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U.S. derivatives regulator vows leniency if companies self-report wrongdoing
September 25, 2017 / 11:54 PM / 3 months ago

U.S. derivatives regulator vows leniency if companies self-report wrongdoing

WASHINGTON (Reuters) - The top U.S. derivatives regulator plans to encourage companies and individuals to report their own wrongdoing and cooperate with investigators in return for more lenient penalties, the watchdog’s director of enforcement said on Monday.

In his first major speech since being appointed in March, James McDonald offered the first major insight into how derivatives dealers can expect to be policed by the Commodity Futures Trading Commission (CFTC) under the Trump administration.

The shift in strategy follows criticism from industry executives and lawyers who say the CFTC has severely penalized firms even when they have fully cooperated in investigations.

The CFTC’s new “cooperation and self-reporting” enforcement program will focus on deterring white-collar crime by giving companies and individuals incentives to voluntarily comply with the law, McDonald said during a speech at New York University.

“We recognize that no matter how much corporate leaders may want to foster compliance within the company, when they detect misconduct, their decision whether to voluntarily report it often comes down to a business decision - to dollars and cents,” said McDonald.

“What’s the risk that, if we don’t report, regulators will detect it? If they detect it, how much might we get fined? We at the CFTC want to shift this analysis in favor of self-reporting.”

Under the program, companies that voluntarily and promptly report their wrongdoing, cooperate with the CFTC throughout the investigation and take swift action to remediate the problem can expect speedier settlements, substantially reduced penalties and in rare cases no prosecution at all, said McDonald.

Previously a prosecutor in the Southern District of New York, McDonald said the program in no way offered a free pass to companies but instead aimed to apply methods successfully used to prosecute gangs and organised crime to the world of corporate misconduct.

“It’s geared toward enabling us to identify all of those involved in the wrongdoing, and to prosecute the individuals who committed the wrongful acts. From an enforcement standpoint, this self-reporting and cooperation program is one of the most aggressive tools we have in our bucket.”

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