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The Commodity Futures Trading Commission has been determining fines in the same way since people were still debating the relative merits of Excel and Lotus 1-2-3. (That’s since 1994, for those of you who’ve never heard of the latter.) Which is to say that it’s been pulling numbers out of nowhere in roughly the same way for long enough for the range of apparently baseless figures pushed across the table during negotiations to become embarrassingly large. And since it’s been letting the Justice Department do most of its work for it lately, it thought it might give the old rules a bit of a brush up, in the name of transparency.

The memo outlines several broad categories of factors to consider, such as the gravity of the violation and mitigating and aggravating circumstances. With respect to the gravity of a violation, the memo directs staff lawyers to consider the number, duration and degree of the infraction, among other factors.

Mitigating or aggravating conduct could include whether a company or individual self-reported or took steps to prevent future infractions. The memo also says staff lawyers can consider factors such as the conservation of the CFTC’s resources.

But not too much transparency: The CFTC isn’t losing all of its Bart Chilton-esque jazzy ways.

The guidance doesn’t elaborate on how the agency calculates the number of violations in cases alleging market manipulation or other types of misconduct related to the derivatives and commodities markets, lawyers for the law firm Skadden, Arps, Slate, Meagher & Flom LLP said in a client message….

“The goal of this document is not that you plug the conduct into a formula and it spits out a number,” [CFTC staff enforcement director James McDonald] said.

Which is just as well, because there’s no way the CFTC could afford to build a system to make that happen.

Penalty Guidance Gives Companies More Transparency, CFTC Official Says [WSJ]


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