations. Each of these factors may be more or less relevant to the facts and circumstances
of a particular matter and the type of violation at issue. In applying the factors identified below,
staff will be guided by the overarching consideration of ensuring the proposed penalty achieves
the dual goals of specific and general deterrence.
Gravity of the Violation: By the express terms of the CEA, and as set forth in the Commission
Guidelines and precedent, the gravity of the violation is the primary consideration in determining
the appropriate civil monetary penalty. Division staff will consider the following factors in
evaluating the gravity of the violation. Staff should understand, however, that no factor listed
below is dispositive, and a case may present additional factors not listed that Division staff will
deem applicable to this inquiry. Nevertheless, the following considerations are illustrative of the
analysis in most cases:
Nature and scope of the violations, including:
o the number, duration, type and degree of the violations;
o the Respondent’s role in the violations;
o whether the Respondent acted in concert with others;
o any efforts to conceal the ongoing violations; and
o whether the violations resulted in harm to victims and, if so, the number and type
of victims;
The Respondent’s state of mind, including whether the conduct was intentional or willful;
and
Nature and scope of any consequences flowing from the violations, including any:
o harm (or risk of harm) to victims and market participants;
31
o benefit or potential benefit to the Respondent; and
o impact on market integrity, customer protection, or the mission and priorities of
the Commission in implementing the purposes of the CEA.
Mitigating and Aggravating Circumstances: The Commission has typically considered
mitigating and aggravating circumstances when determining the appropriate civil monetary
penalty. In making its recommendations to the Commission, Division staff will continue to
consider all relevant mitigating and aggravating circumstances, including the following:
Post-violation conduct, including:
o mitigating conduct, such as attempts to cure, return of victim funds, or efforts to
improve a compliance program; and
o aggravating conduct, such as concealment or obstruction of an ongoing
investigation;
Whether the Respondent self-reported the misconduct, as well as the extent of
cooperation and remediation, as detailed in the Division’s Enforcement Advisories;
Timeliness of remediation;
Existence and effectiveness of the company’s pre-existing compliance program;
8
Prior misconduct, such as whether the Respondent is a recidivist;
Pervasiveness of misconduct within the company, including responsibility of
management; and
Nature of any disciplinary action taken by the company with respect to the individuals
engaged in misconduct.
Other Considerations: Division staff will also evaluate other considerations, including but not
limited to the following:
The total mix of remedies and monetary relief to be imposed on the Respondent in the
recommended Commission enforcement action, in addition to the remedies and relief to
be imposed in parallel cases involving criminal authorities (including incarceration),
other regulatory entities, or self-regulatory organizations;
Monetary and non-monetary relief in analogous cases; and
Conservation of Commission resources, including timely settlement.
8
A “company” as used in Section 6.8.1 of the Manual (Civil Monetary Penalty Guidance) means any type of
business entity except for a sole proprietorship.
32
6.8.2 Collection of Civil Monetary Penalties
As an initial matter, Division staff may, as a matter of course, obtain information regarding a
defendant’s assets throughout the life cycle of an enforcement matter, and should take steps as
appropriate to identify any additional assets in order to satisfy potential civil monetary sanctions.
Part 143 of the Regulations, 17 C.F.R. pt. 143, provides procedures for the collection of debts
owed to the United States arising from activities under the CFTC’s jurisdiction. Administrative
oversight for the collection of debts is delegated to the CFTC’s Financial Management Branch
(“FMB”). 17 C.F.R. § 143.7. If FMB’s efforts to collect are not successful, the Regulations
provide that FMB may refer debts to Treasury or DOJ for collection. 17 C.F.R. §§ 143.2(c),
143.6.
The CFTC itself also may invoke post-judgment discovery and other proceedings to identify and
execute against assets of respondents or defendants. Because monetary sanctions are imposed by
order of the Commission or a court, they may be subject to enforcement through contempt
proceedings as well as through ordinary debt collection procedures.
7. Consideration of Self-Reporting, Cooperation, and Remediation
The Division encourages self-reporting, cooperation, and remediation by individuals and
companies in furtherance of its investigations and related enforcement actions. The Division has
issued a series of advisories and updates setting out the various factors the Division considers in
evaluating self-reporting, cooperation, and remediation. The Division also has developed
various tools to facilitate cooperation.
Self-reporting, full and proactive cooperation, and appropriate remediation will be considered by
the Division in determining whether to recommend that an enforcement action be brought and, if
so, what charges and sanctions to impose. At the outset of a matter, Division staff should explain
the Division’s Self-Reporting, Cooperation, and Remediation program to allow the individuals or
companies involved to determine what level of cooperation they want to provide, if any.
7.1 Cooperation Advisories
7.1.1 Cooperation Factors in Enforcement Division Sanction Recommendations for
Companies and Individuals
The Enforcement Advisory regarding Cooperation Factors in Enforcement Division Sanction
Recommendations for Companies is found at:
https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents/leg
alpleading/enfadvisorycompanies011917.pdf.
The Enforcement Advisory regarding Cooperation Factors in Enforcement Division Sanction
Recommendations for Individuals is found at:
https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents/leg
alpleading/enfadvisoryindividuals011917.pdf.
33
These Advisories state that the Division considers three broad policy issues in its assessment of
whether cooperation was provided and the quality of that cooperation: (1) the value of the
cooperation to the Division’s investigation and related enforcement actions; (2) the value of the
cooperation to the Commission’s broader law enforcement interests; and (3) the balancing of the
level of culpability and history of prior misconduct with the acceptance of responsibility,
mitigation, and remediation. The rewards for cooperation can range from the Division
recommending no enforcement action to recommending reduced charges or sanctions in
connection with enforcement actions.
7.1.2 Advisory on Self-Reporting and Full Cooperation
The Enforcement Advisory regarding on Self-Reporting and Full Cooperation
9
is found at:
https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents/leg
alpleading/enfadvisoryselfreporting0917.pdf.
This Advisory supplements the above Advisories by providing additional information regarding
voluntary disclosures and the substantial credit companies and individuals can expect from the
Division if they timely and voluntarily disclose misconduct, fully cooperate with the Division’s
investigation, and appropriately remediate.
In sum, if a company or individual self-reports, fully cooperates, and remediates, the Division
will recommend that the Commission consider a substantial reduction from the otherwise
applicable civil monetary penalty. Consistent with the above Advisories, the Division may
recommend a reduced civil monetary penalty even where a company or individual did not self-
report wrongdoing but otherwise fully cooperated with the Division’s investigation and
remediated deficiencies in its compliance or control programs. The Division will reserve its
recommendations for the most substantial reductions in civil monetary penalty for those
instances where a company or individual has self-reported the misconduct and fully cooperated
with the Division’s investigation and remediated.
7.1.3 Advisory on Self Reporting and Cooperation for CEA Violations Involving Foreign
Corrupt Practices
The Enforcement Advisory on Self Reporting and Cooperation for CEA Violations Involving
Foreign Corrupt Practices
10
is found at: https://www.cftc.gov/sites/default/files/2019-
03/enfadvisoryselfreporting030619.pdf.
This Advisory applies to companies and individuals not registered (or required to be registered)
with the CFTC that timely and voluntarily disclose to the Division violations of the CEA
involving foreign corrupt practices, where the voluntary disclosure is followed by full
cooperation and appropriate remediation, in accordance with the above Advisories. In those
circumstances, the Division will apply a presumption that it will recommend to the Commission
9
See James M. McDonald, Speech Regarding Perspectives on Enforcement: Self-Reporting and Cooperation at the
CFTC (Sept. 25, 2017), https://www.cftc.gov/PressRoom/SpeechesTestimony/opamcdonald092517
10
See James M. McDonald, Remarks (Mar. 6, 2019),
https://www.cftc.gov/PressRoom/SpeechesTestimony/opamcdonald2.
34
a resolution with no civil monetary penalty, absent aggravating circumstances involving the
nature of the offender or the seriousness of the offense. In its evaluation of any aggravating
circumstances, the Division will consider, among other things, whether: executive or senior
level management of the company was involved; the misconduct was pervasive within the
company; or the company or individual has previously engaged in similar misconduct. The
presumption of the recommendation of no civil monetary penalty will not be applied to
registrants; however, the Division will nonetheless recommend a substantial reduction in the
civil monetary penalty where the registrant timely and voluntarily self-reports, provides full
cooperation, and undertakes appropriate remediation. See also Section 6.8.1 of the Manual
(Civil Monetary Penalty Guidance).
7.2 Cooperation Tools
The Division has various means for facilitating and recognizing self-reporting, cooperation, and
remediation. Certain tools are described below. Division staff carefully consider the facts and
circumstances of each matter to determine what approach is the most appropriate. At times,
more than one tool may be utilized in a matter.
Director approval is required for use of any these tools. As described below, use of certain
cooperation tools requires Commission approval. Division staff should prepare a memorandum
setting out the nature of the case; the cooperation that has resulted, or will likely result, in
substantial assistance; and the reasons why the particular case is appropriate to utilize the
proposed approach. Staff should consult with OCC when using any of these tools.
7.2.1 Division Cooperation Agreement
A cooperation agreement is a written agreement between the Division and a potential
cooperating individual who is prepared to provide substantial assistance to the CFTC’s
investigation and related enforcement actions. Specifically, in a cooperation agreement, the
Division agrees to recommend to the Commission that the individual receive credit for
cooperating in its investigation and related enforcement actions and, under certain limited
circumstances, to make specific enforcement recommendations if, among other things:
the Division concludes that the individual has provided or is likely to provide substantial
assistance to the CFTC;
the individual agrees to cooperate truthfully and fully in the CFTC’s investigation and
related enforcement actions and waive the applicable statute of limitations, including
entering into tolling agreements if necessary; and
the individual satisfies all of her or his obligations under the agreement.
If the agreement is violated, Division staff may recommend an enforcement action to the
Commission against the individual without any limitation.
The Director or senior managers designated by the Director execute such cooperation agreements
on behalf of the Division.
35
7.2.2 Deferred Prosecution Agreement
A deferred prosecution agreement (“DPA”) is a written agreement between the Commission,
acting through the Division, and a potential cooperating individual or company, in which the
Division typically agrees to forego recommending an enforcement action against the individual
or company if the individual or company agrees to, among other things:
cooperate truthfully and fully in the CFTC’s investigation and related enforcement
actions;
enter into a long-term tolling agreement;
comply with express prohibitions and/or undertakings during a period of deferred
prosecution; and
agree either to admit or not to contest underlying facts that the CFTC could assert to
establish a violation of the CEA.
If the agreement is violated during the period of deferred prosecution, typically not to exceed
five years, Division staff may recommend an enforcement action to the Commission against the
individual or company without limitation for the original misconduct as well as any additional
misconduct. Furthermore, if the Commission authorizes the enforcement action, staff may use
any factual admissions made by the cooperating individual or company to file a motion for
summary judgment, while maintaining the ability to bring an enforcement action for any
additional misconduct at a later date.
Commission authorization is required to enter a DPA, and this authorization grants authority to
the Director to execute the DPA on behalf of the Commission.
7.2.3 Non-Prosecution Agreement
A non-prosecution agreement (“NPA”) is a written agreement between the Commission, acting
through the Division, and a potential cooperating individual or company, entered in appropriate,
but generally very limited, circumstances, typically providing that the Division will not
recommend an enforcement action against the individual or entity if the individual or company
agrees to, among other things:
cooperate truthfully and fully in the CFTC’s investigation and related enforcement
actions; and
comply, under certain circumstances, with express undertakings.
If the agreement is violated, Division staff may recommend an enforcement action to the
Commission against the individual or company without limitation.
Commission authorization is required to enter an NPA, and this authorization grants the Director
authority to execute the NPA on behalf of the Commission.
36
7.3 Additional Provisions Regarding Cooperation
7.3.1 Immunity
Witnesses may occasionally ask Division staff for an immunity agreement, either from criminal
or civil liability. Most frequently, a witness seeks a limited grant of immunity with respect to the
testimony or information conveyed during a “proffer session” in the form of a written proffer
agreement, sometimes referred to as a “queen-for-a-day” agreement. See Section 8.1.2.4 of the
Manual (Immunity).
7.3.2 Acknowledgement of Cooperation in an Administrative Consent Order
Cooperation by individuals and entities who are settling enforcement actions with the
Commission may be acknowledged in administrative consent orders. For higher levels of
cooperation, the acknowledgement may specifically state that the cooperation has resulted in a
partial or significant reduction of the civil monetary penalty being imposed. See also Section
6.8.1 of the Manual (Civil Monetary Penalty Guidance).
8. Cooperative Enforcement
Working cooperatively and in parallel with criminal authorities and other federal, state, or
international regulators is a cornerstone to the Enforcement Program. The Division cooperates in
various ways, including through a robust referral process, information sharing, providing
technical assistance and subject matter training, and at times, working on parallel investigations.
8.1 Domestic Cooperative Enforcement
8.1.1 Referring Matters to Other Government Agencies
Section 6c(f) of the CEA, 7 U.S.C. § 13a-1(f), authorizes the CFTC to refer matters to the
Department of Justice for potential criminal prosecution. As a matter of policy and consistent
with these statutory provisions, the Division refers matters for criminal prosecution. These
include willful violations of the CEA and the Regulations, as well as false statements to the
CFTC, perjury, and obstruction of justice.
In addition, Sections 8(a)(2) and 12(a) of the CEA, 7 U.S.C. §§ 12(a)(2), 16(a), authorize the
CFTC to cooperate with other federal, state, and local agencies and foreign agencies in
conducting its investigations, including by referring appropriate matters to those agencies.
The Director determines whether, when, where, and to whom a referral is made. In making this
determination, the Director considers the recommendations of the Division staff assigned to the
matter and the Division’s Office of Cooperative Enforcement. Such recommendations should be
made in writing to the Director, the Principal Deputy Director, and Special Counsel to the
Director. Written referral letters are signed by the Director or her or his designee. The Director
may make a referral at any stage in the life of a matter: lead, preliminary inquiry, investigation,
litigation, or post-litigation.
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8.1.2 Sharing Information
8.1.2.1 Access to the Investigative Files of Other Government Agencies, Registered
Futures Associations, and Self-Regulatory Organizations
Division staff may find useful information about persons under investigation for possible
violations of the CEA or the Regulations in the investigative files of criminal authorities;
governmental agencies at the federal, state, and local level; as well as registered futures
associations (e.g., the NFA) and SROs (e.g., DCMs, DCOs, or SEFs). The CFTC has signed
MOUs or similar cooperative enforcement arrangements with certain government agencies, such
as FERC and the Federal Trade Commission, which also address the sharing of confidential
information. Thus, in conducting investigations, Division staff considers requesting access to the
investigative files of criminal authorities and other agencies and entities that may have
information relating to the same persons, entities, or activities.
In the ordinary course, requests for access to such investigative files should be made in writing
and addressed to an appropriate official in the other agency. A written request for access to
another agency’s files may be signed by a Deputy on behalf of the Director. To the extent the
other agency places use restrictions on the disclosure or use of such information, Division staff
should consult with the other agency on any such restrictions and raise any issues or questions
with OCC.
8.1.2.2 Access to the Investigative Files of the CFTC by Other Government Agencies,
Registered Entities, Registered Futures Associations, and SROs
Section 8 of the CEA, 7 U.S.C. § 12, generally prohibits the CFTC from disclosing information
obtained in connection with its investigations. Federal or state agencies, foreign authorities, and
designated officials of certain authorized industry organizations may request access to the
Division’s investigative files. Section 8(e) of the CEA, 7 U.S.C. § 12(e), permits the sharing of
confidential information with any department or agency of the federal government or a State or
any political subdivision thereof or any foreign government or any political subdivision thereof,
and Section 8a(6), 7 U.S.C. § 12a(6), permits such sharing with registered entities, NFA, or an
SRO. Authorized entities seeking access must obtain permission from the Director of the
Division, in accordance with Section 8(e) of the CEA, 7 U.S.C. § 12(e), and Regulation 140.73,
17 C.F.R. § 140.73, for domestic and foreign authorities, or Section 8a(6) of the CEA, 7 U.S.C.
§ 12a(6), and Regulation 140.72, 17 C.F.R. § 140.72, for registered entities, the NFA, or an
SRO. Access requests are considered separate and distinct from subpoenaed documents,
testimony, or other demands of a court, which are addressed in Part 144 of the Regulations,
17 C.F.R. pt. 144.
Division referrals to an authorized entity usually include an invitation to the authorized entity to
seek access to the Division’s non-public investigative files.
In sharing information, Division staff may take into consideration many factors, including the
following:
38
if the CFTC seeks to preserve a privilege with respect to the information, Division staff
consider whether sharing it would constitute a waiver, see Section 9.1 of the Manual
(Preservation and Assertion of Privileges);
the Division may be restricted from sharing some information that is subject to an
arrangement with a foreign authority;
Sections 8(e) and 8a(6) of the CEA, 7 U.S.C. §§ 12(e), 12a(6), prohibit authorized
entities from disclosing non-public information, including information relating to
business transactions or market positions of any person or trade secrets or names of
customers, except in an action or proceeding in which the federal, state, or authorized
industry entity is a party, see Section 9.4 of the Manual (Confidentiality);
the RFPA may require Division staff to give customer notice regarding sharing of
financial records, see Section 9.4.3 of the Manual (RFPA);
the safeguarding of confidential information and documents containing personally
identifiable information, see Section 9.4 of the Manual (Confidentiality); and
the Division’s sharing of whistleblower information, in certain circumstances, could
reasonably be expected to reveal the identity of the whistleblower, see 7 U.S.C.
§ 26(h)(2)(C); 17 C.F.R. § 165.4.
8.1.2.3 Parallel Proceedings
The Division often has investigations and litigation in parallel with criminal investigations and
proceedings. Division staff work cooperatively and in parallel with criminal agencies when
appropriate. When the Division conducts an investigation or enforcement action in parallel with
a criminal investigation or proceeding, or when there is potential for such parallel action,
Division staff consider the unique considerations raised by such parallel activity. At all points, it
is necessary that the civil investigation has its own independent civil investigative purpose and
not be initiated to obtain evidence for a criminal prosecution. Division staff should consult with
their supervisors at the outset of any parallel proceeding.
8.1.2.3.1 Testimony of CFTC Employees in Other Proceedings
Division staff, often investigators or economists, may be asked to provide testimony in
proceedings to which the CFTC is not a party. This typically involves proceedings by other
governmental agencies or criminal authorities. Provision of such testimony requires
Commission authorization. See 17 C.F.R. § 144.3.
8.1.2.4 Immunity
At times, witnesses in Division enforcement matters may become concerned about their own
exposure, either criminally or civilly, and ask Division staff for an immunity agreement.
39
In most circumstances where the Division staff considers that a witness may have useful
information, Division staff may seek approval from the Director or a delegate to offer a limited
grant of immunity with respect to the testimony or information conveyed during the proffer
session in the form of a written proffer agreement. These agreements offer only limited
immunity because they are limited in duration to the proffer session, and because the grant of
immunity contains exceptions under which the Division may use the information provided.
In some instances, however, witnesses may want full immunity from criminal prosecution. The
CFTC lacks the independent authority to provide immunity from criminal prosecution. But,
pursuant to Regulation 11.7(d), 17 C.F.R. § 11.7(d), the CFTC may ask the Attorney General to
approve issuance of a Commission order requiring a witness to provide the testimony or other
information which he or she previously refused to give on the basis of self-incrimination. Such
testimony or information may not be used against the witness in any criminal case, except for a
prosecution for perjury, giving a false statement, or otherwise failing to comply with the order.
Id.
8.2 International Cooperative Enforcement
International issues can arise at any point during a Division matter. Division staff should
identify potential issues and consult with OCC before making contact with individuals or entities
in any foreign jurisdiction.
8.2.1 Obtaining Information from Foreign Sources
When conducting a matter, Division staff may discover that relevant information, documents, or
witnesses are located in foreign jurisdictions. Many foreign jurisdictions consider unauthorized
contact by foreign authorities with residents within their jurisdiction to be an extra-territorial act
requiring authorization by or involvement of an authority in the home jurisdiction.
Attempts (whether by telephone, e-mail, letter in person, or any other means) by Division staff to
contact an individual or entity found in a foreign jurisdiction are made through OCC. Many of
the documents (bank records, trading records, etc.) and much of the testimony typically available
domestically may be obtained from foreign authorities through the appropriate channels.
8.2.1.1 Assistance from Foreign Authorities
In those jurisdictions with which the CFTC has signed a Memorandum of Understanding
(“MoU”) or similar cooperative enforcement arrangement, OCC can transmit a request for
assistance, in accordance with the applicable laws and particular procedures set forth in the
MoU. In foreign jurisdictions without a signed MoU or other arrangement, each request will be
evaluated on a case-by-case basis.
The most commonly used enforcement MoUs are the Multilateral Memorandum of
Understanding Concerning Consultation and Cooperation and the Exchange of Information
(“MMoU”) developed by the International Organization of Securities Commissions, and the
subsequently executed Enhanced MMoU (“EMMoU”).
40
8.2.2 Issuing and Serving an Investigative or Administrative Subpoena on Persons
Located Outside of the United States
If, during an investigation or in an administrative action, Division staff desire to obtain
information from a person found in a foreign jurisdiction via subpoena—rather than through an
MoU or other cooperative assistance arrangement—and where there either is no U.S. counsel or
that counsel refuses to accept service, Division staff follow the procedure set out in Section 6(c)
of the CEA, 7 U.S.C. § 9. Under this Section, with the prior approval of the Commission, such a
subpoena “may be served . . . in such manner as the Federal Rules of Civil Procedure prescribe
for service of process in a foreign country.” See id. § 9(5). Commission approval is needed in
investigative and administrative actions to issue and serve a subpoena on “any person who is not
found within the territorial jurisdiction of any court of the United States.” OCC assists Division
staff in preparing the memorandum and serving any such subpoena approved by the
Commission. See Section 5.4.2.4 of the Manual (Compelling Production of Documents in
Foreign Jurisdictions).
8.2.3 Obtaining Local Counsel in Foreign Jurisdictions
Division staff consults with OCC for advice on obtaining local counsel abroad. Almost always,
a written agreement is prepared, which specifies in detail the duties to be assumed by local
counsel and the compensation to be paid. Any such agreement requires Director approval.
8.2.4 Providing Assistance to Foreign Authorities
At times the Division receives requests from foreign authorities for the CFTC to provide
assistance in foreign enforcement matters, which it is authorized to provide under the CEA. See
7 U.S.C. §§ 12(e), 16(a), (f).
The Division is authorized to grant access to non-public information already contained in its
files. Id. § 12(e). Where access is granted, but before information or assistance is provided, the
Division receives assurances from the requesting authority regarding the use and confidentiality
of the files and information.
The CFTC also has authority to use its investigation powers on behalf of foreign futures
authorities. Accordingly, pursuant to Section 12(f) of the CEA, 7 U.S.C. § 16(f), and
Regulations 11.1 and 11.2, 17 C.F.R. §§ 11.1, 11.2, the Division may conduct an investigation,
including using its compulsory powers, on behalf of an appropriate foreign authority. In
determining whether to provide this assistance, the Commission considers, among other things,
whether: (1) the requesting authority has agreed to provide reciprocal assistance in futures
matters to the Division, and (2) compliance with the request would prejudice the public interest
of the United States. 7 U.S.C. § 16(f)(2).
OCC is responsible for handling such requests. If such requests are related to Division
investigations or litigations, OCC works with the responsible Division staff to gather responsive
information, such as taking testimony of a witness. If the request is unrelated to a Division
investigation or litigation, OCC may gather the responsive information, including issuing
subpoenas and taking testimony, as necessary.
41
9. Privileges and Confidentiality
9.1 Preservation and Assertion of Privileges
Over time, many privileges that protect material from discovery have been established. Most
privileges, e.g., the attorney-client privilege, the clergy-communicant privilege, and the marital
privilege, are available to all parties. But some privileges belong solely to the government, and
may be asserted by the CFTC in addition to the other available privileges.
9.1.1 Attorney-Client Privilege
The attorney-client privilege is intended to ensure that confidences shared by a client with an
attorney during the course of seeking legal advice are protected from disclosure. The purpose of
the privilege is to foster open and honest communication between attorney and client. The
privilege is not limited to communications made in the context of a litigation or dispute, but
extends to all circumstances where an attorney’s counsel is sought on a legal matter. The scope
of the privilege includes communications from an attorney to her or his client within this
framework.
Information that typically does not involve a confidential communication and therefore is not
privileged includes:
the identity of the client;
the existence of the attorney-client relationship;
the general reason why the attorney was retained;
the fee arrangement between attorney and client; and
any billing statements, unless they include narrative descriptions that satisfy the elements
of a privilege.
9.1.1.1 Corporate Clients
The attorney-client privilege can be asserted by a corporation to protect communications
between corporate employees and in-house or outside counsel. Courts have held that to assert
the attorney-client privilege, a corporation must show that the communication came from a
person who was employed with the corporation at the time of the communication, the employee
was seeking legal advice from an attorney, and the communication was made within the scope of
the employee’s duties.
9.1.1.2 Multiple Representations
A witness in a Division investigation or enforcement action may be represented by counsel who
represents other persons involved in the Division’s investigation. This multiple representation,
however, presents a potential conflict of interest if one client’s interests are or may be adverse to
another’s. The choice of counsel, and the responsibility for that choice, is the witness’s. Note,
42
however, that the Regulations provide that “[w]hen a reasonable basis exists to believe that an
investigation may be obstructed or impeded, directly or indirectly, by an attorney’s
representation of more than one witness during the course of an investigation, . . . [the] attorney
[may be prohibited from attending] the testimony of any witness other than the witness in whose
behalf [the attorney] first appeared in the investigatory proceeding.”
11
17 C.F.R. § 11.8(b).
9.1.1.3 Advice-of-Counsel Defense
An individual or entity being investigated by the Division may wish to assert an advice-of-
counsel defense. To validly assert the defense, the party asserting it must provide evidence
sufficient to substantiate the defense, which could include privileged information. To assert a
valid advice-of-counsel defense, courts have held that the party must establish that she or he:
(1) made complete disclosure to counsel; (2) requested counsel’s advice as to the legality of the
contemplated action; (3) received advice that it was legal; and (4) relied in good faith on that
advice.
9.1.1.4 Crime-Fraud Exception
Communications otherwise protected by the attorney-client privilege may nevertheless be subject
to disclosure where those communications were in furtherance of a crime or fraud. Most courts
require the party seeking to invoke the crime-fraud exception to make a prima facie showing that
the client was engaged in a criminal or fraudulent act when the client sought the advice of
counsel, and that the communications in question were in furtherance of, or closely related to, the
crime or fraud.
9.1.2 Attorney Work-Product Doctrine
An individual or entity may believe that information is protected from disclosure on the basis of
the attorney work-product doctrine. The work-product doctrine provides that material collected
by counsel in anticipation of litigation is protected from disclosure. For material to be prepared
in “anticipation of litigation,” the prospect of litigation must be identifiable, although litigation
need not have already commenced. The work-product protection is not absolute, however, and
disclosure may be compelled where the opposing party can show substantial need for the
material, and where it cannot without undue hardship otherwise obtain the material (e.g., where
the material is otherwise unavailable and relevant to the matter). “Opinion” work product (e.g.,
related to an attorney’s mental impressions, conclusions, opinions, or legal theories) is generally
subject to a heightened standard for disclosure.
9.1.3 The Fifth Amendment Privilege Against Self-Incrimination
A witness testifying before the CFTC may assert her or his Fifth Amendment privilege against
self-incrimination. The Fifth Amendment privilege may not be asserted where immunity has
been granted. See Section 8.1.2.4 of the Manual (Immunity). In order to assert the privilege,
staff ordinarily will require a witness to appear in person, and will not allow a blanket assertion
11
“To the extent practicable, consistent with the integrity of the investigation, the attorney will be advised of the
reasons for his having been sequestered.” 17 C.F.R. § 11.8(b).
43
of privilege. An adverse inference may be drawn in a civil or administrative proceeding from
such a refusal to testify.
In addition to testimony, the act of producing documents in response to a subpoena may also be
covered by the privilege if, by producing the document, the holder performs an act that has
testimonial aspects and an incriminating effect. However, under the required records doctrine,
the Fifth Amendment privilege against self-incrimination does not apply to records required to
be kept by an individual under government regulation, such as records required to be kept under
the CEA and the Regulations.
A corporation or other collective entity generally may not assert the Fifth Amendment privilege.
9.1.4 Governmental Privileges that May Be Asserted by the CFTC
In general, the governmental privileges most relevant
12
to the CFTC are:
the deliberative process privilege;
the investigatory files or law enforcement privilege;
the information given to the government on a pledge of confidentiality privilege;
the informant privilege; and
the confidential report privilege.
These governmental privileges, in essence, provide that certain confidential information in the
government’s possession is protected from disclosure, in litigation and elsewhere. In practice,
the two governmental privileges most often asserted by the Commission are the deliberative
process privilege and the investigatory files privilege.
9.2 Inadvertent Production of Privileged or Non-Responsive Documents
Under Rule 502(b) of the Federal Rules of Evidence, a disclosure to a federal agency of
information covered by the attorney-client privilege or work-product protection does not operate
as a waiver in a federal (or state) proceeding if:
the disclosure is inadvertent;
the holder of the privilege or protection took reasonable steps to prevent disclosure; and
the holder promptly took reasonable steps to rectify the error.
If a person who has produced documents, whether in an investigation or in a proceeding,
believes he or she has inadvertently disclosed information protected by the attorney-client
12
Other governmental privileges, not typically asserted by the CFTC, are the presidential communications
privilege, the bank examination privilege, and the state secret privilege.
44
privilege or the work-product protection, it should notify Division staff. If a potentially
inadvertent production is discovered by staff, staff should notify the party through her or his
counsel of the CFTC’s receipt of potentially inadvertently produced documents.
9.3 Waiver of Privilege
The Division respects legitimate assertions of the attorney-client privilege and work-product
protection, and does not expect persons from whom information is sought to waive such
privilege or protection (whether to obtain cooperation credit or otherwise). The Division’s
objective in investigations and proceedings is to obtain relevant information, and persons from
whom information is sought may be required to produce all relevant, non-privileged information
and documents. Pure factual material, even those facts that may have been conveyed to an
attorney or contained within an attorney’s work-product, are not privileged, and the Division
does require disclosure of facts. Staff should not ask a party to waive the attorney-client
privilege or work-product protection without prior approval of the Director or the supervising
Deputy.
In general, the attorney-client privilege or work-product protection may be waived either
expressly or by implication. Waiver is implied where testimony concerning privileged or
protected communications or documents has been offered, or where the communications or
documents have been disclosed to a third party. As noted above, waiver may also be required
where an advice-of-counsel defense has been asserted, or where some other exception applies.
Finally, the privilege or protection may be waived as to communications or documents belonging
to an entity where a receiver has been appointed to manage that entity.
9.3.1 Privilege Non-Waiver Agreements
From time to time, a party may wish to voluntarily disclose privileged or protected
communications or documents to the CFTC, but may wish to argue that such disclosure does not
constitute a waiver as to other parties or as to other communications or documents (not
disclosed) concerning the same subject matter. The Division will consider entering into a
privilege non-waiver agreement in such circumstances, in which the Division agrees that it will
not argue that such disclosure constitutes a waiver of the attorney-client privilege or the work-
product protection as to any third party, or that the disclosure effects a subject matter waiver as
against the CFTC. The Division also agrees to maintain the confidentiality of the materials,
except to the extent that it determines that disclosure is required by law or that disclosure would
be in furtherance of the CFTC’s discharge of its duties and responsibilities. Notably, some
courts have held that production of documents to agencies like the CFTC, even pursuant to an
agreement that purports not to waive applicable privileges or protections, nevertheless does
constitute a waiver.
9.4 Confidentiality
The Commission is generally required by statute and regulation to maintain the confidentiality of
non-public information and documents it obtains in the course of its investigations. See 7 U.S.C.
§ 12(a); 17 C.F.R. § 11.3. Such information and documents may only be disclosed where the
Commission directs or authorizes the public disclosure of the investigation (e.g., by authorizing
45
the filing of a complaint in federal court), where the information and documents are made a
matter of public record during the course of an adjudicatory proceeding, or where disclosure is
required by the Freedom of Information Act, 5 U.S.C. § 552, the Regulations thereunder,
17 C.F.R. pt. 145, other statute or regulation, or court order. Certain other statutes provide
additional confidentiality protections, as described below.
9.4.1 The Privacy Act of 1974
The Privacy Act, 5 U.S.C. § 552a, establishes requirements for the solicitation and maintenance
by agencies of personal information regarding members of the public.
When obtaining information from the public, the Privacy Act generally requires Division staff to
provide notice with respect to the authority for the solicitation and whether disclosure is
voluntary or mandatory; the principal purposes for seeking the information; the effect of refusing
to provide the information; and the “routine uses” of the information. See Section 9.5 of the
Manual (Statement to Persons). The statute generally prohibits any disclosure of personal
information unless the disclosure is within one of the statute’s exemptions (including the
exemption for “routine uses”).
The CFTC publishes such notice on its website,
https://www.cftc.gov/Transparency/PrivacyOffice/SORN/index.htm, and in the Federal Register,
including notice specific to the Division’s investigatory files (System of Records CFTC-10:
Investigatory Records). See Notice; Publication of the Systems of Records Managed by the
Commodity Futures Trading Commission, 76 Fed. Reg. 5974, 5982–83 (Feb. 2, 2011); see
generally Section 10.2.2 of the Manual (The Division’s Recordkeeping Systems). The notice
includes a listing of the CFTC’s routine uses of personal information, including for the routine
operations of the CFTC. See 76 Fed. Reg. at 5975–76. This includes use in administrative or
court proceedings, sharing with other regulators (including foreign regulators) or criminal
authorities, and use during an investigation. Id.
9.4.2 The Freedom of Information Act
The Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, provides that any person has a right
of access to federal records, and that this right is enforceable by the courts if an agency fails to
comply and the requester has exhausted all administrative appeals. However, access is limited,
in whole or in part, if records are protected from disclosure by various exemptions. For example,
the investigatory records described in Section 9.4.1 of the Manual above are covered by one or
more of the exemptions. A FOIA request generally can be made by “any person,” a broad term
that encompasses individuals (including foreign citizens), partnerships, corporations,
associations, and foreign or domestic governments; requests may also be made through an
attorney or other representative on behalf of any person.
FOIA requests can be made for any reason. However, the request must be made in accordance
with the respective agency’s published procedural regulations, which, for the CFTC, are found at
Part 145 of the Regulations, 17 C.F.R. pt. 145. Specific instructions for making FOIA requests
are located online at https://www.cftc.gov/FOI/foiarequests.html. FOIA requests are processed
46
by the CFTC’s FOIA Compliance Office, which sits within OGC. Division staff may assist
OGC in evaluating and responding to FOIA requests.
9.4.3 The Right to Financial Privacy Act of 1978
The Right to Financial Privacy Act (“RFPA”), 12 U.S.C. §§ 3401–3422, is intended to protect
the customers of financial institutions
13
from “unwarranted intrusions into their records while at
the same time permitting legitimate law enforcement activity.” To achieve these goals, the
RFPA grants customers of financial institutions a right to notice of most government requests to
a financial institution for their financial records, and affords them an opportunity to challenge
such requests. Jurisdiction for actions under the RFPA is in the United States District Courts.
The RFPA generally prohibits a “government authority,” which includes the CFTC, from gaining
access to or obtaining copies of the financial records of customers,
14
or the information contained
therein, from a financial institution unless the financial records are reasonably described and the
agency obtains the records in accordance with procedures authorized by the RFPA.
Under the RFPA, the Commission may lawfully obtain financial information by:
• judicial subpoena (12 U.S.C. § 3407);
• administrative subpoena (12 U.S.C. § 3405); and
• voluntary, written customer authorization (in the form specifically described in 12 U.S.C.
§ 3404). Any joint account holder can authorize the financial institution to release the
records of a joint account by executing a voluntary, written customer authorization.
The RFPA also provides for a delay in service of the customer notice for ninety days (which can
be renewed for additional ninety-day periods), upon a showing that notice would result in:
endangering a person’s life or physical safety;
flight from prosecution;
destruction or tampering with evidence;
intimidation of potential witnesses; or
13
“Financial institution” is defined, in relevant part, as a bank, credit union, or consumer finance institution. 12
U.S.C. § 3401(1). Accordingly, it does not include payment processors (such as PayPal or Square), regulated
entities such as futures commission merchants or introducing brokers, or a commodities dealer whose consumer
financing is incidental to its business.
14
“Customers” include individuals and partnerships of five or less individuals. It does not include corporations or
larger partnerships. As a result, Commission requests to a regional Federal Reserve Bank for wire transfer
information are typically not covered by the RFPA because those entities mostly carry accounts for depository
institutions and do not maintain accounts for individuals.
47
otherwise seriously jeopardizing an investigation or official proceeding or unduly
delaying a trial or ongoing official proceeding.
12 U.S.C. § 3409.
The RFPA also imposes certain restrictions on the ability of the CFTC to share materials
obtained from a financial institution to another federal agency. See Section 8.1.2.2 of the
Manual (Access to the Investigative Files of the CFTC by Other Government Agencies,
Registered Entities, Registered Futures Associations, and SROs). The RFPA generally requires
that the Division provide notice to customers of financial institutions before transferring a
customer’s financial records to another federal agency, but contains exceptions for sharing with
the Department of Justice regarding potential criminal violations, 12 U.S.C. § 3412(f), and
sharing with certain federal financial regulators, id. § 3412(e).
9.4.4 The Electronic Communications Privacy Act of 1986
The Electronic Communications Privacy Act of 1986 (“ECPA”), 18 U.S.C. §§ 2510–2711,
provides protection against unauthorized government interception of electronic
communications. An electronic communication is “any transfer of signs, signals, writing,
images, sounds, data, or intelligence of any nature transmitted in whole or in part by a wire,
radio, electromagnetic, photo electronic or photo optical system that affects interstate or foreign
commerce.” 18 U.S.C. § 2510(12). Common examples of electronic communications are
transfers of email or other electronic data or images over the Internet.
The ECPA consists of three federal statutes: the Stored Communications Act (“SCA”), the
Wiretap Act, and the Pen Register statute. The SCA regulates government access to stored
communications and does not apply to messages that are still in transmission. The Wiretap Act
regulates efforts to collect evidence by intercepting the contents of communications (including
internet communications) in real time. The Pen Register Act regulates the collection of evidence
by obtaining non-content information in real time.
The SCA is the statute most often relevant to CFTC investigations. The SCA was intended to
protect electronic communications in the hands of communications service providers and remote
computing services. The SCA does not, however:
protect communications in the hands of a user, subscriber or customer
15
of the service
provider (including a sender or a receiver of an email);
protect communications maintained for a corporation’s own purposes in its own
computers or local area network; or
15
The ECPA defines “user” as any person or entity that “uses an electronic communications service” with the
authorization of the service provider. 18 U.S.C. § 2510(13). The ECPA does not, however, define the terms
“subscriber” or “customer.” For convenience, subscribers and customers of service providers will hereafter be
referred to collectively as “subscribers."
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affect a CFTC registrant’s obligations to make certain books and records available to
CFTC staff upon request, even if they are stored on a computerized system and
maintained by a third-party service provider.
However, when a government regulatory agency without criminal powers, such as the CFTC,
seeks information directly from a service provider, the SCA generally:
prohibits obtaining the contents
16
of electronic communications and postings to
electronic bulletin boards from electronic communications services and remote
computing services without a warrant (which generally is not available to the CFTC);
permits obtaining the contents of electronic communications and postings to electronic
bulletin boards from a service provider with the consent of a party to the communication
and with reimbursement to the service provider;
permits obtaining subscriber information (e.g., name; address; local and long distance
telephone connection records or records of session times and durations; length of service
and types of service utilized; telephone or instrument number or other subscriber number
or identity, including any temporarily assigned network address; and means and source
of payment, including credit card or bank account number) pursuant to an administrative
or trial subpoena without notice to the subscriber and without reimbursement to the
service provider; and
permits obtaining the contents of electronic communications of any age if
communications are “readily accessible to the general public.”
18 U.S.C. § 2511(2)(g).
9.5 Statement to Persons Providing Information About Themselves to the CFTC
When the CFTC solicits information from an individual about him or herself, including
information that describes the person in some way or information about her or his personal
actions that may violate the CEA, the Privacy Act and CFTC policy require that certain notices
be provided. In this situation, the Division provides individuals a standardized “Statement to
Persons Providing Information about Themselves to the CFTC” (“Required Notice”), which
informs the individual of certain legal rights and responsibilities he or she may have before the
individual provides information about him/herself to the CFTC. The Required Notice is given
whether information is provided voluntarily or pursuant to subpoena, whether the information is
in the form of documents or oral statements, and whether information is provided during
investigative testimony, a deposition, or in less formal contexts.
In accordance with the notice requirements of the Privacy Act, the Required Notice explains in
detail the CFTC’s authority for, and purpose in, soliciting the information being sought, its
routine uses by the CFTC, and the effect of not supplying the information. When the notices
described here must be given orally (for example, during a telephone call), Division staff will
16
The “contents” of a communication means “any information concerning the substance, purport, or meaning” of
the communication. 18 U.S.C. § 2510(8).
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subsequently send a written copy of the Required Notice to the individual. The Require Notice
discusses a number of applicable procedural safeguards, including:
the authority for the solicitation of information and whether disclosure of information is
mandatory or voluntary;
the purpose of the solicitation of information;
the effect of not supplying information;
the routine uses of supplied information;
relevant provisions of Freedom of Information Act, 5 U.S.C. § 552, and the CFTC’s rules
and regulations pursuant thereto;
the person’s right to be accompanied, represented and advised by counsel;
her or his rights under the Fifth Amendment;
the potential consequences of making false or fraudulent statements (or the submission of
false documents), which violates Section 6(c)(2) of the CEA, 7 U.S.C. § 9(2), and also
constitutes felonies punishable by fines and/or imprisonment (see 18 U.S.C. § 1001 and
18 U.S.C. § 1621, respectively);
the disclosure requirements of the Freedom of Information Act, 5 U.S.C. § 552, and
Regulation 145.9, 17 C.F.R. § 145.9; and
the CFTC’s “Informal Procedure Relating to the Recommendation of Enforcement
Proceedings,” found in Appendix A to the Part 11 Regulations.
Persons providing sworn investigatory testimony or litigation deposition testimony are also
provided with an additional notice with information relevant to those proceedings.
Neither the Privacy Act of 1974 nor CFTC policy requires provision of the Required Notice in
the context of information requests to corporations or other business entities, or individuals
acting as an agent of a business entity.
10. Other
10.1 Ethics
10.1.1 General Principles and Standards
Division staff, along with all other staff of the CFTC, are expected to adhere to the highest
standards of integrity and ethical conduct. Those standards emanate from a number of sources.
All federal employees are bound by certain federal statutes and regulations, which apply to
issues such as financial disclosure, conflicts of interest, acting impartially when performing
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official duties, misuse of public office for private gain, gifts and invitations, seeking or engaging
in outside employment or activities whether paid or unpaid, and the Hatch Act limitations on
certain political activities. The CFTC has supplemented the general federal provisions with
additional regulations regarding the conduct of both current and former members of the CFTC at
5 C.F.R. pt. 5101 and 17 C.F.R. pt. 140, subpt. C. The CFTC Ethics Office resides in the
General Law Division of OGC. Moreover, the General Counsel in OGC is the CFTC’s
Designated Agency Ethics Official (“DAEO”), and the Deputy General Counsel of the General
Law Division within OGC is her or his Alternate DAEO. The DAEO or Alternate DAEO
provides advice on any federal ethics question a staff member may have regarding ethical issues.
If a potential ethical issue arises, Division staff should seek guidance from the DAEO or
Alternate DAEO.
Division attorneys have additional ethical obligations, which are set forth in the Rules of
Professional Responsibility of the state in which the attorney is licensed to practice, and the
Rules of Professional Responsibility of the state in which the attorney is practicing or appearing
on behalf of the CFTC. Division staff and OCC may coordinate with OGC if additional
assistance is necessary.
10.2 Records Management and Document Control
10.2.1 General Policies
As a federal agency, the CFTC is required to retain Federal records. The Federal Records Act
defines federal records as “all recorded information, regardless of form or characteristics, made
or received by a Federal agency under Federal law or in connection with the transaction of public
business and preserved or appropriate for preservation by that agency or its legitimate successor
as evidence of the organization, functions, policies, decisions, procedures, operations, or other
activities of the United States Government or because of the informational value of data in
them.” See 44 U.S.C. § 3301(a)(1)(A). CFTC policy states that information may be covered as a
“federal record” if it:
documents significant CFTC decisions or commitments;
adds to a proper understanding of the formulation or execution of CFTC actions,
operations, or responsibilities;
conveys information of value on important CFTC activities;
facilitates action by staff;
provides key substantive comments on a draft;
makes possible a proper scrutiny by Congress, CFTC, or its auditors;
is required by CFTC to be created or received; or
protects the financial, legal, and other rights of the government and persons directly
affected by the government’s actions.
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The Commission has established and maintains a Records Management Program to create and
maintain authentic, reliable, retrievable, and useable records for as long as they are required by
Federal records laws and regulations and authorized records disposition schedules. Files relating
to Leads, PIs, and Investigations closed without filing an enforcement action are generally
retained for five years. Files relating to Litigations are generally retained for fifteen years. See
generally Records Disposition Schedule, https://www.cftc.gov/idc/groups/public/documents/file/
recordsdispositionschedulepdf.pdf. Cf. Section 10.2.3 of the Manual (Historically Significant
Matters).
10.2.2 The Division’s Recordkeeping Systems
The Division receives records in various forms, including, but not limited to, data in electronic,
paper, or other media forms. Generally, the CFTC’s Office of Data and Technology’s Legal
Technology Services Program provides the Division with various database and electronic storage
systems in conformity with the CFTC-wide Records Management Program. Non-electronic
materials are also maintained in a secure manner that ensures the CFTC meets all applicable
confidentiality obligations and requirements.
10.2.3 Historically Significant Matters
The National Archives and Records Administration (“NARA”) approves the CFTC’s records
disposition schedule, which defines certain “permanent records.” These are records that are
determined to have sufficient historical or other value to warrant permanent preservation by
NARA. When an investigative or ligation matter is closed, the Division evaluates whether the
matter is historically significant one under the NARA.
10.3 Closing an Enforcement Matter
Closing an enforcement matter (whether a lead, PI, investigation, or a litigation) triggers various
Commission requirements, including those concerning recordkeeping, record destruction, and
sanction reporting. As a general matter, Division staff are responsible for: (1) ensuring that the
matter is closed appropriately and CFTC recordkeeping obligations are completed within the
requisite periods; (2) completing the appropriate closing reports; and (3) providing the completed
closing reports to the assigned Deputy within the requisite periods.
10.4 Press Releases
A press release is customarily issued at the initiation and conclusion or settlement of either a
federal court or administrative enforcement action. The press release is issued at the time of the
filing of a complaint, unless the complaint is filed under seal, an ex parte restraining order to
freeze assets and preserve documents is sought, or a consent order is submitted with the
complaint for immediate consideration by the court. At times the Commission will enter orders
filing and simultaneously settling administrative enforcement actions and will issue one press
release announcing the entry of the order.
Releases may also be issued for significant developments in litigation, such as the issuance of a
preliminary injunction, orders of contempt, important subpoena enforcement actions, issuance of
52
a restraining order, issuance of a decision in federal court, final Commission orders, or any other
development that may be of public interest.
The Office of External Affairs (“OEA”) is responsible for the issuance of the CFTC’s public
announcements. The Division works with OEA on press releases relating to enforcement
activities. Press releases are subject to review and approval by the Director or a delegate, OEA,
OGC, and the Office of the Chairman. Press releases are not subject to negotiation.
10.5 Reparations Program
The CFTC has a Reparations Program, authorized under Section 14 of the CEA, 7 U.S.C. § 18,
which allows customers of persons registered with the CFTC to seek compensation for damages
caused by violations of the CEA or the Regulations by those registered persons. Division staff
may inform a customer about the Reparations Program, but do not advise whether the customer
should use the Program or otherwise comment on the viability of any claims the customer may
have. Information regarding the eligibility requirements for the Reparations Program is set out
on the CFTC Reparations Program webpage, available at
https://www.cftc.gov/ConsumerProtection/ reparationsprogram/index.htm or may be obtained by
calling (202) 418-5250. In addition, information describing the arbitration and mediation
programs of NFA may be obtained by calling the NFA Information Center at (800) 621-3570 or,
in Illinois, (312) 781-1410.
11. Whistleblower Program
The CFTC’s Whistleblower Program provides monetary incentives to individuals who come
forward to report violations of the CEA. It also provides anti-retaliation and confidentiality
protections for whistleblowers. The Division’s Whistleblower Office (“WBO”) administers the
program.
11.1 General Description of the Whistleblower Program
In general, the CFTC will pay monetary awards, based on collected monetary sanctions and
under regulations prescribed by the Commission, to eligible whistleblowers who voluntarily
provide the CFTC with original information about violations of the CEA that leads the CFTC to
bring a successful enforcement action resulting in the imposition of monetary sanctions
exceeding $1,000,000.
The CFTC will also pay monetary awards to eligible whistleblowers whose information leads to
the successful enforcement of a Related Action brought by another governmental entity (or
certain other entities) that is based on original information voluntarily submitted by a
whistleblower to the CFTC that led to the successful resolution of an action brought by the
CFTC.
The total amount of an award for an eligible whistleblower is between 10% and 30% of the
amount of monetary sanctions collected in the CFTC’s enforcement action or a Related Action.
If multiple whistleblowers are granted awards in an action, the total award amount is still limited
to between 10% and 30% of the amount of the monetary sanctions collected.
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Submitting a tip alone will not be sufficient to obtain an award. In order to be considered for an
award, a whistleblower must also submit an award application when the WBO releases a Notice
of Covered Action, or when a qualifying resolution is reached in a Related Action.
11.2 Qualifying as a Whistleblower
In order to be eligible for the monetary awards and protections afforded by the Whistleblower
Program, an individual (or group of individuals) must submit to the CFTC information relating
to a potential violation of the CEA on a Form TCR (Tip, Complaint, or Referral). The Form
TCR may be submitted electronically via the Whistleblower Program website,
https://www.whistleblower.gov/overview/submitatip/, or by fax or mail.
A whistleblower can be any individual who sends the CFTC a Form TCR containing information
about a potential violation of the CEA. Examples range from a corporate officer or insider, to a
trader or market observer, to a customer or fraud victim; but a company or other entity is not
eligible to be a whistleblower. Certain persons—for example, certain government and self-
regulatory personnel, and persons convicted of a crime related to the conduct at issue in the
whistleblower matter—are ineligible for award, but they still qualify for anti-retaliation and
confidentiality protections.
11.3 Protecting the Identity of Whistleblowers
Section 23(h) of the CEA, 7 U.S.C. § 26(h)(2), provides, in relevant part:
(2) CONFIDENTIALITY
(A) IN GENERAL—Except as provided in subparagraphs (B) and (C), the
Commission, and any officer or employee of the Commission, shall not disclose
any information, including information provided by a whistleblower to the
Commission, which could reasonably be expected to reveal the identity of a
whistleblower . . . .
See also 17 C.F.R. § 165.4. Division staff should consult with OCC and the WBO in connection
with any concerns regarding confidentiality.
11.3.1 Handling of Information and Documents
The confidentiality protections of the CEA and the Regulations require the CFTC not to disclose
information that “could reasonably be expected to reveal the identity of the whistleblower.”
Division staff take measures to ensure that information that could reasonably be expected to
reveal a whistleblower’s identity is not disclosed.
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11.3.1.1 Referrals and Requests to Domestic or Foreign Authorities
The CFTC may provide whistleblower-identifying information in appropriate circumstances to:
criminal authorities; federal, state, and local agencies; foreign authorities; and registered entities,
the NFA, or an SRO. See generally Section 8 of the Manual (Cooperative Enforcement). Note
that if a whistleblower’s identity is disclosed in the referral or request, the receiving authority
must keep the whistleblower’s identity confidential. 7 U.S.C. § 26(h)(2)(C)(ii); 17 C.F.R.
§ 165.4(a)(2).
11.3.1.2 Investigations
Freedom of Information Act (FOIA) Requests: If there is a FOIA request for documents
that may contain whistleblower identifying information, Division staff must contact the
WBO for assistance to ensure that responsive documents are redacted.
Drafting Subpoenas (Document Requests): Whistleblowers often provide very specific
and timely information relating to documents in the possession of an individual or entity
that contain evidence of violations of the CEA. In drafting subpoenas and document
requests, staff should ensure that that they do not inadvertently reveal the existence or
identity of a whistleblower, e.g., requests that reveal the drafter of the subpoena has
knowledge that only a specific person (or persons) would possess.
11.3.1.3 Litigation
In federal court litigation or an administrative proceeding, the CFTC’s disclosure obligations
have the potential to involve whistleblowers or whistleblower identifying information in general.
If a matter involving a whistleblower goes into litigation or an administrative proceeding,
Division staff should consult OCC and the WBO about any issues arising with discovery.
11.4 Additional Whistleblower Protections
Whistleblowers have certain protections in addition to confidentiality of their identity, including:
employers may not impede would-be whistleblowers from communicating directly with
the CFTC’s staff about possible violations of the CEA;
employers may not retaliate against whistleblowers for reporting violations of the CEA;
and
a whistleblower who has been retaliated against has the right to sue an employer in
federal court.
In addition, the CFTC has authority to enforce the anti-retaliation provisions of the CEA by
bringing an enforcement action against an offending employer.
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11.5 Whistleblower Awards
When the CFTC obtains a judicial or administrative order that—by itself or together with
judgments or orders in related CFTC enforcement actions or Related Actions brought by certain
other entities—imposes monetary sanctions exceeding $1,000,000, then the order becomes a
covered judicial or administrative action upon which the CFTC may pay out whistleblower
awards. The WBO will then post a Notice of Covered Action, and whistleblowers may begin
applying for awards. The CFTC may also pay out whistleblower awards based on monetary
sanctions collected in Related Actions brought by certain other entities, as long as those Related
Actions are based on information provided by a CFTC whistleblower.
To apply for an award, a whistleblower must complete and submit a copy of the award
application, Form WB-APP (Application for Award For Original Information Submitted
Pursuant to Section 23 of the Commodity Exchange Act), to the WBO. For further information
regarding the award determinations process, see https://www.whistleblower.gov/overview/.
