Tuesday, December 3, 2019
In reading, CFTC Relying More Heavily on Coordination with Criminal Prosecutors, I saw that the CFTC recently released their Division of Enforcement Annual Report for FY2019 (Report) (here).
Surprisingly, it’s only the second such report, and it aims to increase the transparency, continuity, and consistency surrounding the priorities of the Division of Enforcement (Division). This strikes me as a good thing. In case you’re wondering, the current priorities are: “preserving market integrity; (2) protecting customers; (3) promoting individual accountability; and (4) increasing coordination with other regulators and criminal authorities.” The Report also provides several interesting charts and lots of metrics about the Division’s enforcement activities.
I found several items in the Report particularly interesting. First, in May 2019, the Division made its Enforcement Manual public for the first time (here). Second, the amount recovered in enforcement actions for FY 2019 - $1,321,046,710 – was the 4th highest amount ever for the CFTC! Third, there’s much focus these days on entities’ compliance programs. This should be of interest to the increasing number of law schools offering compliance courses/curriculum. Indeed, the Report’s concluding paragraph states that “The ultimate goal is to foster among our market participants a true culture of compliance…And that’s the end goal at which our enforcement actions are aimed.” Fourth, the Division has had important wins in litigating fraud cases involving digital assets falling within the definition of commodity in the Commodities Exchange Act. Fifth, we all know that data is king/queen everywhere these days – the Division is no exception! Increased use of data analytics is accelerating its ability to detect market misconduct. Sixth, the Division’s Whistleblower Program is definitely on the rise. In FY19, Whistleblower Awards totaled $15,384,664, and were linked to “judgements totaling more than $800 million.” Indeed, “between 30 to 40% of the Divisions ongoing investigations now involve some whistleblower component.”
Finally, “During the last Fiscal Year, we filed more cases in parallel with criminal authorities (sixteen) than any prior year.” The Report states that “When criminal penalties are added to the broader range of other remedies the CFTC can impose, the result is a robust combination of sanctions which can be tailored to the violation at issue to achieve optimal deterrence.” A 2003 WilmerHale publication is entitled: Parallel Criminal and SEC Prosecution Present New Risks for Public Companies and their Officers and Directors (here). The increased number of parallel proceedings involving the CFTC is also likely to present new risks for firms and their officers/directors/employees. A quick law review search suggests that little has been written on this specific issue – perhaps some BLPB readers could make it the topic of future research!