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CFTC Issues Advisory on Violations of the Commodity Exchange Act Involving Foreign Corrupt Practices

By | March 11, 2019

The CFTC announced an Enforcement Advisory on self-reporting and cooperation for violations of the Commodity Exchange Act, or CEA, involving foreign corrupt practices.  Because the Enforcement Advisory is limited to the CEA, it does not suggest that the CFTC will bring actions regarding violations of the Foreign Corrupt Practices Act.

The new Enforcement Advisory provides further clarity surrounding the benefits of self-reporting misconduct, full cooperation, and remediation in this context, according to the CFTC.  According to a CFTC official, “Together with the Department’s Corporate Enforcement Policy, CFTC’s Advisory on self-reporting and cooperation will make clear to companies the significant benefits of voluntarily self-disclosing misconduct, fully cooperating with the government’s investigation, and remediating the misconduct.”

A CFTC official also noted companies and individuals engaging in foreign corrupt practices should recognize that foreign corrupt practices might constitute fraud, manipulation, false reporting, or a number of other types of violations under the CEA, and thus be subject to enforcement actions brought by the CFTC.  “Bribes might be employed, for example, to secure business in connection with regulated activities like trading, advising, or dealing in swaps or derivatives.  Corrupt practices might be used to manipulate benchmarks that serve as the basis for related derivatives contracts.  Prices that are the product of corruption might be falsely reported to benchmarks.  Or corrupt practices in any number of forms might alter the prices in commodity markets that drive U.S. derivatives prices.  We currently have open investigations involving similar conduct.  But regardless of the specific factual scenario, we are committed at the CFTC to enforcing the CEA provisions that encompass foreign corrupt practices.”

The new Enforcement Advisory only apples to non-CFTC registrants.  CFTC registrants have existing obligations to disclose to the Commission CEA violations, including those involving foreign corrupt practices; registrants are thus not eligible for the presumptive recommendation of no penalty set out in this Advisory.  Nevertheless, the CFTC stated CFTC registrants who self-report, cooperate, and remediate still would be eligible to receive the recommended substantial reduction in penalty generally applicable under existing Enforcement Advisories.

Contact Steve Quinlivan for more information.

Topics: 
Derivatives, Litigation