The U.S. Securities Exchange Commission ("SEC") and Commodity Futures Trading Commission ("CFTC") administer whistleblower claims under the Sarbanes-Oxley Act of 2002. While the SEC has jurisdiction to regulate U.S. securities markets, the CFTC regulates the U.S. derivatives markets, which includes futures, swaps, and certain types of option contracts. In October, the CFTC's Whistleblower Office ("WBO") released its 2019 Annual Report (the "Report") to two congressional subcommittees to provide insights into its whistleblower program and customer education initiatives. The Report provides an overview of the tips received by the WBO from October 1, 2018-September 30, 2019 (the "reporting period"), highlights several of the whistleblower awards from the past year, and discusses the WBO's efforts to educate stakeholders about its whistleblower program.
Breakdown of Tips Received during the Reporting Period
The WBO reported a decrease in the number of whistleblower tips and complaints that it received in 2018–455 tips in 2019 compared to 760 tips in 2019—but noted that the number was almost the same as the number of tips it received in 2017 (465). Interestingly, the WBO attributed the 2018 spike in tips to "increased popular interest in virtual currencies and certain WBO publicity around them, which encouraged members of the public to report virtual currency fraud through the Whistleblower Program."
The WBO also reported that it received 117 whistleblower award applications in 2019, just below its program record of 120 in 2018. Overall, the 2019 whistleblower tips regarded activities such as: Bank Secrecy Act violations; failures to register; false reporting; foreign bribery; fraud involving virtual currencies, precious metals, foreign currency exchange, or binary options; inadequate risk controls; insider trading; money laundering; retaliation against employees; and spoofing and other forms of disruptive trading or market manipulation.
Profiles of Bounty Recipients
During the reporting period, the CFTC announced five whistleblower awards totaling more than $15 million (including two awards based in part on related actions), bringing the total payout under the program to approximately $100 million between 14 awards since its inception. Notably, the report specifically highlighted several 2019 awards, some of which we previously covered here. Ultimately, the CFTC enforcement actions associated with those awards resulted in a total amount of sanctions exceeding $800 million.
Additional CFTC Priorities
The Report reaffirmed the CFTC's continued focus on educating stakeholders about the agency's whistleblower program. The Report mentioned speeches, web postings, panel, and seminar appearances as the main sources of educating the public. The Report also reiterated the role its website plays as a source for providing information about its programs, learning about whistleblower rights, and for submitting whistleblower tips. It noted that the CFTC is also using its website to publish alerts on trending topics, such as virtual currencies.
The Report also discussed the WBO's important role in protecting whistleblower confidentiality during judicial and administrative actions by the CFTC and other government agencies. Furthermore, the Report highlighted the Office of Customer Education and Outreach's ("OCEO") efforts to create and distribute financial education messages designed to help consumers identify, avoid, and report fraud. Specifically, the OCEO focused much of its attention on virtual currency education in 2019, because it "remain[ed] an area where greater customer education and information [wa]s needed." Finally, the Report noted that the OCEO has conducted outreach to educators, communications professionals, military personal financial management counselors, and other key professional stakeholders to help amplify its message to reach more members of the public.
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