Why the CFTC's 'Ready, Shoot, Aim' Days are Over

This week, the Commodity Futures Trading Commission (CFTC) Acting Chair, Caroline D. Pham, announced significant reforms to its internal Rules of Practice and Rules Relating to Investigations. These changes represent a decisive shift in how the CFTC's Division of Enforcement (DOE) operates, moving from opaque and unpredictable to transparent and disciplined.

The reforms are the culmination of Acting Chair Pham’s long-standing critique of the CFTC's enforcement approach. You may recall her infamous "ready, shoot, aim" rebuke in a 2023 dissent, where she called out the agency's failure to ensure robust legal review and an administrative record sufficient for reasoned determinations. Since her appointment as Acting Chair in January, she wasted no time in restructuring the Division of Enforcement and is now delivering on a commitment to due process.

The Actionable Intelligence: What Has Changed?

The rule revisions fall into five critical categories, but the most immediately actionable intelligence for energy and commodities firms relates to the Wells process.

The Wells process is the procedural step used by U.S. federal regulators like the CFTC to provide notice to prospective enforcement targets, giving them an opportunity to respond before a formal action is brought.

• No More "Secret Charges": The reforms are designed to stop the practice of initiating "secret" charges.
• A Guaranteed 30-Day Response Window: Crucially, the time to respond to a Wells notice is expanded to no less than 30 days, a significant change from the two-day windows some firms were given in the past.
• Mandated Objectivity: Memos provided to the Commissioners must now be "objective, consistent with applicable rules of professional conduct, comprehensive in addressing the law and facts, and supported by citations to evidence". This is designed to create a clear, auditable compliance record for the highest level of decision-making.

The Compliance Imperative for Energy & Commodities

The guarantee of 30 days to respond under the Wells process affords compliance and legal teams much-needed breathing room to gather data, perform the necessary internal investigations and formulate accurate and legally robust responses.

Next Steps

Naturally, questions remain about the broader state of the CFTC. RegTrail will continue to track this topic, delivering specific intelligence that drives better decision-making and operational advantage.

RegTrail’s platform-enabled solutions ensure that your internal surveillance and compliance records are not just ticking a box but are designed for decisive action and clarity when scrutiny hits. These reforms validate the urgent need for a partner that replaces manual, reactive chaos with a robust, compliant, and scalable operational system.