Securities Regulation Daily CFTC enforcement chief rolls out foreign corrupt practices advisory
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Thursday, March 7, 2019

CFTC enforcement chief rolls out foreign corrupt practices advisory

By Brad Rosen, J.D.

DOE Director James McDonald announces new policies extending prior pronouncements that encourage cooperation and self-reporting of violations, as well as enhanced coordination with law enforcement partners.

CFTC’s Enforcement Director James McDonald announced a DOE enforcement advisory on self-reporting and cooperation for violations of the Commodity Exchange Act involving foreign corrupt practices in remarksbefore the American Bar Association’s 33rd Annual National Institute on White Collar Crime held in New Orleans, Louisiana.

Director McDonald stated that the new enforcement advisory provides further clarity surrounding the benefits of self-reporting misconduct, full cooperation, and remediation, and reflects the enhanced coordination between the CFTC and law enforcement partners like the Department of Justice. The enforcement director declared, "Combatting misconduct that affects our financial markets has truly become a team effort, and that is particularly true with respect to foreign corrupt practices." He added, "We at the CFTC will do our job as part of the team to identify this type of misconduct in our markets and hold wrongdoers accountable, working closely with our enforcement partners domestically and abroad."

Building on prior self-reporting guidance. In prior advisories, the enforcement division has made clear that it will give substantial credit for self-reporting and cooperation in determining, among other things, the appropriate level of sanctions to impose or seek. With the current advisory, the DOE builds on that foundation to further incentivize individuals and companies to self-report misconduct, cooperate fully in CFTC investigations and enforcement actions, and appropriately remediate to ensure the wrongdoing does reoccur.

Specifically, the current advisory applies to those companies and individuals not registered, or required to be registered, with the CFTC that have timely and voluntarily disclosed CEA violations of the Commodity Exchange Act involving foreign corrupt practices. Additionally, the voluntary disclosure must be accompanied by full cooperation and appropriate remediation, in accordance with the earlier advisories. The advisory provides for the following:

  • the division will apply a presumption that it will recommend to the CFTC 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;
  • if the division recommends a resolution without a civil monetary penalty pursuant to the advisory, the division would still require payment of all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue; and
  • the DOE will seek all available remedies against companies or individuals implicated in the misconduct that were not involved in submitting the voluntary disclosure, including substantial civil monetary penalties where appropriate.

Piling on among enforcement authorities to be avoided. In his remarks, McDonald also noted when working in parallel with other enforcement authorities, efforts will be made to avoid duplicative investigative steps. He also stated that when the CFTC does brings an enforcement action involving a civil monetary penalty, the division will ensure that the penalty appropriately accounts for penalties imposed by any other enforcement bodies. Moreover, he indicated that when the CFTC imposes disgorgement or restitution, the agency will give dollar-for-dollar credit for disgorgement or restitution payments made in connection with other related actions.

DOJ leadership welcomes working in concert with the CFTC. Brian A. Benczkowski, Assistant Attorney General of the Department of Justice’s Criminal Division, welcomed the prospect of working in concert with the CFTC, stating, "Together with the Department’s Corporate Enforcement Policy, [the] CFTC’s Advisory on self-reporting and cooperation will make clear to companies the significant benefits of voluntarily self-disclosing misconduct, fully cooperating with the government’s investigation, and remediating the misconduct." The DOJ revised its guidelines regarding Foreign Corrupt Practice Act enforcement by making its self-disclosure pilot program permanent back in 2017.

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