On January 19, 2017, the CFTC Enforcement Division issued new advisories outlining the factors that the Division would consider in evaluating cooperation by individuals (PDF: 272 KB) and companies (PDF: 282 KB). Intended to underscore the high value the Division placed on cooperation, these advisories were issued on the same day that the Commission announced a $25 million fine against Citigroup Global Markets, Inc., (“Citi”) for violating the CEA’s anti-spoofing provisions. The accompanying Order included a discussion of Citi’s cooperation and its impact on the terms of the settlement. On March 30, 2017, the Commission announced settlements with two former Citi traders, including the former desk head, for the same misconduct. These settlements included significant fines and market bans.
On June 29, 2017, the CFTC announced the third, and presumably final, disposition in the Citi spoofing investigation: Non-Prosecution Agreements (“NPA’s”) with three relatively junior former traders at Citi who had provided the Commission with valuable assistance. This marks the first time in recent memory that the CFTC has granted NPA’s, and it is a visible sign of the Commission’s emphasis on encouraging cooperation by both individuals and entities.
The new advisories explicitly hold out the possibility that, as a reward for extraordinary cooperation, the Division could consider “recommending no enforcement action” as well as a reduction in charges or sanctions. The advisories note that the Division “looks for more than ordinary cooperation or mere compliance with the requirements of law,” and that recognition “is most likely to be given for conduct that is sincere, robustly cooperative, and indicative a willingness to accept responsibility for the misconduct, where appropriate.”
The individual traders who received NPA’s appear to have covered all of these bases. According to a statement by Enforcement Director James McDonald, “[t]hese traders readily admitted their own wrongdoing, identified misconduct of others, and provided other valuable information, all of which expedited our investigation and strengthened our cases against the other wrongdoers.”
Both the Department of Justice and the SEC have used Non-Prosecution Agreements (as well as Deferred Prosecution Agreements) for years to accomplish similar goals. Although the NPA’s with the former Citi traders mark the first time in recorded history that the CFTC has granted NPA’s, it very likely will not be the last, as the Division clearly recognizes the utility of NPA’s in incentivizing proactive cooperation by both individuals and companies. In his statement, McDonald predicted that NPA’s “will be an important part of the Division’s cooperation program going forward,” and noted that they “give the Division a powerful tool to reward extraordinary cooperation in the right cases, while providing individuals and organizations strong incentives to promptly accept responsibility for their wrongdoing and cooperate with the Division’s investigation.”
Aitan Goelman is a partner in the Washington office of Zuckerman Spaeder LLP.
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