Amendments to CFTC Rules of Practice and Rules Relating to Investigations

<RULE> COMMODITY FUTURES TRADING COMMISSION <CFR>17 CFR Parts 10 and 11</CFR> <RIN>RIN 3038-AF44</RIN> <SUBJECT>Amendments to CFTC Rules of Practice and Rules Relating to Investigations</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Commodity Futures Trading Commission. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Commodity Futures Trading Commission (“CFTC” or “Commission”) is amending its Rules of Practice and its Rules Relating to Investigations. The revised Rules of Practice enhance the transparency of the Commission's enforcement proceedings, specifying that the Commission can accept an offer of settlement by order of the Commission and establishing requirements for the form and content of recommendation memos provided by the Division of Enforcement to the Commission when recommending an offer of settlement. The revised Rules Relating to Investigations revise the applicable procedures when the Division of Enforcement notifies persons who may be named in an enforcement action, including that the notification or confirmation of the notice be in writing. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective on December 3, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> James G. Wheaton, Special Counsel to the Director of Enforcement, Division of Enforcement, at (646) 746-9752 or <E T="03">jwheaton@cftc.gov,</E> Commodity Futures Trading Commission, 290 Broadway 6th Floor, New York, NY 10007. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> The Commodity Futures Trading Commission is amending its rules of practice and its rules relating to investigations. The Commission is authorized to promulgate this rule under section 2(a)(12) of the Commodity Exchange Act (“the Act”). <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>  Section 2a(11), 7 U.S.C. 2a(12), authorizes the Commission to promulgate such rules and regulations as it deems necessary to govern the operating procedures and conduct of the business of the Commission. </FTNT> The revisions fall into five categories: (1) revisions in part 10 to clarify the definition of adjudicatory proceedings to include an order by the Commission instituting proceedings pursuant to the Act, making findings, and imposing remedial sanctions; (2) revisions to part 10 removing references to regulations that are no longer effective or 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 of Enforcement (“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 to be used when the Division chooses to inform persons who may be named in a proposed enforcement proceeding of the nature of the allegations pertaining to them as well as the procedure to be followed by such persons in submitting a written response to the Division. <HD SOURCE="HD1">I. Revisions to Part 10 Rules of Practice</HD> The Commission is revising part 10, Rules of Practice, in four ways. First, the Commission is revising the definition of adjudicatory proceedings in § 10.2(b) to clarify that adjudicatory proceedings under the Rules of Practice include the issuance of an order by the Commission instituting proceedings pursuant to the Act, making findings, and imposing remedial sanctions. Second, the Commission is revising § 10.1(i) to remove a reference to no longer effective provisions of part 13 of the Commission's regulations. Third, the Commission is removing references to communications by fax from §§ 10.4 and 10.12. Fourth, the Commission is revising § 10.108(d) to clarify that in lieu of adjudicatory proceedings under subpart B of part 10, the Commission may accept an offer of settlement by order instituting proceedings pursuant to the Act, and making findings and imposing remedial sanctions, and that the Commission can determine to accept an offer of settlement in lieu of an adjudicatory proceeding either by Commission meeting or by the Commission's seriatim process. To ensure that the Commission has the information necessary to evaluate a matter, the revisions require the Division to include certain information with its recommendation that the Commission accept an offer of settlement. In particular, the revisions require the Division must provide an objective memorandum that adheres to the applicable rules of professional conduct, provides a comprehensive explanation of the factual and legal foundation for the recommendation, and distinguishes unfavorable facts or legal precedents. In addition, to ensure a complete and accurate administrative record, the Division's recommendation memorandum must be supported by citations to evidence in the investigative record or to stipulations by the parties, and legal arguments must be supported by points and authorities. <HD SOURCE="HD1">II. Revisions to Part 11 Rules Relating to Investigation</HD> <HD SOURCE="HD2">Appendix A to Part 11—Informal Procedure Relating to the Recommendation of Enforcement Proceedings</HD> The Commission is making several revisions to this procedure, which applies to when the Division, in its discretion, chooses to inform persons who may be named in a proposed enforcement proceeding of the nature of the allegations pertaining to them. While the Division can decide whether it will provide such notice, the revised procedure details the requirements for such notice if given. Under the revised appendix A, the notice should be provided in writing when possible, and, if given orally, is to be followed by written confirmation. The revisions promote transparency to entities or individuals who may be named in a proposed enforcement proceeding by requiring that the written notice or confirmation of oral notice identifies the specific charges that the Division has made preliminary determinations to recommend to the Commission. The revisions also state that the Division may provide information regarding the facts and circumstances that form the basis for the recommendation by referring to specific evidence. Establishing that the Division can choose to disclose specific evidence learned during the investigation promotes transparency and enhances the Division's ability to have productive dialogues with the entity or individual who may be named. While the Division still maintains the discretion to advise entities or individuals who may be named that they may submit a written statement prior to consideration of a staff recommendation, the revised appendix A modifies the procedures surrounding such a response. The revised appendix A provides that a potential respondent shall have at least 30 days to submit a response, rather than having to submit within 14 days as required by the prior version of appendix A. The amended procedures only permit the Division to require a submission be made in a shorter period if there is both good cause and the approval of specified senior attorneys, a change from the prior version which did not explicitly require good cause. This revision is designed to ensure that respondents have adequate time to respond. The revised appendix A also states that a person submitting a written statement may request that the statement be provided to the Commission “promptly,” a requirement that may expedite consideration of the matter in some cases and, when used, may inform the Commission about the pending matter at an earlier stage than the previous Appendix A, which contemplated providing respondent responses to the Commission when the Division made its recommendation to the Commission rather than when the response was initially received. Finally, the Revision states that all written statements will be forwarded to the Commission, a change from the previous version which only required that written submissions be forwarded to the Commission upon request of the submitter. This provision helps to ensure that the Commission has an accurate and complete record on which to base decisions if the Division ultimately does recommend the commencement of an enforcement action. <HD SOURCE="HD1">III. Related Matters</HD> <HD SOURCE="HD2">A. Notice Requirement</HD> The Administrative Procedure Act (“APA”)  <SU>2</SU> <FTREF/> requires federal agencies to publish a notice of proposed rulemaking and provide an opportunity for public comment before issuing a new rule. Rules are exempt from notice and comment if they are interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice. <SU>3</SU> <FTREF/> The Commission has determined that this exception applies. These amendments apply to agency procedure and practice, as they pertain to the procedures by which the Commission settles adjudicatory proceedings, the Division of Enforcement makes settlement recommendations to the Commission, and the Division of Enforcement, in its discretion, makes persons aware of potential allegations against them. Furthermore, an agency may also issue a new rule without a pre-publication public comment period when it for “good cause” finds that prior notice and comment is “impracticable, unnecessary, or contrary to the public interest.”  <SU>4</SU> <FTREF/> If made effective immediately, these amendments to parts 10 and 11 will promote efficiency and facilitate the Commission's core mission without imposing any new burden on market participants or the public. <FTNT> <SU>2</SU>  5 U.S.C. 553 <E T="03">et seq.</E> </FTNT> <FTNT> <SU>3</SU>  5 U.S.C. 553(b)(3)(A). </FTNT> <FTNT> <SU>4</SU>  5 U.S.C. 553(b)(3)(B). </FTNT> <HD SOURCE="HD2">B. Regulatory Flexibility Act</HD> The Regulatory Flexib ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 24k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━