The trend of escalating penalties for derivatives and commodities market abuse violations continued in 2020. Civil monetary penalties exceeding $100 million have become commonplace for serious corporate violations. Moreover, the DOJ routinely conducts criminal investigations in parallel with the CFTC, levying its own very large penalties against corporate targets and seeking convictions and incarceration for individuals. On February 2, the CFTC increased the maximum civil monetary penalties it can seek for violations of the Commodity Exchange Act and the Commission's rules and regulations. However, as explained below, it has also become apparent in recent years that charges and penalties can be mitigated by having in place a well-designed compliance program, and through early detection and remediation of potential violations and cooperation with the authorities. In light of these benefits as well as the ever-increasing penalties, these new figures should serve as a reminder to organizations of the importance of having proper systems in place to prevent and detect misconduct.
To do this effectively, companies must continue to evaluate their compliance functions, and must ensure they have mechanisms in place for investigating, reporting, and remediating misconduct once identified, in line with the CFTC's and DOJ’s guidelines (see our September 2017 and September 2020 client briefings). For further detail, please consult our Guide to United States, United Kingdom, and Hong Kong Derivatives and Commodities Market Enforcement Regimes, and for those facing the prospect of a government inquiry, our guide to Responding to a U.S. Government Investigation in the Derivatives and Commodities Markets.
Clifford Chance offers risk-assessment services to companies who trade in the commodities and derivatives markets, as well as expedited preliminary investigations. For more information about these services, please reach out to any of the contacts listed below.