United States: CFTC Releases Enforcement Manual In Hopes Of Increasing Transparency

Intending to bring greater transparency to the operation of its enforcement program, the Commodity Futures Trading Commission's (CFTC or Commission) Division of Enforcement (the Division) recently, for the first time, made public its Enforcement Manual (Manual).1 The Manual provides market participants, industry professionals and the enforcement bar with insights into the Division's detections, investigations, and pursuit of violations (and potential violations) of the Commodity Exchange Act (CEA) and the regulations thereunder. According to CFTC Director of Enforcement James McDonald, this move is intended to "promote fairness, increase predictability, and enhance respect for the rule of law."

The public release of the Manual brings CFTC practice in line with those of other enforcement agencies, including the Department of Justice and the Securities and Exchange Commission (SEC).2 The Manual provides a roadmap of the life cycle of a CFTC enforcement action, from the opening of an investigation through the Wells process to resolution. Although the Manual provides broad insight into the general policies and procedures that guide the work of the Division's Staff, it does not provide concrete guidance on how those general policies may be applied in particular cases. 

Below, we highlight several of the Manual's more significant provisions.

Initiation of an Investigation. Unsurprisingly, the Manual notes that when faced with a tip or lead, the Staff conducts an initial review of its viability. If the Staff determines to move past the preliminary inquiry phase, the Staff begins an in-depth investigation of the relevant facts and circumstances. After completing its investigation, the Staff then decides whether to recommend an enforcement action.

Self-Reporting, Cooperation and Remediation Credit. The Manual reinforces the Division's ongoing initiative (reflected in its 2017 guidance) to incentivize cooperation and self-reporting.3 The Manual notes that in determining whether to bring an enforcement action and what charges and sanctions to impose, the Division will consider a party's efforts to self-report misconduct and cooperate with the investigation and remediate the alleged violations. Consistent with the 2017 guidance, the Manual further notes that in making these determinations, the Division will consider (1) the value of the cooperation in the Division's investigation and related enforcement actions; (2) the value of the cooperation to the CFTC's broader law enforcement interests; and (3) balancing the level of culpability and history of prior misconduct with the acceptance of responsibility for and mitigation and remediation of any misconduct.

Individuals or entities the Division deems to be cooperative may be eligible to enter into a non-prosecution agreement (NPA) or a deferred prosecution agreement (DPA) with the CFTC. The Manual sets forth the conditions necessary for each of these agreements, e.g., the individual or entity must enter into a long-term tolling agreement in the case of a DPA, and the potential implications for violation of such an agreement are listed.4

This additional detail is useful, but it remains uncertain how these updated guidelines will be administered in practice. And, while the Commission has resolved a number of recent enforcement actions through NPAs or DPAs, the Division retains broad discretion in determining when and how to award cooperation credit. As a result, the decision to cooperate will remain complicated.

Cooperative Enforcement. The Manual notes that "[w]orking cooperatively and in parallel with criminal authorities and other federal, state, or international regulators is a cornerstone" of the Division's enforcement program. The Manual highlights the Division's practice of referring matters to other government agencies such as the Department of Justice, including matters for criminal prosecution (e.g., matters involving willful violations of the CEA, perjury and obstruction of justice).

While the Acting Chair of the Commission recently acknowledged the value in avoiding duplicative enforcement actions and deferring, when appropriate, to "the civil and criminal capabilities of other federal and state regulators and enforcement agencies," the Manual does not reflect that view.5 This stands in contrast to the Justice Manual, which was amended in May 2018 to memorialize the Department of Justice's interest in reducing duplicative enforcement.6 

Privilege Assertions. The Manual provides that Division Staff should not ask an individual or entity to waive the attorney-client privilege or work-product protection without prior approval of the Director or the supervising Deputy Director. Where a party wishes voluntarily to disclose certain privileged or protected materials to the Commission yet avoid waiver as to other parties or of other materials (not so disclosed) concerning the same subject matter, the Division may enter into a non-waiver agreement barring the Division from arguing that such disclosure constitutes a waiver of any privilege protections.

Such agreements, of course, only bind the Division. As the Manual notes, "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."7 Accordingly, a party and its counsel must weigh the potential benefit of entering the non-waiver agreement with the CFTC against the significant risk that a court would nonetheless later find that a waiver had occurred.

Wells Process and White Papers. The Division has discretion to inform parties that may be named in a proposed enforcement action of the nature and substance of the allegations against them before such action is filed (i.e., the "Wells Notice").8 The Manual outlines the factors the Division considers in determining whether to issue a Wells Notice, which must be approved by the Division Director, including:

i. Whether the Division's investigation of the intended recipient of the Wells Notice is substantially complete;

ii. Whether immediate enforcement action is necessary;

iii. Whether provision of the Wells Notice would alert the intended recipient (and perhaps others) to a possible asset freeze or otherwise put at risk funds that the proposed enforcement action is intended to protect; 

iv. Whether issuance of the Wells Notice may jeopardize any ongoing parallel criminal investigations; and

v. Whether a response (i.e., a Wells Submission) from the intended recipient would be useful to the CFTC and the Division in evaluating complicated factual, legal or policy issues.

Further, the Manual details that a Wells Notice recipient may choose to submit a Wells Submission, i.e., a written statement, setting forth its views on factual, legal or policy matters relevant to the investigation or proposed enforcement action. Similarly, persons who become involved in an investigation may also submit of their own accord (i.e., absent a Wells Notice) a written statement as to such matters, these submissions are referred to as White Papers.9

Closing an Investigation. The Manual lays out five factors that the Division should consider in determining whether to close an investigation without action, including: (1) the seriousness and scope of the conduct and potential violations; (2) the sufficiency and strength of the evidence; (3) the extent of potential harm if an action is not commenced; (4) the applicable statute of limitations; and (5) whether there are prior enforcement actions by the CFTC or other regulatory authorities or criminal prosecutions of the individual or entity.

In its discretion, the Division may send a Closing Letter notifying an individual or an entity as soon as practicable that it has determined to close an investigation as it relates to them and, thus, not to recommend an enforcement action against them to the CFTC. The Manual makes clear that although an individual or entity may receive a Closing Letter, the Division retains the discretion to reopen the investigation at any time in the future.

Enforcement Priorities. A close reading of the Manual, and any future changes thereto, may provide insights into the Division's enforcement priorities. For example, the Manual's "Summary of Types of Prohibited Conduct Subject to Investigation" includes, in addition to the traditional areas of enforcement interest of fraud, price manipulation, trade practice violations and illegal off-exchange activity, "use of a manipulative or deceptive device," "misappropriation of material, confidential, non-public information," and "disruptive trading practices."  Section 7.1.3 of the Manual also addresses CEA violations involving foreign corrupt practices.


As discussed above, the Manual is a useful tool for those seeking to better understand the Division's enforcement practices as well as the general policies and procedures that guide the work of the Division's Staff. The Manual, however, leaves broad discretion to the Staff and provides little concrete guidance on how those general factors will be applied in particular cases. In addition, the Manual provides no additional guidance regarding some of the most complicated issues that arise in CFTC enforcement proceedings, including how to evaluate particular types of claims; how to handle particularly sensitive information, such as source code; and how to calculate settlement demands. Market participants and enforcement counsel will appreciate the additional transparency and clarity provided in the Manual but will still face tough decisions in determining how to navigate the enforcement process. 


1 The official press release can be found here.

2 For example, the SEC released its own Enforcement Manual in 2008. The "Justice Manual" of the U.S. Department of Justice was updated as of 2018.The Division's Enforcement Manual, similar to its SEC counterpart, reflects the Division's operating policies and procedures, and does not necessarily reflect the views of CFTC or its commissioners; neither does it create any substantive or procedural rights that are enforceable against the Division or the Commission in potential civil or criminal matters.

3 In 2017, the CFTC released Enforcement Advisories (Advisories) discussing cooperation by parties to an investigation. The January 2017 Advisories can be found here and here, while the September 2017 Advisory can be found here. For more on these Advisories, see our Client Alert found here.

4 For instance, in the event of a violation of a DPA, the Division may recommend an enforcement action against the party for the original misconduct.

5 Testimony of J. Christopher Giancarlo, Acting Chairman, CFTC, before the H. Comm. on Appropriations Subcomm. on Ag., Rural Dev., and Related Agencies (June 8, 2017), available here.

6 Justice Manual § 1-12.100, as amended May 2018 (providing that the "Department should also endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct").

7 See Gates Corp. v. CRP Indus., Inc., 2018 WL 4697327 (D. Colo. Aug. 10, 2018) (finding that communications between the plaintiff and government enjoyed no privilege protection and required in camerareview of all such communications); In re: Columbia/HCA Healthcare Corp., 293 F.3d 289 (6th Cir. 2002) (finding waiver of privilege when company disclosed information to the Department of Justice despite non-waiver agreements); but see In re: Grand Jury 16-3817 (16-4), 740 F. App'x 243 (4th Cir. 2018) (enforcing a non-waiver agreement against the Department of Justice stating that "[c]ooperation between private entities and the Government furthers the truth-finding process").

8 This process is named after a similar notification process employed by the SEC.

9 The Enforcement Manual details the applicable procedures related to a Wells Submission and White Paper that must be followed in submitting the individual's written statement to the Division (e.g., the statement must be submitted to the Division within fourteen (14) days after the potential respondent or defendant or his counsel has been informed of the nature of the allegations against them).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions