On March 6, 2019, the Commodity Futures Trading Commission (CFTC) issued an Enforcement Advisory that applies to companies and individuals not registered with the CFTC that voluntarily disclose violations of the Commodities Exchange Act (CEA) “involving foreign corrupt practices.” Companies and individuals that voluntarily disclose such violations and fully cooperate with the CFTC will presumptively receive a recommendation of a resolution without civil monetary penalty as long as there are no aggravating circumstances.
Aggravating circumstances involve the nature of the offender and the seriousness of the offense. In determining the existence of such circumstances, the Enforcement 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.”
Similar to the DOJ Corporate Enforcement Policy, this new CFTC policy contains a catch – while they may recommend no civil monetary penalty, the Enforcement Division “would still require payment of all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.” So your voluntary disclosure is going to cost you something.
It is not clear why the CFTC issued this advisory. The Head of the Enforcement Division, James McDonald, stated that foreign corrupt activities potentially constitute fraud, manipulation or false reporting under the CEA. In particular, McDonald gave the following scenarios:
“Bribes might be employed, for example, to secure business in connection with regulated activities like trading, advising, or dealing in swaps or derivatives. Corrupt practices might be used to manipulate benchmarks that serve as the basis for related derivatives contracts. Prices that are the product of corruption might be falsely reported to benchmarks. Or corrupt practices in any number of forms might alter the prices in commodity markets that drive U.S. derivatives prices.”
All those situations, however, would likely be covered by a DOJ or SEC investigation into such conduct. And McDonald noted that they would be working as a team with other enforcement agencies, domestic and foreign, and that they would not “pile on” in terms of disgorgement, forfeiture and restitution. Thus, it appears that CFTC is trying to get a piece of the pie for any FCPA settlements that may involve the markets it regulates.
On the heels of a $2 million award the CFTC issued to a whistleblower earlier in the week, McDonald noted in his policy announcement that the CFTC’s Whistleblower Program and encouraged people to come forward with information of violations to be eligible for a potential award. He further noted that they had open investigations into such conduct.
This is another potential source of an investigation into a financial services company’s business, and another reason to review your compliance programs to ensure that they are up-to-date and functioning properly. The Investigations, Financial Regulation and White Collar team at BCLP can help you do so.