On May 8, 2019, the Commodity Futures Trading Commission (CFTC) Division of Enforcement (DOE or Division) released its first publicly available Enforcement Manual. The Manual provides an overview of the Division and sets out the general policies and procedures that guide its Staff in detecting, investigating and prosecuting violations of the Commodity Exchange Act (CEA) and Commission regulations. According to its simultaneous press release, in publishing the Manual the CFTC intends to “increase transparency, certainty, and consistency, and, more generally, to advance the rule-of-law principles that underpin all DOE and CFTC enforcement actions.”
The Manual begins with a background of the Commission’s structure and mission, an overview of the markets subject to CFTC oversight and the DOE’s role as a discrete division within the agency. It describes the DOE’s process in conducting preliminary inquiries, and investigations and in recommending enforcement proceedings to the Commission, and enumerates the many sources from which DOE may obtain information about potential regulatory violations. The Manual also highlights the CFTC’s cooperation with foreign governmental agencies, both in receiving details about cross-border conduct and in compelling production of documents or testimony from individuals located abroad.
The Manual details the Commission’s policies regarding self-reporting, company accountability, cooperation and remediation. The Manual also outlines the CFTC’s Whistleblower Program, describing the protections and awards available to eligible whistleblowers who provide original information about CEA violations that enables the Division to successfully bring an enforcement action resulting in monetary sanctions over $1 million.
The Manual sets out the CFTC’s procedures for dealing with privileged, confidential and private information and describes how the CFTC addresses its own ethical responsibilities, particularly as they apply to maintaining records, closing cases and making any public statements.
Of particular note to many may be the CFTC’s “queen-for-a-day” immunity procedure set out in Section 126.96.36.199 of the Manual. This describes the existing CFTC practice of permitting a witness in an enforcement matter who is concerned about civil or criminal exposure to seek an immunity agreement with respect to the testimony or information conveyed during a proffer session. Where DOE Staff consider the witness’s information useful to their investigation, Staff may seek approval from the Enforcement Director or his delegate to offer civil immunity to the witness, limited in duration to the proffer session and subject to exceptions under which the Division may use the information conveyed. There is no guidance, however, on what circumstances the Staff may consider granting such immunity or what exceptions to the use of the information may be required of a witness.
In instances where the witness refuses to provide testimony without protection from criminal prosecution, the CFTC also may ask the United States Attorney General to approve a Commission order requiring the witness’s testimony in exchange for agreement that the information provided may not be used against the witness in a criminal case, absent perjury, giving a false statement or failing to comply with the order.
The Manual’s release puts the CFTC more visibly on par with the Securities and Exchange Commission (SEC), which first publicly released its Enforcement Manual in late 2008. While seasoned practitioners before the CFTC are unlikely to learn much new from the Manual, it does make the Division’s processes and procedures more readily accessible to the less well initiated.
The CFTC has stated that it will continuously update the Manual to reflect changes and evolution in the Division’s enforcement policy.