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“This Is Wrong” And “Callous” – CFTC Commissioner Unleashes On Enforcement Action Based On Record Keeping Issues During The Height Of Covid


This post has little to do with the Foreign Corrupt Practices Act specifically.

However, during the early months of Covid in Spring 2020, this post highlighted how the standard in the FCPA’s internal controls (and books and records) provisions is “reasonable” and that “reasonable” (a term used throughout the law) contemplates a variety of factors including the circumstances in which conduct occurs.

Given that FCPA scrutiny tends to last 4 years on average – and given that conduct giving rise to FCPA scrutiny tends to be up to 5-10 years old – this site has more than once “wondered” how FCPA internal control and/or books and records “deficiencies” will be viewed in future FCPA enforcement actions for the general time period March 2020 – 2021 (or perhaps even 2022).

If this recent Commodities Futures Trading Commission (CFTC) enforcement action against Goldman Sachs is any indication, the answer is the government may not care about the real-world conditions during that time period.

In the enforcement action – which Goldman agreed to resolve by paying a $5.5 million penalty – the CFTC found (as stated in its press release).

“In November 2019, the CFTC entered an order that found Goldman failed to record the phone lines of a trading and sales desk for 20 calendar days in January and February 2014, after its recording hardware malfunctioned following a software patch. The CFTC ordered Goldman to pay a $1 million civil monetary penalty and to cease and desist from further violations of CFTC recordkeeping provisions.

The order entered today finds that, following the issuance of the November 2019 order, Goldman had additional recordkeeping failures, in violation of the cease-and-desist provision of the earlier order. Specifically, Goldman used a vendor service to record calls made on mobile devices. Beginning in March 2020, increased use of the vendor’s recording service during the pandemic led to increased failures in the vendor’s hardware. As a result, Goldman failed to fully record and retain thousands of mobile device calls. Goldman discovered the issue when investigating reports of poor call quality from employees using the recording service. An interim fix was implemented in May 2020, and the vendor’s hardware was replaced with an alternative system in September 2020. 

Separately, beginning in March 2020, Goldman began using software from another vendor that was designed to replicate the experience of a hard-wired trading turret—a specialized phone setup used to facilitate trading—via a computer. In late May 2020, Goldman discovered a software issue where the system sometimes failed to properly record audio. As a result, Goldman failed to fully record and retain thousands of calls. After implementing an interim fix, a permanent fix in the form of a software update was completed in June 2022.”

The CFTC enforcement action drew a blistering dissent from Commissioner Caroline Pham (pictured).

She stated in pertinent part:

“I respectfully dissent from the order and settlement in the administrative proceeding In re Goldman Sachs & Co. LLC, because I believe that this enforcement action is fundamentally unfair, unjust, and does not best serve the public interest.  Based on my review of the record, I believe that this enforcement action is wrong—we are not doing the right thing here on vendor issues arising out of the unprecedented move to remote work because of the COVID-19 pandemic, and I cannot support it.


I believe that this enforcement action and civil monetary penalty is a callous approach to the challenges and unspeakable human tragedy of the COVID-19 pandemic, and the near-overnight switch to remote work that was required due to civil and criminal quarantine laws and other restrictions imposed by governments everywhere as the world struggled to combat the spread of infection and disease.

Regulations never contemplated and were never designed for remote work, and some were even impossible to comply with under the circumstances (such as physical or location-based requirements).  The shift to remote work created extensive compliance challenges for our registrants that I do not think the Commission or the staff neither comprehend nor appreciate.

I do not doubt that hundreds of thousands of people in operations, technology, finance, risk, compliance, legal, regulatory, Human Resources, and other control function personnel across the industry and across the world, all rose to the occasion and worked valiantly and around-the-clock to design and implement new technology solutions, procedures, and processes to comply with regulatory requirements. These new compliance solutions took time to implement, and as unforeseen issues popped up, might have needed additional fixes. Many, many of these personnel did all this during personal upheaval to their lives and while working remotely themselves, as team members, colleagues, family, and friends died from COVID.

Every government authority and regulator around the world provided temporary relief or forbearance from regulatory requirements in light of the pandemic and devastating impact to business, including the CFTC and other U.S. regulators. But I am not aware of any regulator in any public consent order imposing sanctions and penalties for one-off, non-material operational or technical issues arising from the pandemic—especially for the use of vendors to support remote work. It will only be the CFTC with that dubious distinction and disregard for the human reality.

That is why I think this is wrong.


Knowing when to have compassion is a strength in leadership.  The Commission has nearly boundless discretion in exercising its prosecutorial authority in bringing enforcement actions, and is rarely challenged in imposing administrative sanctions and penalties.  I am saddened and disappointed by the choices made and the approach to the facts in this case for two separate and unrelated vendor issues arising out of the COVID-19 pandemic, both of which are wholly separate and unrelated to the non-material and limited internal systems recording issue in 2019.

The Commission is not in the right here. While I recognize the efforts of the Division of Enforcement, I cannot support this action, and I must respectfully dissent.”

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