United States: CFTC's Publication Of Largest Whistleblower Award Follows Increased Focus On Whistleblowing Initiatives

On April 4, 2016, the US Commodity Futures Trading Commission ("CFTC") announced the issuance of a whistleblower award of more than $10 million for original information that it said led to a major enforcement action over violations of the Commodity Exchange Act ("CEA"). This was just the third whistleblower award issued under the CFTC's whistleblower program and it represents a significant increase over the previous two awards (for approximately $240,000 and $290,000, respectively). The award is also the first following the disclosure in December 2015 by the CFTC's Inspector General of his review of the CFTC's whistleblower office over the limited number of awards issued when compared to a similar whistleblower program by the SEC, likely a sign of things to come.

CFTC's Whistleblower Program Overview

In 2011, the CFTC announced the opening of its Whistleblower Office, created under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank Act") and Section 23 of the CEA. Much like the more heavily publicized and talked-about whistleblower program of the Securities and Exchange Commission, under the CFTC whistleblower program, the CFTC is required to pay awards, subject to certain limitations and conditions, to whistleblowers for original information that led to a successful enforcement action1 resulting in monetary sanctions greater than $1 million. We highlight some of the key components of the CFTC whistleblower program here:

  • Original information must be based on the whistleblower's independent knowledge or independent analysis. With certain exceptions, the information cannot be derived from the public sources such as corporate filings or from protected sources such as communications subject to the attorney-client privilege. The whistleblower also cannot have obtained the information through the entity's mechanism for identifying possible violations of law or as a result of the whistleblower's compliance or internal audit responsibilities.
  • The information must be provided voluntarily to the CFTC, meaning that the information must be provided before any request, inquiry, or demand for information from the CFTC, Congress, certain other agencies, entities, or self-regulatory organizations.
  • The whistleblower is not obligated to report potential violations internally in order to qualify for the CFTC whistleblowing awards. However, to incentivize internal reporting, the CFTC allows for the whistleblower to receive credit if they choose to report internally and they subsequently report to the CFTC within 120 days; and if the company conducts an investigation and reports the results to the CFTC, the whistleblower can seek credit for the information provided by the company.
  • The total amount of a whistleblower award is set between 10 and 30 percent of any monetary sanctions collected in either the CFTC action or a related action where their information played a key role. Per its rules, the CFTC has not disclosed the exact percentage of monetary sanctions in its publication of whistleblower awards.
  • The CFTC also will pay monetary awards to eligible whistleblowers whose information leads to successful enforcements of related actions brought by other governmental entities based on information submitted to the CFTC. Notably, unlike the SEC whistleblower program, the CFTC does not bar monetary awards to a whistleblower who has previously received an award from the SEC's whistleblower system, in part due to certain statutory differences in the definition of "related actions."
  • Employers may not retaliate against whistleblowers, who are afforded protections under the CFTC whistleblower program, under Section 23 of the CEA. Although the CFTC has determined that it does not have the statutory authority to initiate an enforcement action over retaliation claims, Section 23 of the CEA provides a federal cause of action for such violations and lists potential reliefs including reinstatement, back pay, compensation for related expenses, and reasonable attorney's fees.

Current Impact of the CFTC Whistleblower Program

The CFTC's whistleblower program has to date received far fewer tips and paid significantly fewer awards than the SEC's similar program. The most recent award marks only the third award granted by the CFTC since its program's inception over four years ago. In FY 2015, the CFTC received 232 whistleblower tips and complaints and 75 additional non-whistleblower tips and complaints, and did not pay any whistleblower awards.2 In contrast, the SEC received almost 4,000 whistleblower tips in FY 2015 and paid more than $37 million in whistleblower awards.3 

Part of the difference might be attributed to the broader mandate of the SEC. The Head of the CFTC's Whistleblower Office, Chris Ehrman, has previously noted the technical nature of the CFTC's cases and the agency's smaller scope may explain the slow progress of the CFTC whistleblower program.4  In addition, differences in the enforceability of its retaliation provisions and the number of relevant statutes decrease the potential footprint of the CFTC whistleblower program. But part of the difference is likely due to lack of publicity and awareness of potential whistleblowers, factors that significant awards like the one announced on April 4 may begin to change. As the CFTC continues to increase its enforcement focus and bring higher-profile cases in a range of subject areas, potential whistleblowers will likely take note.

Future Trajectory of the CFTC Whistleblower Program

As with its previous announcements of whistleblower awards, the CFTC did not provide information that would directly or indirectly identify the whistleblower and also declined to publicize the percentage of the monetary award when compared to the total sanctions. Still, even without these details, there are some lessons learned from the newest multi-million dollar award.

Going into FY 2016, the CFTC is clearly prioritizing awareness and efficacy of its whistleblower program. We have already seen a reflection of its increased efforts with the announcement of the Inspector General's investigation into the "low number" of whistleblowing awards in December 2015. In February 2016, the CFTC also launched a website for the whistleblower program at "whistleblower.gov" in order to promote the whistleblower program, providing a dedicated space for filing tips and complaints, notices of actions, and orders concerning awards. These actions, coupled with the publicity surrounding the $10 million whistleblower award and the CFTC's increased enforcement activity generally, will surely encourage more potential whistleblowers to step up and consider the CFTC as a potential destination for their tips. And because the CFTC has far fewer tips to evaluate every year than the SEC, it may be able to more easily prioritize prompt investigations.

Accordingly, while every instance of an actual whistleblower must be dealt with delicately and on a case-by-case basis depending on the nature of any allegations, even in the absence of a specific whistleblower allegation we encourage companies dealing in businesses regulated by the CFTC to takes steps to review their compliance programs to ensure that they provide adequate mechanisms for internal reporting and anti-retaliation measures so as to encourage internal reporting and investigation of any potential CEA violations before they reach the CFTC. Tips to the CFTC will surely increase in the coming months and years, and it is best for companies to be as prepared as possible.

Footnotes

1 See CFTC Final Rules, Whistleblower Incentives and Protection, available online at http://www.cftc.gov/idc/groups/public/@lrfederalregister/documents/file/2011-20423a.pdf.

2  CFTC 2015 Annual Report on the Whistleblower Program and Customer Education initiatives, available online at https://www.whistleblower.gov/files/Reports/wb_fy2015reporttocongress.pdf.

3  SEC 2015 Annual Report to Congress on the Dodd-Frank Whistleblower Program, available online at https://www.sec.gov/whistleblower/reportspubs/annual-reports/owb-annual-report-2015.pdf.

4  Russell-Kraft, Stephanie, CFTC Whisleblower Head Forecasts Big Things to Come, Law360, May 1, 2015, available online at http://www.law360.com/articles/649672/cftc-whistleblower-head-forecasts-big-things-to-come.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Cadwalader, Wickersham & Taft LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Cadwalader, Wickersham & Taft LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions