The Commodity Futures Trading Commission (CFTC) has announced amendments to its Rules of Practice and Rules Relating to Investigations, according to Acting Chairman Caroline D. Pham. The changes are designed to increase transparency in enforcement actions and strengthen due process for individuals who may be named in enforcement proceedings.
The revised Rules of Practice require improvements in the internal memoranda that the Division of Enforcement submits when recommending an enforcement action. This aims to ensure a more accurate and complete administrative record. Changes to the Rules Relating to Investigations will enhance the Wells process, which notifies persons of potential charges and provides them with relevant facts supporting the allegations.
“As I have said before, the CFTC has nearly boundless discretion to investigate and prosecute violations of the law, and our sanctions and penalties are rarely challenged. That is why, for over 3 years, I have called for the CFTC to uphold the highest standards of integrity, diligence and excellence in our enforcement actions to maintain the public’s trust in the CFTC’s ability to oversee our markets with fairness and in service to justice. Today, I am announcing improvements to our CFTC Rules of Practice and Rules Relating to Investigations to make much-needed reforms to our enforcement program and the Wells process,” Acting Chairman Pham said. “These reforms ensure due process, such as providing a proper Wells notice and discontinuing the practice of ‘secret’ charges, and providing a minimum of 30 days—instead of as little as 2 days in the past—to make a Wells submission that is shared with the Commission promptly.Most importantly, these reforms ensure that the Division of Enforcement’s memos to the Commission are objective, consistent with applicable rules of professional conduct, comprehensive in addressing the law and facts, and supported by citations to evidence. Taken together, these reforms will end lawfare so that all are treated fairly with respect for basic rights in CFTC enforcement actions.The Commission must be an objective finder of fact and neutral arbiter of law that respects the Constitution and Constitutional rights. There must be no bias in the administration of justice and due process.”
Key revisions include clarifying definitions related to adjudicatory proceedings; removing references to outdated regulations; specifying how settlement offers can be accepted; setting requirements for recommendation memoranda from Enforcement; and updating procedures for issuing Wells notices. The new rules extend the minimum response time for those receiving a Wells notice from 14 days under previous rules to at least 30 days.
The amended rules will take effect upon publication in the Federal Register.
