United States: CFTC Proposes Amendments To Whistleblower Awards Process And Anti-Retaliation Authority

Last Updated: September 8 2016
Article by Lewis M. Csedrik, Levi McAllister and Pamela C. Tsang

The amendments would make the CFTC's whistleblower awards process more uniform with the SEC's program and would enable the CFTC to bring enforcement actions against employers that retaliate against whistleblowers.

On August 30, the Commodity Futures Trading Commission (CFTC or Commission) requested comments on proposed amendments to its whistleblower awards process and anti-retaliation enforcement authority. The proposed amendments are intended to enhance the transparency of the award evaluation and review process and to clarify CFTC staff authority to administer the whistleblower program. The proposed amendments also reinterpret the CFTC's authority to take enforcement action where whistleblowers are retaliated against.

Background

The CFTC first established its whistleblower program in 2011. Under the program, whistleblowers who voluntarily provide the CFTC with original information about a violation of the Commodity Exchange Act1 (CEA or the Act) will receive a monetary award if the information provided leads to the successful enforcement of a CFTC action and results in monetary sanctions of more than $1 million (Covered Action), or the successful enforcement of a related action. Awards range between 10% and 30% of the monetary sanctions collected in a Covered Action or related action, and are determined by, among other things, the significance of the information provided and the degree of the whistleblower's assistance.

Although the CFTC established the whistleblower program five years ago, only about 40 awards have been sought by claimants since the program's inception (fewer than five awards have been granted). Until now, the CFTC has not considered its enforcement authority as covering retaliation against whistleblowers. The proposed changes mark a renewed emphasis on the CFTC's whistleblower program and suggest that the whistleblower program will play a more prominent role in the CFTC's future enforcement efforts. Notably, the CFTC intends to assign responsibility over the whistleblower program to the Director of the Division of Enforcement.

Proposed Amendments to Whistleblower Awards Process

The proposed amendments to the CFTC's whistleblower awards process are based on the CFTC's experience over the last five years, as well as the experience of the US Securities and Exchange Commission (SEC), in administering their whistleblower programs. Among other things, the proposed changes will make it easier for whistleblowers to seek awards and provide them more opportunity to participate in the awards process. One proposed change would extend the amount of time a claimant has to file the requisite Form TCR (Tip, Complaint, or Referral) from 120 days to 180 days in order to seek an award. Other changes (many of which are modeled after the SEC's whistleblower program) would do the following:

  • Replace the Whistleblower Awards Determination Panel with a review process handled by Claims Review Staff and the Whistleblower Office, Division of Enforcement.
  • Assign primary responsibility over handling facially ineligible claims to the Whistleblower Office to reduce the administrative burden on the CFTC.
  • Allow the Whistleblower Office to require additional information, explanation, or assistance from a claimant.
  • Require a Preliminary Determination on claims and allow claimants to request the materials on which determinations are based and/or submit objections.
  • Outline the process and timing of a claimant's challenge to a Preliminary Determination denying an award or the amount of the award.

The proposed amendments also would allow a claimant who is eligible to receive an award in a covered judicial or administrative action to receive an additional award based on the monetary sanctions collected in a related action. The CFTC considers a "related action" to be a judicial or administrative proceeding brought by certain entities (e.g., US Department of Justice, a registered entity, or futures organization) that is based on the same information the whistleblower voluntarily provided that led to the original successful enforcement. Notwithstanding this, the amendments would preclude a claimant from "double dipping" by receiving an award for a related action if the claimant already received an award from the SEC for the "same action." The proposed rules do not define or otherwise specify what constitutes a "same action."

Whistleblower Protection and Anti-Retaliation Enforcement Authority

The CFTC also proposes to set aside its 2011 interpretation of whether it possesses the authority to take enforcement actions against employers that retaliate against whistleblowers in violation of the CEA. Citing to the private right of action for whistleblowers to bring retaliation claims under Section 23(h)(1) of the Act, the Commission previously held that it lacked the statutory authority to conclude that an entity found to have retaliated against a whistleblower in violation of the Act could be subject to a separate enforcement action by the CFTC. The SEC reached the opposite conclusion with respect to its enforcement authority, and the CFTC seeks to remedy this inconsistency.

As explained by the CFTC, while Section 23(h)(1) allows whistleblowers to bring retaliation claims before federal district courts, nothing in that section precludes the Commission from bringing related enforcement actions where retaliation is found to occur. Notwithstanding this, the Commission stops short of explaining how it will exercise its authority where retaliation occurs, including whether it will rely on the findings made by district courts or will make its own retaliation findings, including in situations where there is no private claim filed in federal district court.

Possible Impact of Proposed Amendments

The CFTC's proposed amendments to the whistleblower program indicate that the CFTC will be devoting more resources and attention to its whistleblower awards process and the protection of whistleblowers. This increased focus could have the effect of increasing the number of awards claims and/or retaliation claims brought by covered employees. Regardless, it will require employers subject to the CEA to ensure that their compliance programs and related policies are up to date and consistent with the CFTC's new regulations, any revised guidance, and industry best practices, including with respect to detecting and preventing retaliation.

Comments on the CFTC's proposed amendments must be filed by September 29, 2016.

Footnotes

1 7 U.S.C. § 26.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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