For many years regulators have publicly stated, “Firms that ‘self-report’ violations will receive a milder punishment.” Similarly, regulators expect that all firms cooperate with investigations, but have noted that, “Providing material aid to investigators can result in softer penalties.” These statements have, justifiably, been met with skepticism from the industry. No company wants to call attention to itself when there is no indication that they are even on the government’s radar. Is it a prudent business decision to self-report, all but ensuring an investigation and fines, in exchange for the government dangling a potentially softened penalty? What company in their right mind would take that bait?
Now, the CFTC has released its “Mitigation Credit Matrix” [1] which puts specific numbers to the previously undefined benefits of self-reporting. This release shows the CFTC’s willingness to take a seat at the table and engage with those companies which take their in-house compliance programs seriously.
Companies can now weigh the potential benefit of making an “Exemplary Self Report” and providing “Exemplary Cooperation” , a presumptive 55% mitigation credit vs. “No Self-Report” and “No Cooperation”, a presumptive 0% mitigation credit. While the CFTC Release[2] specifically notes that it retains the discretion to deviate from the Mitigation Credit Matrix given the unique facts and circumstances of a particular case, the industry finally has information from which it can evaluate the risks and benefits of proactively engaging with regulators.
The decision to self-report a violation should not be taken lightly, and organizations that have not implemented robust compliance programs are likely unable to make an “Exemplary Self Report” or provide “Exemplary Cooperation” to regulators. Whether you are weighing the decision to self-report or are just getting your compliance program off the ground, the attorneys at Cosgrove Simpson can help.
[1] file:///C:/Users/msimp/Downloads/EnfAdv_Resolutions022525.pdf
[2] https://www.cftc.gov/PressRoom/PressReleases/9054-25?utm_source=govdelivery