WASHINGTON — Commodity Futures Trading Commission Acting Chairman Caroline D. Pham today announced the Commission is amending its Rules of Practice and its Rules Relating to Investigations. The amended Rules of Practice enhance the transparency of the Commission’s enforcement actions, including changes to ensure an accurate and complete administrative record by improving internal memoranda to the Commission when the Division of Enforcement recommends an enforcement action. The amended Rules Relating to Investigations enhance due process when the Division of Enforcement notifies persons who may be named in an enforcement action (Wells process), ensuring that notice of potential charges and relevant facts supporting the allegations are provided.
“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.”
The revisions fall into five categories: (1) revisions to Part 10 to clarify the definition of adjudicatory proceedings; (2) revisions to Part 10 removing references to regulations that are no longer effective and to communications by facsimile machine; (3) revisions to Part 10 to clarify that the Commission can accept an offer of settlement by an order; (4) revisions to Part 10 establishing certain requirements for the form of the recommendation memorandum that the Division provides to the Commission when recommending that the Commission accept an offer of settlement; and (5) revisions to Appendix A to Part 11 detailing the procedures when the Division chooses to inform persons who may be named in an enforcement proceeding of the nature of the allegations pertaining to them (Wells notice), as well as the procedure to be followed by such persons in submitting a written response to the Division (Wells submission), including expanding the time to respond to no less than 30 days rather than14 days as required by prior versions of Appendix A.
The amended rules are effective on the date of their publication in the Federal Register.