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New enforcement advisory encourages reporting of foreign corrupt practices that the
agency intends to pursue under the Commodity Exchange Act.
On March 6, 2019, the Division of Enforcement (Division) of the US Commodity Futures Trading
Commission (CFTC or Commission) announced that it will work alongside the US Department of Justice
(DOJ) and the US Securities and Exchange Commission (SEC) to investigate foreign bribery and
corruption relating to commodities markets.1 CFTC Enforcement Director James McDonald announced
the agencyâ€™s new interest in this area as the Division issued an enforcement advisory on self-reporting
and cooperation for violations of the Commodity Exchange Act (CEA) involving foreign corrupt practices.2
For companies and individuals who participate in the markets for commodities and derivatives â€” or
whose activities may impact those markets â€” the CFTC announcement adds a new dimension to an
already crowded and complex landscape for anti-corruption enforcement. A range of industries, including
energy, agriculture, metals, financial services, cryptocurrencies, and beyond, must now consider the
CFTC and the CEA when assessing global compliance and enforcement risks relating to bribery and
corruption. This article summarizes the new developments and outlines key considerations for industry
participants and their legal and compliance teams.
Enforcement Directorâ€™s Remarks
Announcing the Divisionâ€™s new focus on foreign corruption at the American Bar Associationâ€™s National
Institute on White Collar Crime, McDonald explained that â€œ[c]ompanies and individuals engaging in
foreign corrupt practices should recognize that this sort of misconduct 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.â€3 He added that the CFTCâ€™s â€œinvolvement in this spaceâ€
arose â€œthrough conversations with our enforcement partners about factual scenarios known to them, to
which we at the CFTC might be able to add our expertise about how those facts would affect American
Recognizing that the Foreign Corrupt Practices Act (FCPA) is enforced by the DOJ and SEC, McDonald
noted that the CFTC â€œwill not pile on to other existing investigations,â€ but rather will â€œinvestigate in parallel
with other enforcement authoritiesâ€ to â€œavoid duplicative investigative steps,â€ account for penalties
imposed by other authorities, and give â€œcredit for disgorgement or restitution payments in connection with
other related actions.â€5
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McDonald cited several examples of factual scenarios that could lead to CFTC enforcement in connection
with foreign corrupt practices, including:
ï‚· â€œBribes ... to secure business in connection with regulated activities like trading, advising, or dealing
in swaps or derivativesâ€
ï‚· Manipulated prices that are â€œthe product of corruptionâ€ and might result in false reporting to
ï‚· Corruption that may â€œalter the prices in commodity markets that drive US derivatives pricesâ€6
Notably, McDonald stated that the CFTC currently has â€œopen investigations involving similar conduct.â€7
New Enforcement Advisory on Foreign Corrupt Practices
In tandem with McDonaldâ€™s speech, the Division announced an expansion of its existing cooperation
policy to address foreign corruption.
Previous enforcement advisories established the Divisionâ€™s policy of exercising discretion to impose
lesser penalties when appropriate to encourage cooperation in CFTC investigations. In January 2017, the
Division issued two advisories outlining factors the Division considers in evaluating cooperation by
companies and individuals.8 In September 2017, the Division updated its policy to place greater emphasis
on self-reporting as a key first step, allowing full credit only when â€œthe company or individual self-reports,
fully cooperates, and remediates.â€9 In those circumstances, the Division â€œwill recommend the most
substantial reduction in the civil monetary penalty that otherwise would be applicable.â€10
The new advisory extends the benefits of self-reporting, cooperation, and remediation to violations of the
CEA involving foreign corrupt practices.11 For companies and individuals not registered with the CFTC,
the Division will reward such cooperative steps by applying â€œa presumption that it will recommend to the
Commission a resolution with no civil monetary penalty.â€12 The Division will still â€œrequire payment of all
disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue,â€ and it may decline to
apply the presumption on penalties if it finds aggravating circumstances, such as company-wide
misconduct or senior management involvement.13 The Division will â€œseek all available remedies â€”
including, where appropriate, substantial civil monetary penalties â€” with respect to companies or
individuals implicated in the misconduct that were not involved in submitting the voluntary disclosure.â€14
While the new advisory applies only to companies and individuals who are not registered (or required to
be registered) with the agency, it notes that CFTC registrants have â€œexisting, independent reporting
obligationsâ€ requiring them â€œto report any material noncompliance issues under the CEA, which would
include any foreign corrupt practices that violate the CEA.â€15 The advisory states that registrants who self-
report, cooperate, and remediate may still receive a â€œsubstantial reduction in the civil monetary penalty,â€
but the â€œpresumption of a recommendation of no civil monetary penalty will not apply.â€16
In offering incentives for cooperation on foreign corruption, the CFTCâ€™s new advisory parallels the DOJ
Corporate Enforcement Policy implemented in April 2016 and further codified in November 2017.17 Under
its program, the DOJ applies a presumption in favor of declination or reduced penalties for companies
that voluntarily self-disclose FCPA violations and satisfy the DOJâ€™s requirements for cooperation and
remediation.18 In the CFTCâ€™s March 6 announcement, the Assistant Attorney General for the DOJ
Criminal Division, Brian A. Benczkowski, stated that the DOJ â€œlook[s] forward to working in parallel with
the CFTC in cases involving foreign corrupt practices, as well as others.â€19
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A Novel Step That Extends Existing Enforcement Priorities
With responsibility for prosecuting FCPA violations residing with the DOJ and SEC, the CFTC has
surprised many in the industry by announcing that it will devote precious enforcement resources to
foreign corruption.20 The Divisionâ€™s announcement indicates that it believes such conduct abroad â€œcan
distort prices and undermine the integrity of our markets here,â€ implicating the CEAâ€™s anti-fraud and anti-
manipulation provisions.21 McDonald also linked â€œcombatting corrupt practicesâ€ to protecting markets,
noting that â€œregistrants and market participants who obey the law and do the right thing should not be
placed at a disadvantage simply because their competitors choose to break the rules.â€22
The CFTCâ€™s move into foreign corruption enforcement can thus be viewed as an extension of its focus on
market integrity. In its 2018 annual report, the CFTC highlighted the fact that it brought more cases
involving market integrity last year than ever before, and that some of those cases involved conduct
across international borders.23 The Commission has pursued a series of high-profile market manipulation
and spoofing cases in recent years, in markets ranging from interest rates to energy to agriculture to
Beyond markets, the Division has also displayed a commitment to broader economic integrity concerns,
recently establishing a task force to ensure that CFTC registrants comply with applicable Bank Secrecy
Act and anti-money laundering rules, including suspicious activity reporting and know-your customer
programs.25 The CFTCâ€™s new interest in foreign corruption extends these trends.
McDonald noted in his March 6 remarks that the CFTC has open investigations involving conduct relating
to foreign corruption.26 By announcing its new policy before bringing any cases, the Division may be
signaling its commitment â€” to the market, other enforcement agencies, and subjects of investigations â€”
to foster quicker resolutions of existing cases and prepare the field for a first action in this area.
Key Takeaways for Navigating the New Landscape
The CFTCâ€™s announcement leaves open how the agency will charge foreign corruption offenses under
the CEA, what connection to US markets will be required, and whether such charges will fill any gaps in
DOJ and SEC enforcement.27 Nonetheless, the announcement makes clear that companies and
individuals confronting a potential problem under the FCPA must now consider the CEAâ€™s regulatory
requirements and broad anti-fraud and anti-manipulation provisions as well. In light of the CFTCâ€™s
announcement, companies and individuals whose operations involve commodities or derivatives should
bear in mind the following considerations:
ï‚· Compliance and Training: Companies should review their anti-corruption compliance and training
programs to ensure that they provide appropriate guidance for business units and personnel who
trade commodities and derivatives or who interact with government officials and government-owned
enterprises in these markets.
ï‚· Investigating Foreign Corruption: If a potential incident of bribery or corruption has been detected,
a companyâ€™s analysis should include an assessment of any connections the incident may have to
commodities, including physical commodity transactions, derivatives trading and clearing, and price
reporting. In time, the CFTC may bring enforcement actions that provide guidance on how and when
it will police foreign corruption. In the absence of such guidance, companies should think broadly
about potential connections to commodities and the CEA.
ï‚· Registrant Reporting: Swap dealers, futures commission merchants, and other CFTC registrants
confronting a potential incident of foreign corruption should consider their reporting obligations under
Latham & Watkins March 20, 2019 | Number 2469 | Page 4
the CEA and CFTC regulations. The new advisory makes clear that the Division regards foreign
corrupt practices as a subject of reporting duties. And while the presumption of no penalty does not
apply for registrants, the new advisory notes that registrants may still receive substantial credit for
reporting and cooperation.
ï‚· Voluntary Self-Reporting: Even when a company or individual does not have a regulatory duty to
report an incident of foreign corruption to the CFTC, they should consider whether to self-report to the
agency pursuant to the new advisory. In doing so, the company or individual must be prepared to
anticipate and address the concerns of the CFTC in addition to those of the DOJ, SEC, and
international authorities, and to cooperate with multiple agencies simultaneously.28
ï‚· Whistleblowing: Companies should be aware that the Divisionâ€™s announcement serves as an
invitation for whistleblowers to report foreign corruption to the CFTC. McDonald noted in his March 6
remarks that the CFTCâ€™s Whistleblower Office â€œremains open and ready for business,â€ that it â€œissued
a record number of whistleblower awards last year, with record payments to whistleblowers,â€ and that
the Whistleblower Program â€œapplies to CEA violations involving foreign corrupt practices, just as it
does in other areas.â€29 The CFTC recently highlighted that this program is available to whistleblowers
in foreign countries.30 The Division has thus notified potential whistleblowers (and the attorneys who
often represent them) that tips to the CFTC on foreign corruption may entitle whistleblowers to
significant monetary awards.
The CFTC Division of Enforcementâ€™s announcement of its interest in investigating and prosecuting
violations of the CEA involving foreign corrupt practices opens a new chapter in the complex landscape
for foreign corruption compliance and enforcement. While the scope and impact of the CFTCâ€™s role in
foreign corruption enforcement remains to be seen, companies and individuals who operate in the
commodities and derivatives markets â€” whether or not they are registered with the CFTC â€” now face a
new set of considerations when evaluating their global compliance programs, confronting any foreign
corruption risks that may arise, and making decisions about self-reporting of potential violations.
Latham & Watkins March 20, 2019 | Number 2469 | Page 5
If you have questions about this Client Alert, please contact one of the authors listed below or the Latham
lawyer with whom you normally consult:
Alice S. Fisher email@example.com +1.202.637.2232 Washington, D.C.
Douglas K. Yatter firstname.lastname@example.org +1.212.906.1211 New York
Douglas N. Greenburg email@example.com +1.202.637.1093 Washington, D.C.
William R. Baker III firstname.lastname@example.org +1.202.637.1007 Washington, D.C.
Benjamin A. Dozier email@example.com +1.212.906.4728 New York
Robyn J. Greenberg firstname.lastname@example.org +1.202.637.2394 Washington D.C.
You Might Also Be Interested In
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1 CFTC Press Release No. 7884-19, CFTC Division of Enforcement Issues Advisory on Violations of the Commodity Exchange
Act Involving Foreign Corrupt Practices (Mar. 6, 2019), https://www.cftc.gov/PressRoom/PressReleases/7884-19 (March Press
2 Remarks by CFTC Enforcement Director James M. McDonald at the Am. Bar Assâ€™n Natâ€™l Institute on White Collar Crime (Mar. 6
2019), https://www.cftc.gov/PressRoom/SpeechesTestimony/opamcdonald2 (McDonald Remarks).
3 Id. at 1.
5 Id. at 2.
6 Id. at 1.
8 CFTC Enforcement Advisory: Cooperation Factors in Enforcement Division Sanction Recommendations for Companies (Jan.
19, 2017), https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents/legalpleading/
enfadvisorycompanies011917.pdf (January 2017 Advisory for Companies); CFTC Enforcement Advisory: Cooperation Factors in
Enforcement Division Sanction Recommendations for Individuals (Jan. 19, 2017), https://www.cftc.gov/sites/default/files/idc/
groups/public/@lrenforcementactions/documents/legalpleading/enfadvisoryindividuals011917.pdf (January 2017 Advisory for
Individuals). The January 2017 advisories supplemented and replaced previous statements regarding cooperation by companies
in 2004 and 2007. See Jan. 2017 Advisory for Companies, at 1; Jan. 2017 Advisory for Individuals, at 1.
9 CFTC Enforcement Advisory: Updated Advisory on Self Reporting and Full Cooperation (Sept. 25, 2017), https://www.cftc.gov/
(September 2017 Advisory).
10 Id. at 3. This credit is available for civil monetary penalties. The September 2017 Advisory noted that the company or individual
must still â€œdisgorge profits â€¦ resulting from any violations.â€ Id.
11 CFTC Enforcement Advisory: Advisory on Self-Reporting and Cooperation for CEA Violations Involving Foreign Corrupt
Practices (Mar. 6, 2019), https://www.cftc.gov/sites/default/files/2019-03/enfadvisoryselfreporting030619.pdf.
12 Id. at 1.
13 Id. at 1-2.
14 Id. at 2.
15 Id. at 1 n.1.
17 U.S. Depâ€™t of Justice, Criminal Division, Fraud Sectionâ€™s FCPA Enforcement & Guidance (Apr. 5, 2016), https://www.justice.gov/
archives/opa/blog-entry/file/838386/download. For additional information about the DOJ policy, please see our previous client
alert, DOJ Expands and Codifies Policy Incentivizing Corporations to Voluntarily Self-Disclose FCPA Violations (Nov. 30, 2017),
18 United States Attorneysâ€™ Manual, Insert No. 9-47.120, FCPA Corporate Enforcement Policy, at 1 (Nov. 29, 2017),
https://www.justice.gov/criminal-fraud/file/838416/download (Corporate Enforcement Policy).
19 March Press Release. In addition to the DOJ and SEC, the CFTC may also coordinate on foreign corruption matters with
international regulators such as the UK Serious Fraud Office, the UKâ€™s key anti-corruption enforcement authority. See U.K.
Serious Fraud Office, Matthew Wagstaff, Joint Head of Bribery & Corruption, speaking at The Lawyerâ€™s Managing Risk and
Litigation 2018 Conference (Nov. 21, 2018), https://www.sfo.gov.uk/2018/11/21/current-priorities-and-future-directions/ (noting
that the SFO is â€œcharged with investigating and prosecuting cases of serious or complex fraud, bribery and corruption and
associated money laundering,â€ that this â€œremains, very clearly, our focus,â€ and that â€œitâ€™s important that we work alongside other,
similar, agencies, both here and abroadâ€).
20 In the most recent Congressional appropriations, the CFTC received a 7.6% budget increase â€“ its first in several years â€“ but the
agencyâ€™s total annual appropriation of $268 million remains approximately 16% of the SECâ€™s budget and less than 1% of the
DOJâ€™s budget. See Alison Noon, In Spending Plan, CFTC Gets Funding Boost, SEC Can Move, Law360 (Feb. 15, 2019),
https://www.everycrsreport.com/files/ 20180502_R44938_776ac0838068ddc265bbe3404cd52faae7b3441d.pdf (reporting a total
annual budget of $268 million for the CFTC and $1.675 billion for the SEC); Congressional Research Service, FY2018
Appropriations for the Department of Justice, at 2 (May 2, 2018) https://www.everycrsreport.com/files/
20180502_R44938_776ac0838068ddc265bbe3404cd52faae7b3441d.pdf (â€œFor FY2018, DOJ received a total of $30.384 billion
in funding through the annual appropriations process.â€).
21 McDonald Remarks, at 1; March Press Release.
22 McDonald Remarks, at 2.
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23 â€œ[F]rom 2009 to 2017, the CFTC, on average, brought about six [market integrity] cases per year,â€ but in 2018 filed 26 such
cases. Speech of CFTC Enforcement Director James M. McDonald Regarding Enforcement Trends at the CFTC, NYU School of
Law: Program on Corporate Compliance & Enforcement, at 3 (Nov. 14, 2018), https://www.cftc.gov/PressRoom/
SpeechesTestimony/opamcdonald1 (McDonald November 2018 Speech); see also CFTC, Annual Report of the Division of
Enforcement, at 10 (Nov. 2018) (noting that recent market integrity cases have involved facts that â€œcross markets, cross
exchanges, and even cross international bordersâ€), https://www.cftc.gov/sites/default/files/2018-
11/ENFAnnualReport111418_0.pdf (CFTC 2018 Annual Report).
24 The Division recently announced a task force on spoofing and manipulative trading to advance its work in such cases. CFTC
2018 Annual Report, at 5. The CFTC has also recently filed insider trading cases based on new authority embodied in the Dodd-
Frank Act and related CFTC regulations. See, e.g., CFTC Press Release No. 7459-16, CFTC Orders Jon P. Ruggles to
Disgorge More than $3.5 Million in Trading Profits and Pay a $1.75 Million Penalty for His Illegal Futures and Options Trading
(Sept. 29, 2016), https://www.cftc.gov/PressRoom/PressReleases/pr7459-16. As the focus of another new task force, see CFTC
2018 Annual Report, at 6, insider trading and protection of confidential information may also be another avenue the Division
explores in regard to foreign corrupt practices.
25 See McDonald November 2018 Speech, at 6; CFTC 2018 Annual Report, at 6.
26 McDonald Remarks, at 1.
27 The Second Circuit recently cabined DOJâ€™s international reach under the FCPA in United States v. Hoskins, 902 F.3d 69, 97 (2d
Cir. 2018) (holding that DOJ could not â€œexpand the extraterritorial reach of the FCPAâ€ using conspiracy and accomplice liability).
The international reach of the CEA has also been the subject of recent judicial rulings, in the context of private causes of action
under Section 22 of the CEA. See, e.g., Choi v. Tower Research Capital LLC, 890 F.3d 60, 66-68 (2d Cir. 2018) (holding that
â€œplausible allegations that parties to a transaction subject to the CEA [had a meeting of the minds] in the United States suffice to
overcome a motion to dismiss CEA claims on territoriality groundsâ€); Loginovskaya v. Batratchenko, 764 F.3d 266, 272-75 (2d
Cir. 2014) (holding the â€œdomestic transactions testâ€ applied to CEA claims such that the â€œCEA creates a private right of action for
persons anywhere in the world who transact business in the United Statesâ€); In re North Sea Brent Crude Oil Futures, 256 F.
Supp. 3d 295, 309-10 (S.D.N.Y. 2017) (holding that a domestic transaction â€œis not alone sufficient to state a properly domestic
claimâ€ under the CEA where the claims are â€œso predominantly foreignâ€ that individuals and entities would be â€œsubject to multiple,
and potentially incompatible lawsâ€).
28 For additional discussion of strategic considerations in cooperating with the CFTC Division of Enforcement, see our previous
article, CFTC Self-Reporting Policy Leaves Open Several Questions, Law360 (Oct. 5, 2017), https://www.law360.com/articles/
29 McDonald Remarks, at 2. Over the past few years, the CFTC has issued several large whistleblower awards, including a recent
award of $2 million in March 2019 and the agencyâ€™s largest ever award of $30 million in July 2018. See CFTC Press Release
No. 7882, CFTC Announces Whistleblower Award Totaling More Than $2 Million (Mar. 4, 2019), https://www.cftc.gov/
PressRoom/PressReleases/7882-19; CFTC Press Release No. 7753-18, CFTC Announces Its Largest Ever Whistleblower
Award of Approximately $30 Million (July 12, 2018), https://www.cftc.gov/PressRoom/PressReleases/7753-18. The CFTCâ€™s
Whistleblower Program provides financial incentives to report misconduct by awarding eligible whistleblowers ten to thirty
percent of total resulting penalties. For additional information, see our previous article, Whistling a Common Tune: CFTC
Finalizes Rule Amendments to Provide Greater Protection and Clarify Incentives for Whistleblowers, Corporate Counsel (June
12, 2017), https://www.lw.com/thoughtLeadership/whistling-common-tune.
30 In July 2018, the CFTC publicized an award of over $70,000 to a whistleblower living in a foreign country, â€œsignal[ing] to
whistleblowers around the world that anyone with information about potential violations of the [CEA] can participate in the
CFTCâ€™s Whistleblower Program.â€ CFTC Press Release No. 7755-18, CFTC Announces First Whistleblower Award to a Foreign
Whistleblower (July 16, 2018), https://www.cftc.gov/PressRoom/PressReleases/7755-18.