Receiving a subpoena from the U.S. Commodity Futures Trading Commission often causes panic by the recipient given the civil and criminal penalties associated with Commodities Exchange Act violations.  The recipient may have no advance notice of the subpoena and may be unaware if they are a target of the CFTC’s investigation or merely an individual or company that possesses records of interest to the government.  This blog post outlines appropriate steps to take upon receipt of a CFTC subpoena.

CFTC’s Information Gathering Process

The Staff of the CFTC is empowered to initiate investigations of persons and companies suspected of having violated the Commodity Exchange Act.  The Staff generally receives documents from voluntary productions and use of compulsory process (meaning, the issuance of subpoenas).  Any request for a voluntary interview or the voluntary production of documents requires serious consideration and consultation with counsel.  The Staff’s reach can extend internationally.  The CFTC has Memoranda of Understandings with various foreign authorities, which enables the CFTC’s staff to obtain documents without resort to use of subpoena power.

Action Steps Upon Receipt of a Subpoena

  1. Preserve all records and gather responsive documentation
  2. Alter all need-to-know employees (in-house counsel and certain officers) and issue a litigation hold
  3. Confer with experienced counsel
  4. Assess any potential liability under the applicable statutes and regulations
  5. Counsel should obtain the Formal Order of Investigation
  6. Counsel should consider conferring with the Staff of the CFTC in an effort to limit the scope of the subpoena where appropriate
  7. Assess with counsel whether an internal investigation is appropriate
  8. Review collected documents for responsiveness, privilege and confidentiality
  9. Assess with counsel whether any targeted employee should have independent counsel
  10. Determine any objections to the scope or burden of the subpoena and whether to resist the subpoena (by motion to quash) or comply
  11. If the subpoena recipient is a public company, determine whether public disclosure is necessary

Given the number of necessary action steps, individuals and entities without in-house counsel are often disadvantaged by going it alone.  Herskovits PLLC has a nationwide practice representing individuals and entities which are subject to CFTC investigations.  Feel free to call us at 212-897-5410 with any questions concerning a CFTC subpoena or request for information.

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