CFTC Unveils Replacement Penalty Mitigation Policy Focused on Self-Reporting, Cooperation, and Remediation

Quick Hits

• The CFTC’s new policy allows companies to potentially reduce penalties by up to 55 percent through voluntary self-reporting, cooperation, and effective remediation of misconduct.
• The policy introduces a matrix for mitigating penalties based on the level of voluntary self-reporting, ranging from “No Self-Report” to “Exemplary Self-Report,” and the level of cooperation, ranging from “No Cooperation” to “Exemplary Cooperation.”
• The policy emphasizes a proactive approach, enabling companies to demonstrate good faith through cooperation and remediation efforts in enforcement actions.

On February 25, 2025, the CFTC’s Division of Enforcement issued a new advisory detailing how it will evaluate companies’ self-reporting, cooperation, and remediation and reduce penalties accordingly in enforcement actions.

The CFTC, through its Division of Enforcement, investigates violations of the Commodity Exchange Act (CEA) and the CFTC Regulations. Violations can be certain actions or behavior in connection with futures, options, and swaps and in connection for a contract of sale of any commodity in interstate commerce.

The CFTC’s new advisory replaces prior guidance with a new matrix that the Division of Enforcement will use to determine an appropriate reduction in penalties, or a “mitigation credit,” which can reach up to 55 percent of a possible penalty. The CFTC characterized the new guidance as a significant step toward transparency in enforcement actions.

“From the beginning, I have encouraged firms to self-report to proactively take ownership, ensure accountability, and prevent future violations,” Acting Chairman Caroline D. Pham said in a statement. “By making the CFTC’s expectations for self-reporting, cooperation, and remediation more clear—including a first-ever matrix for mitigation credit—this advisory creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.”

Acting Chairman Pham further emphasized that the new program implements President Donald Trump’s EO 14219, “Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative,” which calls for streamlining federal government processes.

Three-Tiered Scale for Self-Reporting

The advisory outlines a three-tiered scale the CFTC Division of Enforcement will use to evaluate the “voluntariness” of self-reporting:

1. No Self-Report—The advisory states that this factor would apply when an organization has not self-reported in a timely manner, “no timely self-report,” or when a self-report was not “reasonably related to the potential violation or not reasonably designed to notify the Commission of the potential violation.”
2. Satisfactory Self-Report—This factor applies when there was notification of a potential violation to the Commission, but the notification lacked “all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report.”
3. Exemplary Self-Report—This factor applies when a comprehensive notification includes all material information and additional information that assists with the investigation and conserves the agency’s resources.

According to the advisory, to receive full credit, disclosures must be (1) voluntary, (2) made to the Commission, (3) timely, and (4) complete. Reports can be made to the Division of Enforcement or other relevant CFTC divisions. The CFTC will provide a safe harbor for good faith self-reporting, allowing for corrections of any inaccuracies discovered post-reporting.

Cooperation and Remediation

Similarly, the advisory explains that the division will evaluate cooperation on a four-tiered scale:

1. No Cooperation: According to the advisory, the division will apply this factor in cases where there has been compliance with legal obligations but no substantial assistance.
2. Satisfactory Cooperation: This factor applies when documents, information, and witness interviews have been voluntarily provided.
3. Excellent Cooperation: This factor applies when there has been consistent, substantial assistance, including internal investigations and thorough analysis.
4. Exemplary Cooperation: This factor applies when there has been proactive engagement and significant resource allocation to assist the Division of Enforcement.

Additionally, according to the advisory, the division will consider remediation efforts as part of a company’s cooperation evaluation. Specifically, the division will assess whether substantial efforts were made to prevent future violations, including corrective actions and implementation of appropriate remediation plans. In some cases, a compliance monitor or consultant may be recommended to ensure the completion of undertakings.

Mitigation Credit Matrix

The advisory further introduces a “Mitigation Credit Matrix,” which explains a “mitigation credit” will be applied based on the levels of voluntariness and cooperation as a percentage of the initial civil monetary penalty. The matrix ranges from 0 percent for no self-report and no cooperation to 55 percent for exemplary self-report and exemplary cooperation. However, the division said it will retain discretion to deviate from the matrix based on each case’s unique facts and circumstances.

Next Steps

The advisory and Mitigation Credit Matrix provides more clarity and transparency about how the CFTC will evaluate voluntary self-reporting of potential misconduct and cooperation with subsequent CFTC enforcement actions, applying a new matrix that considers the levels of voluntariness and cooperation. Prior guidance had focused on whether an entity self-reported or not and whether cooperation “materially advanced” the division’s investigation.

Future enforcement and administration of the advisory will be necessary to clarify how the Trump administration will handle self-reporting and cooperation. Further, the CFTC has maintained discretion in applying the matrix and mitigation factors, and there is still some room for ambiguity in applying the factors. CFTC Commissioner Kristin N. Johnson dissented from the issuance of the new guidance. In a separate statement, Commissioner Johnson said that while she supports improvements to “transparency, clarity, and efficiency” processes to incentivize self-reporting, cooperation, and remediation, the CFTC “must be careful not to muddy the waters.”

The new advisory comes amid a broader push by federal enforcement agencies, including the CFTC, to encourage self-reporting and whistleblowing, at least under the Biden administration.

The advisory makes it clear it is now the division’s sole policy on self-reporting, cooperation, and remediation and explains that all previously announced policies, including those contained in six different division advisories as well as in the division’s enforcement manual, are no longer the policy of the division.

Thus far, no federal enforcement agencies have indicated their whistleblower protections will be weakened under the Trump administration.

CFTC-regulated businesses may want to review and update their compliance programs and related policies, considering the CFTC’s self-reporting, cooperation, and remediation incentive mechanisms. According to the advisory, entities must undergo an “exemplary self-report” and “exemplary cooperation” to maximize the potential for lowered penalties.

Moreover, entities regulated by other federal enforcement agencies may want to consider that the CFTC advisory could signal a revised approach generally under the Trump administration and keep a close watch on whether any modifications similar to those set forth in this advisory are adopted by other agencies.

Ogletree Deakins’ Ethics Compliance and Whistleblower Response Practice Group will continue to monitor developments and will provide updates on the Ethics / Whistleblower and Workplace Investigations and Organizational Assessments blogs as additional information becomes available.

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