Newsflash: CFTC Aligns With SEC In Enacting Wells Process Reforms

On December 1, 2025, CFTC Acting Chairman Caroline D. Pham announced in a press release that the CFTC was making "improvements" to its Rules of Practice (the "Rules of Practice") and Rules Relating to Investigations (the "Rules Relating to Investigations") to "enhance the transparency of the Commission's enforcement actions, including changes to ensure an accurate and complete administrative record... when the Division of Enforcement [the "Division"] recommends an enforcement action." The revisions take effect immediately and were published in the Federal Register on December 3, 2025. Notably, in her announcement, Acting Chairman Pham acknowledged the "nearly boundless discretion" the CFTC has "to investigate and prosecute violations of the law, and [to impose] sanctions and penalties that are rarely challenged."

As previously reported by Dechert, in October 2025, SEC Chairman Paul Atkins announced enhancements to the SEC's Wells Process and other enforcement practices to promote an "open, informed, and thoughtful dialogue" between the SEC and market participants. Like those efforts by the SEC, the CFTC's recently announced revisions are intended to "enhance due process when the Division of Enforcement notifies persons who may be named in an enforcement action (Wells process), ensuring that notice of potential charges and relevant facts supporting the allegations are provided."

As stated in the press release, the CFTC's revisions to the Rules Relating to Investigations include detailing the procedures when the Division "inform[s] persons who may be named in an enforcement proceeding of the nature of the allegations pertaining to them (Wells notice), as well as the procedure to be followed by such persons in submitting a written response to the Division (Wells submission), including expanding the time to respond to no less than 30 days rather than 14 days as [previously] required."¹ Moreover, as outlined in the Final Rule, the revisions also state that the Division may provide information regarding the facts and circumstances that form the basis for the recommendation by referring to specific evidence, as well as disclose specific evidence learned during the investigation which, as noted in the Final Rule, "promotes transparency and enhances the Division's ability to have productive dialogues with the entity or individual who may be named." Finally, the revisions state that all "written statements", including the Wells submission, will be forwarded to the Commission, which reflects a change from the prior practice which only required that written statements be provided to the Commission upon the request of the submitter. The revisions also state that the submitter may request that the statement be provided to the Commission "promptly", which reflects a change from the prior practice of providing the statements to the Commission when the Division made its recommendation to the Commission rather than when the statement is submitted.

The CFTC is also revising its Rule of Practice to provide that the Commission can determine to accept an offer of settlement in lieu of an adjudicatory proceeding either by Commission meeting or by the Commission's seriatim process. As outlined in the Final Rule, to "ensure that the Commission has the information necessary to evaluate a matter, the revisions require the Division to include certain information with its recommendation that the Commission accept an offer of settlement." Specifically, the revisions "require the Division must provide an objective memorandum that adheres to the applicable rules of professional conduct, provides a comprehensive explanation of the factual and legal foundation for the recommendation, and distinguishes unfavorable facts or legal precedents." The Division's memorandum also "must be supported by citations to evidence in the investigative record or to stipulations by the parties, and legal arguments must be supported by points and authorities." As Acting Chairman Pham stated in the press release, "[t]he Commission must be an objective finder of fact and neutral arbiter of law that respects the Constitution and Constitutional rights. There must be no bias in the administration of justice and due process."

Under these revised procedures, potential respondents and defendants should expect Division staff to be more open with defense counsel when it comes to sharing the evidentiary basis for investigations and providing more time for Wells submissions. Acting Chairman Pham's statements also suggest that the Commission may expect greater detail when evaluating whether or not to approve an enforcement recommendation and may be more probing in its consideration of Division staff recommendations.

Footnote

1. Both the SEC and CFTC detail in their respective enforcement manuals the facts and circumstances to be considered when determining whether or when to provide a Wells notice, including, for example: (i) whether the investigation is substantially complete as to the recipient of the Wells notice; (ii) whether immediate enforcement action is necessary; (iii) whether providing a Wells notice may alert potential defendants to a possible asset freeze or otherwise put at risk investor funds that the recommendation is intended to protect; and (iv) whether there is a parallel criminal investigation that may be adversely affected by providing a Wells notice. See CFTC Enforcement Manual (2020) and SEC Enforcement Manual (2017).

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