For years, the Commodity Futures Trading Commission (CFTC or Commission) has exercised broad discretion in investigating and prosecuting potential violations of the law, with its sanctions and penalties infrequently subject to challenge. The industry has long criticized this process as being opaque and lacking fairness. Joining the chorus of critics, CFTC Acting Chairman Caroline D. Pham has been vocal about her objections to the Commission’s prior enforcement practices, emphasizing the need for higher standards of integrity, diligence and excellence in enforcement actions to maintain public trust.
To address these longstanding criticisms, the CFTC published amendments to Rule of Practice and Rules Relating to Investigations (the Amendments) on December 1, 2025, to improve transparency, fairness and the preservation of constitutional rights in the Commission’s enforcement procedures.[1] By clarifying certain procedures, expanding response times and ensuring objectivity in internal recommendations, the CFTC is taking concrete steps to uphold the integrity of its enforcement program and restore public confidence in its oversight of US derivatives markets.
The following is Katten’s forward-looking analysis of the Amendments, which unpacks critical enhancements to the Commission’s Wells Process, extended response timelines and reinforced due process protections, as well as the internal process reforms designed to elevate transparency and objectivity in CFTC investigations and enforcement actions.
Key Amendments to the Rules of Practice
The Amendments represent a comprehensive effort to address the concerns noted above and to modernize the agency’s enforcement framework. The Amendments fall into five main categories:
- revising procedures for notifying individuals or entities who may be named in enforcement actions, including the Wells process;
- clarifying (and, in effect, materially broadening) the definition of adjudicatory proceedings to capture certain actions, including (a) Commission orders instituting proceedings pursuant to the Commodity Exchange Act, (b) Commission findings, and (c) Commission-imposed remedial sanctions;
- establishing new requirements for the form and content of recommendation memoranda from the CFTC’s Division of Enforcement (Division);
- removing references to outdated regulations and obsolete communication methods; and
- clarifying the Commission’s authority to accept settlement offers by order.
Enhancements to the Wells Process
A central focus of the Amendments is the reform of the Wells process, which governs how the Division notifies individuals or entities that may be subject to enforcement action. The Amendments now require that notice of potential charges and the relevant facts supporting those allegations be provided in writing whenever possible, with oral notices to be promptly confirmed in writing. The written notice must identify the specific charges the Division has made a preliminary determination to recommend to the Commission and may refer to specific evidence supporting the recommendation. This change is intended to end the practice of “secret” charges and ensure that those potentially subject to enforcement action are fully informed of the allegations against them.
The Amendments also significantly expand the time allowed for recipients of a Wells notice to respond. Previously, individuals or entities had as little as two days — and in some cases, only 14 days — to make a Wells submission. Under the Amendments, a minimum of 30 days is provided for such responses, unless good cause is shown and approved by senior Division attorneys. This ensures that respondents have adequate time to prepare a thorough and meaningful submission.
Acting Chairman Pham highlighted the importance of this change. She noted that “[t]hese 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”.[2]
Objective and Comprehensive Internal Memoranda
Another major reform is the requirement that the Division’s recommendation memoranda to the CFTC be objective, comprehensive and consistent with applicable rules of professional conduct. As a result of the Amendments, these memos must now provide a thorough explanation of the factual and legal basis for the recommendation, distinguish unfavorable facts or legal precedents and be supported by citations to evidence in the investigative record or stipulations by the parties. Legal arguments must be supported by points and authorities. This change is a significant departure from prior practice, which did not require the Division to preview or discuss unhelpful facts or law that may favor the recipient of a Wells notice. This change is intended to ensure an accurate and complete administrative record and to prevent bias in the CFTC’s decision-making process.
Transparency and Fairness in Enforcement Proceedings
The Amendments also require that all written statements submitted in response to a Wells notice be forwarded to the full Commission, not just upon the submitter’s request, as was previously the case. The Amendments also permit the recipient of a Wells notice to request that their response be “promptly” provided to the Commission, which could expedite the resolution of the matter and also inform the Commission of the pending matter, potentially before the Division makes a charging recommendation. These changes ensure that the CFTC has a complete and accurate record when considering whether to commence an enforcement action.
Impact on the Industry, Next Steps
The Amendments collectively aim to “end lawfare so that all are treated fairly with respect for basic rights in CFTC enforcement actions,” as Acting Chairman Pham put it. She further emphasized, “[t]he 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”.
The Amendments will become effective upon their publication in the Federal Register. In short, the Amendments are expected to benefit enforcement respondents by enhancing transparency, efficiency, and due process in the CFTC’s core enforcement activities.
