A CFTC Wells notice is a formal notification from the Commodity Futures Trading Commission (CFTC) indicating that its staff is recommending an enforcement action. The same process is used by the Securities and Exchange Commission.
While not determinative, in the past, a Wells notice was viewed as indicating that the individual or entity would soon be under the regulator’s scrutiny.
Yesterday, the acting Chair of the CFTC, Caroline D. Pham, said she intended to amend the rules that guide the Wells process.
Pham stated:
“As I have said before, the CFTC has nearly boundless discretion to investigate and prosecute violations of the law, and our sanctions and penalties are rarely challenged. That is why, for over 3 years, I have called for the CFTC to uphold the highest standards of integrity, diligence, and excellence in our enforcement actions to maintain the public’s trust in the CFTC’s ability to oversee our markets with fairness and in service to justice. Today, I am announcing improvements to our CFTC Rules of Practice and Rules Relating to Investigations to make much-needed reforms to our enforcement program and the Wells process. These reforms ensure due process, such as providing a proper Wells notice and discontinuing the practice of ‘secret’ charges, and providing a minimum of 30 days—instead of as little as 2 days in the past—to make a Wells submission that is shared with the Commission promptly. Most importantly, these reforms ensure that the Division of Enforcement’s memos to the Commission are objective, consistent with applicable rules of professional conduct, comprehensive in addressing the law and facts, and supported by citations to evidence. Taken together, these reforms will end lawfare so that all are treated fairly with respect for basic rights in CFTC enforcement actions. The Commission must be an objective finder of fact and neutral arbiter of law that respects the Constitution and Constitutional rights. There must be no bias in the administration of justice and due process.”
Concerns regarding overly aggressive actions by financial regulators were prolific during the Biden Administration. SEC Chairman Paul Atkins recently said the disclosure regime has been weaponized in the past, indicating his intent to review the enforcement and compliance process.
Regarding the CFTC, the updated rules become effective on the date of publication in the Federal Register.
