CFTC Enforcement Division Outlines Criteria for Criminal Referrals to DOJ

The Commodity Futures Trading Commission's (CFTC) Division of Enforcement has issued an advisory outlining guidance for handling criminally liable regulatory offenses in accordance with Executive Order 14294, "Fighting Overcriminalization in Federal Regulations." The advisory establishes the formal framework that staff within the Division of Enforcement (DOE) must follow when deciding whether to refer alleged regulatory violations to the U.S. Department of Justice (DOJ). Under the newly announced guidance, enforcement staff are directed to evaluate several specific factors before initiating a criminal referral. These criteria include the actual or potential harm—financial or otherwise—resulting from the alleged offense, alongside any potential illicit gains obtained by the subject. Staff must also consider the background of the alleged defendant, specifically examining whether they possessed specialized industry knowledge, expertise, or relevant professional licensing related to the violated rule. Furthermore, staff will review available evidence concerning the party's general awareness of the unlawfulness of their actions and their understanding of the specific regulation at issue. Additional referral considerations include whether the individual or entity has a history of recidivism or has engaged in an ongoing pattern of misconduct, as well as whether DOJ intervention would provide meaningful, additional protection to participants across the derivatives markets. The advisory was released pursuant to section 7 of Executive Order 14294 in lieu of Federal Register publication, with the CFTC noting that there is currently no majority vote from the Commission to authorize publication in the Federal Register.