On February 25th, the Commodity Futures Trading Commission (CFTC or Commission) adopted a new approach for how the Division of Enforcement (Division) will assess self-reporting, cooperation, and remediation efforts when recommending enforcement actions and considering civil monetary penalties. The Enforcement Advisory on Self-Reporting, Cooperation, and Remediation (the Advisory) supersedes all prior Division policies addressing cooperation and self-reporting and establishes a first-ever “Mitigation Credit Matrix” to determine the appropriate penalty reduction to apply in each case. The Advisory creates a “Mitigation Credit” system, which sets forth specific criteria the Division will use to evaluate the value of a market participant’s mitigation efforts and determine the amount of any associated penalty reduction. The Advisory formalizes policy changes previously proposed by Acting Chairwoman Caroline D. Pham, who said the Advisory “creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.”

Commissioner Kristen N. Johnson issued a statement in dissent, in which she criticized the Advisory as undercutting longstanding guidance which enables effective compliance and well-established pathways to report, cooperate, and remediate. Further she noted the Advisory was created without adequate engagement with other divisions at the Commission, market participants, and Commissioners and their staff. The pending nomination of Brian Quintenz as chair of the CFTC calls into question the longevity of the guidance contained in the Advisory. Nominated on February 11, 2025, Mr. Quintenz is slated to replace current Acting Chairwoman Pham and his eventual confirmation will change the Commission dynamics. The current Director of Enforcement, Brian Young, was appointed by Acting Chairwoman Pham on February 14th. Should Mr. Quintenz become Chair, it is likely he will name a new Director of Enforcement who may update the guidance in the Advisory. Nevertheless, in the meantime, market participants should review the new Mitigation Credit Matrix and contemplate its implications when evaluating potential misconduct, considering a Commission self-report, or responding to a CFTC investigation.

Key Takeaways

As detailed further below, the Advisory creates a systematic and tiered approach to evaluating the value of a Person’s self-reporting, cooperation, and remediation efforts. Based on the quality of such efforts, Mitigation Credits will be determined via application of the Mitigation Credit Matrix and a percentage discount will presumptively be applied to any assessed civil monetary penalty. The Advisory provides examples of the types of conduct that would lead to the identified cooperation and self-reporting quality levels. Market participants should review the specific conduct examples provided in the Advisory to guide their conduct in dealing with the CFTC enforcement staff.

The Mitigation Credit calculation contemplated in the Advisory further formalizes the typical cooperation and self-reporting analysis that was undertaken in the Division’s penalty assessments under prior guidance; however, there are several notable differences. For example:

• Reporting to Commission Divisions: The Commission will now recognize self-reporting made to the relevant Operating Division (i.e., reports to the Enforcement Division are no longer the only avenue for obtaining Mitigation Credit).
• CCO Reporting: Mitigation Credit is now available for issues that may also have to be included in mandatory chief compliance officer annual reports (for FCMs, SDs, SDRs, etc.).
• Safe-Harbor for Good Faith Reporting: Self-reports must be complete to receive full credit, but there is now a safe-harbor for reports made in good-faith, so long as any inaccurate information in the self-report is supplemented and corrected promptly after discovery.
• Involvement of Operating Divisions: The Advisory instructs the Division to assess remediation as part of its cooperation evaluation. Significantly, under the guidance the Enforcement Division will only recommend Mitigation Credit where a CFTC Operating Division (e.g., the Market Participants Division, etc.) has concluded that the potential violation and its root cause have been remediated or are subject to an appropriate remediation plan. While informal cooperation among divisions is not uncommon, this required coordination with a CFTC Operating Division is new and has the possibility of further complicating settlement discussions with the Enforcement staff.
• Timeliness: Self-reports must be prompt to receive credit, but when considering what is a prompt self-report, the Division will now consider whether the timing was reasonable taking into account a Person’s efforts to determine whether there was a potential violation and its materiality, including discovery of conduct, escalation, investigation, management review, and governance requirements.
• Conduct Examples: Many new examples of quality cooperation and creditable self-reporting are set forth in the Advisory without clear explanations as to the full nature and scope of such factors. The broad nature of these examples will leave much room for interpretation by both market participants and the Enforcement staff when applying the Advisory to specific facts and circumstances.

The new cooperation and self-reporting guidance may ultimately be short lived given the nomination and expected confirmation of a new CFTC Chair, which will likely be accompanied by a re-examination of this Advisory under a new Director of Enforcement. Nevertheless, market participants should review and consider the enumerated factors identified in the Advisory when evaluating potential misconduct, considering a self-report to the Commission, and communicating with the Commission staff in connection with Enforcement Division inquiries and investigations.

Mitigation Credit Framework

The Advisory creates a framework of “Mitigation Credit” which firms may be eligible for if they self- report or cooperate with the Commission. The Commission reserves the right to deviate from the framework, but notes that the credit matrix below will presumptively apply.

Under the Advisory, the Division will recommend a civil monetary penalty based on its analysis of facts, law, and precedent. Then, it will evaluate a firm’s self-reporting and cooperation to determine the appropriate discount to that penalty as enumerated by the Mitigation Credit Matrix. Mitigation Credit will only be applied to civil monetary penalties, not to any disgorgement or restitution resulting from a violation. The following chart from the Advisory sets forth the matrix:

Mitigation Credit Matrix

	Tier 1: No Cooperation	Tier 2: Satisfactory Cooperation	Tier 3: Excellent Cooperation	Tier 4: Exemplary Cooperation
Tier 1: No Self-Report	0%	10%	20%	35%
Tier 2: Satisfactory Self-Report	10%	20%	30%	45%
Tier 3: Exemplary Self-Report	20%	30%	40%	55%

 

Self-Reporting

The Division will classify incoming self-reporting as one of three tiers: Tier 1: No Self- Report; Tier 2: Satisfactory Self Report; and Tier 3: Exemplary Self-Report. The following non-exhaustive list of factors will be considered by the Division when evaluating a Person’s self-reporting.

• Voluntariness: whether the disclosure was made prior to an imminent threat of exposure of the potential violation.
• Addressed to the Commission: whether the disclosure was made to the appropriate Division. The Division of Enforcement will always constitute appropriate disclosure.
• Timeliness: whether the disclosure is promptly made, including a firm’s efforts to determine whether there was a potential violation.
• Completeness: whether the disclosure includes all non-privileged material information regarding the potential violation known at the time of the self-report.

The Division will provide a safe harbor for good-faith self- reporting, and not recommend charges for self-reports which are later found to be inaccurate, so long as any inaccurate information in the self-report is supplemented and corrected promptly after discovery. The following chart from the Advisory sets forth the self-reporting tiers:

Self-Reporting Tiers

Tier	Self-Reporting
Tier 1: No Self-Report	No timely self-report; or Self-report was information already known from other sources; or Self-report that was not reasonably related to the potential violation or not reasonably designed to notify the Commission of the potential violation
Tier 2: Satisfactory Self-Report	Self-report to an Appropriate Division Notified the Commission of the potential violation Did not include all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report
Tier 3: Exemplary Self-Report	Self-report to an Appropriate Division Notified the Commission of the potential violation Included all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report Included additional information that assisted the Division with conserving resources in the Division’s investigation

 

Cooperation and Remediation

The Division will evaluate cooperation and remediation efforts and categorize the cooperation into one of the following tiers: Tier 1: No Cooperation; Tier 2: Satisfactory Cooperation; Tier 3: Excellent Cooperation; and Tier 4: Exemplary Cooperation. The Division will consider the following non-exhaustive list of factors when evaluating a Person’s cooperation:

• Whether the cooperation resulted in material assistance to the Division’s investigation and resulted in a timely resolution that conserved the Division’s resources.
• The timeliness of the cooperation, including whether a Person was the first to report the potential violation to the Commission or to offer cooperation in the investigation and related enforcement action.
• The nature of the cooperation, including whether it was truthful, specific, complete, credible, and reliable.
• Whether the cooperation was voluntary or required by the terms of an agreement with another law enforcement or regulatory organization that makes a specific reference to the Commission.
• The adequacy of the resources used for cooperation, including the thoroughness and quality of the analysis, presentations, or submissions provided to the Division.
• The extent of the cooperation, including whether steps were taken to ensure the timely preservation of documents and records reasonably related to the potential violation; whether there was consistent timely disclosure of relevant facts; whether a Person encouraged high-quality cooperation of its directors, officers and employees, including, as appropriate, their provision of complete and truthful sworn statements and testimony during the investigation or in any related enforcement litigation or proceeding brought by the Commission, as permitted by applicable law; and whether a Person made admissions that conserved the Division’s resources.

The Division will also consider the following non-exhaustive list of factors when evaluating a Person’s remediation. Specifically, whether a market participant:

• Took immediate steps to address the potential violation, including corrective action.
• Performed a gap analysis to identify and remediate similar potential violations, including other businesses, products, or functions subject to the Commission’s jurisdiction.
• Implemented an appropriate remediation plan, which may include enhancements to policies and procedures, controls, monitoring, testing, and training; where appropriate, accountability measures for responsible personnel or management with respect to the potential violation, consistent with applicable law or policy; or took other reasonable steps to prevent a future violation.
• Provided an explanation of how the remediation plan is reasonably designed to prevent a future violation.

The Advisory notes that any bad-faith or uncooperative conduct may offset credit that might otherwise be received. The following chart from the Advisory sets forth the cooperation tiers:

Cooperation Tiers

Tier	Cooperation
Tier 1: No Cooperation	No substantial assistance beyond required legal obligations
Tier 2: Satisfactory	Provided substantial assistance Voluntary production of documents and information Arranging for voluntary witness interviews Basic presentations on legal and factual issues
Tier 3: Excellent Cooperation	Meet the expectations for Satisfactory Cooperation Consistently provided substantial assistance Internal investigations or reviews Thorough analysis of potential violation, root cause, and corrective action for remediation Use of internal or external expert resources and consultants as appropriate
Tier 4: Exemplary Cooperation	Meet the expectations for Excellent Cooperation Consistently provided material assistance Proactive engagement and use of significant resources Significant completion of remediation Use of accountability measures, as appropriate

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