April 28, 2025
CFTC staff defines “materiality” in evaluating whether self-reported violations will qualify as referrals to the CFTC’s Division of Enforcement
On April 17, 2025, the U.S. Commodity Futures Trading Commission (CFTC) issued an informational advisory (the advisory) that focuses on the definition and standard of materiality that the CFTC’s operating divisions must use to determine whether self-reported violations will qualify as referrals to the CFTC’s Division of Enforcement (the DOE).
The advisory follows the February 2025 guidance, which addressed self-reporting, cooperation and remediation, and identified factors to be considered when imposing penalties for registrants and registered entities that self-report or co-operate.
According to the advisory, the CFTC’s Market Participants Division, Division of Clearing and Risk, and Division of Market Oversight (the Operating Divisions), will refer a matter to the DoE only if it involves a “material” violation; a violation that causes harm to clients, counterparties, or market participants; undermines market integrity; or results in significant financial loss. In connection with supervision and non-compliance issues, matters will not be referred to the DoE unless the issue is material.
Staff urged registrants and registered entities that self-report to exercise judgment and report directly to the DoE in cases involving “fraud, manipulation, or abuse.”
To determine materiality, the CFTC said it would apply a reasonableness standard based on the size, the activity, and complexity of the registrant or registered entity. In addition, material violations would be defined as:
- “especially egregious or prolonged systematic deficiencies” in a compliance or supervisory system;
- “knowing or willful misconduct by management,” including efforts to conceal violations; or
- lack of “substantial progress” of a remediation plan for an unreasonably long period.
Why is this Important to Whistleblowers?
Individuals and/or Insiders who report that CFTC registrants or registered entities engaged in non-compliant and/or harmful or fraudulent business practices in violation of the Commodity Exchange Act (the CEA) should be aware of the CFTC’s new materiality guidance. The newly clarified materiality standard asserted in the advisory will apply to whistleblower claims. Whistleblower claims filed with CFTC’s Whistleblower Office must ensure that material evidence in the claim aligns with the definition of materiality stated in the advisory.
How do I report misconduct or fraud to the CFTC?
If you suspect misconduct or fraud, contact an attorney, such as a member of Cohen Milstein’s Whistleblower practice. Our experienced attorneys in this field can counsel you on the Whistleblower process and help you navigate CFTC’s Whistleblower Office’s process and required evidence. Cohen Milstein’s Whistleblower practice attorneys will guide you, step by step, in completing and filing the CFTC’s Tip, Complaint or Referral form (Form TCR).
Whistleblower Protection & Confidentially
The CFTC’s Whistleblower Program and the whistleblower attorneys at Cohen Milstein are committed to protecting the identity of whistleblowers and prohibiting retaliatory behavior by the registrant or CFTC registered entity. The integrity and success of whistleblower programs relies on the courage of individuals and/or insiders to come forward voluntarily and free of intimidation to report fraud or misconduct.
Does the CFTC offer a whistleblower award for reporting fraud or misconduct?
Yes. If your information leads to a successful CFTC enforcement action resulting in more than $1 million in monetary sanctions, you may receive an award ranging from 10-30% of monetary sanctions collected.
Where do I find more information about reporting fraud and becoming a whistleblower?
The CFTC’s Whistleblower Office provides comprehensive guidelines on reporting fraud and the whistleblower process.
You can also contact a member of Cohen Milstein’s Whistleblower practice for a confidential and free-of-charge consultation.
About the Author
Christina McGlosson, special counsel in Cohen Milstein’s Whistleblower practice, focuses exclusively on Dodd-Frank Whistleblower representation. She is the former acting director of the Whistleblower Office in the Division of Enforcement at the U.S. Commodity Futures Trading Commission. She was also a senior attorney in the SEC’s Division of Enforcement, where she assisted in drafting the SEC rules to implement the whistleblower provisions of Dodd-Frank and create the SEC’s Office of the Whistleblower. She served as Senior Counsel to the Director of the Division of Enforcement at the SEC and Senior Counsel to its Chief Economist.
Christina represents whistleblowers in the presentation and prosecution of claims of fraud or misconduct before the SEC, CFTC, FinCen, as part of the U.S. Treasury, the Department of Justice, and other government agencies.