The CFTC’s New Enforcement Manual Guidance Details Factors Used in Corporate Compliance Programs
The Commodity Futures Trading Commission (“CFTC”) has announced Division of Enforcement staff-level guidance that outlines whether a company’s compliance program was reasonably designed and implemented to (i) prevent the underlying misconduct at issue; (ii) detect the misconduct; and (iii) remediate the misconduct. At all points, the Division will conduct a risk-based analysis, taking into consideration a variety of factors such as the specific entity involved, its role in the market, and the potential market or customer impact of the underlying misconduct in CFTC enforcement matters.
Factors to guide Division staff in evaluating a compliance program’s ability to prevent misconduct may include (i) the written policies and procedures in effect; (ii) the training of staff; (iii) a failure to cure any previously identified deficiencies; (iv) adequate resources; and (v) the structure, oversight, and reporting of the compliance function. Factors that relate to the compliance program’s effective detection of the underlying misconduct may include (i) internal surveillance and monitoring efforts; (ii) the organization’s internal-reporting system and handling of complaints; and (iii) procedures for identifying and evaluating unusual or suspicious activity.
CFTC Division of Enforcement staff will also consider remediation measures to assess and address both the misconduct and any deficiencies in the compliance program that may have permitted the misconduct to occur. In considering remediation, staff will focus on whether the company (i) effectively addressed the impact of the misconduct; (ii) appropriately disciplined the individuals responsible for the misconduct; and (iii) identified and addressed any deficiencies in the compliance program itself.
This is the second updated to the publicly available Enforcement Manual, the first of which addressed the CFTC’s civil monetary penalty guidance in May of 2020.
To view the entire press release, please visit the link here.
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