How Poor Voice Recording Controls Led to a $650,000 CFTC Penalty - and How Regulated Firms Can Avoid the Same Mistake
Learn why the CFTC fined a firm $650,000 for recordkeeping failures and how to prevent communications recording compliance breaches.
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Introduction
In late September 2024, the U.S. Commodity Futures Trading Commission (CFTC) issued an enforcement order against a registered futures commission merchant for widespread recordkeeping failures that resulted in thousands of missing customer call recordings1. The Commission found that, over several years, the firm failed to capture or retain roughly 3,000 audio recordings of calls that included trading instructions, quotes, and other communications relating to commodity transactions - in clear violation of Section 4g(a) of the Commodity Exchange Act and CFTC Regulations 1.31(b)(2)2 and 1.35(a)(1)(iii)3.
Although the enforcement order also addressed unauthorized trading activity, this post focuses on the recordkeeping aspect, where technical deficiencies in multiple voice recording systems caused significant compliance lapses.
CFTC Regulations 1.31 and 1.35
CFTC Regulation 1.31 establishes the standards for how regulated entities must store, retain, and produce records under the Commodity Exchange Act (CEA). It applies to all required records - including electronic and oral communications - that relate to trading, customer orders, or other regulated activity.
Originally adopted decades ago, the rule was modernized in 2017 to reflect modern technology. The update made the regulation technology-neutral, emphasizing principles such as authenticity, integrity, confidentiality, accessibility, and searchability rather than prescribing specific media (like microfilm or paper).
Under § 1.31(b)(2), firms that are required to retain oral communications must keep them for at least one year from the date of the communication, while most other regulatory records must be retained for five years, with the first two years readily accessible. Records must be retrievable and available promptly for inspection by the CFTC or the Department of Justice.
In short, Regulation 1.31 ensures firms can demonstrate what was said, when, and by whom - a foundation of compliance and a frequent focus in CFTC enforcement actions.
Regulation 1.35(a)(1)(iii) further requires futures commission merchants (FCMs), introducing brokers (IBs), and certain swap dealers and members of designated contract markets or swap execution facilities to record and retain all oral communications that lead to the execution of a commodity interest transaction or a related cash or forward transaction.
This includes telephone calls and electronic voice communications concerning quotes, solicitations, bids, offers, instructions, trading, or prices. These recordings must be retained for at least one year and be readily accessible for regulatory inspection.
The purpose of Regulation 1.35 is to ensure a complete audit trail - allowing regulators to reconstruct the circumstances surrounding any trade. Missing or incomplete recordings, even when caused by technical or system failures, constitute a recordkeeping violation under Section 4g(a) of the CEA and Regulations 1.31 and 1.35.
What the CFTC Found
Between 2019 and 2023, the firm relied on several different telephony and collaboration systems - including traditional phone recording platforms and enterprise communication tools - to capture regulated voice communications. According to the CFTC’s findings:
- Over 400 calls were lost due to platform failures in one system.
- More than 2,000 calls were not recorded because of software updates and patching issues in another platform.
- Nearly 500 calls went unrecorded when an associated person (AP) forwarded calls to a personal mobile device that bypassed recording altogether.
In each case, the missing recordings included conversations that could have contained trading instructions, bids, offers, or prices - all of which must be recorded and retained for at least one year under CFTC rules.
The Commission concluded that the firm “neither made nor kept” the required recordings, constituting violations of both the Act and the associated recordkeeping regulations.
The Penalty
As part of a settlement, the CFTC ordered the firm to cease and desist from further violations and to pay a civil monetary penalty of $650,000. The order also recognized that the firm had self-reported the issue, cooperated during the investigation, and taken remedial actions to prevent recurrence - factors that likely mitigated the penalty amount.
Lessons for Regulated Firms
This enforcement action underscores that technical failures are not an excuse for recordkeeping deficiencies. The CFTC expects firms to ensure that their recording systems are robust, continuously monitored, and configured to capture all required communications - across all channels and devices.
Here are several takeaways for compliance and IT leaders in regulated environments:
- Centralize Recording Across Platforms
Firms increasingly use unified communications platforms like Microsoft Teams alongside legacy systems. If these environments are not consistently captured under a unified recording policy, calls can slip through the cracks - especially when users forward calls or use mobile devices. - Implement Automated Monitoring and Alerts
Recording systems should provide real-time health checks and alerting for failed sessions, license expirations, or integration issues. Early detection can prevent weeks or months of unrecorded activity. - Avoid Reliance on End-User Behavior
Compliance should not depend on users remembering to initiate recordings or use specific devices. Policies and technology must enforce recording automatically, regardless of call routing or device type. - Ensure Retention and Accessibility
Even when recordings are successfully captured, retention must comply with CFTC Regulation 1.31(b)(2) - at least one year for oral communications related to transactions - and be accessible for prompt retrieval in case of regulatory inspection.
How Reliable Microsoft Teams Archiving Can Help
Modern regulated firms can mitigate these risks by using a dedicated Microsoft Teams archiving solution that ensures:
- Automatic capture of all Teams voice and video calls, chats, and meetings relevant to trading or client interactions.
- Tamper-proof storage in immutable, compliant archives.
- Centralized retention policies aligned with CFTC and SEC requirements.
- Proactive monitoring to detect and alert on recording or ingestion failures in real time.
- Audit-ready access for supervisors and regulators.
A purpose-built Teams archiving system such as Argus Archive can close the compliance gap exposed in this enforcement case. By ensuring all communications are automatically captured and securely retained in accordance with CFTC rules, firms can prevent costly regulatory breaches and strengthen overall governance of their digital communications environment.
Final Thoughts
The CFTC’s $650,000 penalty demonstrates the serious consequences of failing to maintain accurate and complete communication records. In an era when regulated firms rely heavily on digital collaboration tools, recordkeeping compliance is only as strong as the weakest integration.
With automated and resilient communication archiving - particularly for platforms like Microsoft Teams - firms can confidently meet their recordkeeping obligations and avoid becoming the next cautionary example in an enforcement order.
