The Commodity Futures Trading Commission (CFTC) has released an enforcement advisory that sets out a new approach that could see firms that voluntarily self-report potential misconduct reduce financial penalties by up to 55%.
What is the CFTC’s self-reporting policy?
On February 25, 2025, the CFTC released an enforcement advisory on “self-reporting, cooperation, and remediation” that sets out:
“How the Division will evaluate a company’s or individual’s self-reporting, cooperation, and remediation when recommending enforcement actions to the Commission and establishes the factors the Division will consider.”
According to acting CFTC chair Caroline Pham, the new approach “creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.” Firms that meet all of the CFTC’s new criteria for self-reporting and cooperation can expect to receive up to 55% mitigation credit towards calculated penalties – a substantial sum that could be a considerable motivating factor.
Enter the matrix
The enforcement advisory “marks the first time the Division will use a matrix to determine the appropriate mitigation credit to apply.” The move gives firms clear benchmarks to work towards, and increases regulatory transparency and clarity, as organizations and individuals know what steps need to be taken in order to secure the maximum amount of mitigation, and which levels of cooperation will result in lesser reductions.
The matrix allows mitigation credit to be calculated “as a percentage of the Division’s initial calculation of the civil monetary penalty,” and ranges “from 0% for no self-report and no cooperation to 55% for an exemplary self-report and exemplary cooperation.”
Interestingly, the CFTC’s advisory makes clear that:
“The Division retains the discretion to deviate from the Mitigation Credit Matrix given the unique facts and circumstances of a particular case.”
This indicates that, although mitigation is “presumptive,” firms cannot assume that fines will be reduced in every case. The CFTC will calculate initial penalties based on “an analysis of the facts, the statute and regulation, past Commission precedent as appropriate, and other applicable law.”
Individual conduct and cooperation are also covered by the release, with the CFTC spelling out that:
“Bad faith conduct that unreasonably impede the division’s investigation or requires the use of significant division resources … may conclude that the person’s cooperation does not warrant credit.”
This conduct can include individuals working to obscure material information regarding violations, failures to preserve or produce material information, and failures to take corrective action or self-report on discovering a material violation. Where individuals have been found to have acted in a way that results in harm to a client, counterparty, or customer, they will be required to disgorge all profits, potentially pay restitution, and will not be eligible for mitigation credit.
Making the grade
The CFTC’s mitigation matrix is contingent on firms meeting self-reporting and cooperation and remediation benchmarks, broken down using a tier system, with each tier carrying a different weighting for calculation mitigation credit.
Self-reporting:
- No Self-report
- Satisfactory Self-report
- Exemplary Self-report
Firms will only receive full mitigation credit providing disclosures are “voluntary, made to the commission, made in a timely manner, and complete.” The CFTC’s enforcement division will provide a “safe harbor” for firms self-reporting in good faith that supply inaccurate information in initial reports, as long as this information is promptly corrected.
Cooperation and Remediation
- No Cooperation
- Satisfactory Cooperation
- Excellent Cooperation
- Exemplary Cooperation
Consideration of “whether a party engaged in substantial efforts to prevent a future violation” will also be taken into account here, as well as considering any examples of uncooperative conduct. The CFTC may recommend that “a compliance monitor or consultant” be onboarded to “ensure the completion of undertakings.”
The benefits of proactive self-reporting and engagement with regulatory enforcement teams have been raised consistently by regulators, with the Securities and Exchange Commission (SEC) discussing the potential positive impacts back in 2024. The SEC highlighted how early self-reporting, proactive cooperation with investigations, and clear signs of remediation could result in reduced penalties, but stopped short of establishing a matrix-led commitment as the CFTC has.
“Doing more with less”
In comments on the advisory, Caroline Pham said:
“From the beginning, I have encouraged firms to self-report to proactively take ownership, ensure accountability, and prevent future violations.
“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.”
Amid ongoing efforts by the U.S. government to decrease staffing and spending across departments and federal agencies, Pham highlighted the impacts this incentive will have on regulatory resources:
“Critically, it will enable the CFTC to do more with less and free up enforcement resources to focus relentlessly on catching fraudsters and scammers, helping victims, and promoting market integrity.”
Her words were echoed by CFTC Division of Enforcement director Brian Young, who sees the move as “encouraging efficiency and conserving government resources by giving entities a clear reason to self-report and cooperate.”
While other regulators are of the view that firms should seek to “do the right thing” as a default without expectation that it will lead to mitigation, it will be interesting to see how impactful the CFTC’s new approach will be in increasing self-reporting culture. By incentivizing proactive compliance, the regulator is not only taking steps towards freeing up enforcement resource, but potentially creating an environment where firms are encouraged to not only self-report, but self-regulate.
