The Commodity Futures Trading Commission whistleblower program is on the cusp of being revitalized after Congress passed legislation to temporarily boost its funding.
The CFTC Fund Management Act, which was sent to President Biden for his signature this week, would create a temporary new fund to finance the CFTC whistleblower program’s operations. A pending whistleblower award for $100 million would have wiped out the CFTC’s budget for the CFTC Whistleblower Office’s operations and whistleblower rewards.
The CFTC pays for both whistleblower rewards and the operating expenses of the CFTC Whistleblower Office from its Customer Protection Fund, a pool of money that is financed through the collection of enforcement penalties levied by the agency. The fund is capped at $100 million. Any fines collected after the fund reaches $100 million go to the US Treasury.
Since many CFTC penalties typically tend to be $5 million or less, it can take a while for the Consumer Protection Fund to replenish.
“The CFTC whistleblower program has become far more successful than Congress imagined when we set it up back in 2010,” said Sen. Chuck Grassley, the legislation’s author and chief sponsor. “We can’t allow this program to become a victim of its own success.”
The CFTC leadership reached out to Grassley late last year to alert him to the funding issue for the CFTC Whistleblower Office.
The $100 million whistleblower award is expected to go to a former Deutsche Bank AG executive who provided important information and assistance to the CFTC and the Department of Justice in their investigations into whether Deutsche Bank manipulated the London interbank offered rate (Libor) – a global benchmark interest rate for international short-term loans. Deutsche Bank paid a total of roughly $2.5 billion to settle charges stemming from those investigations.
The CFTC Fund Management Act would alleviate the critical funding needs by temporarily creating a separate account with the US Treasury to fund CFTC operating expenses. Up to $10 million could be housed in the separate account to support regular operations until Oct. 1, 2022 – at which point the remaining funds would be transferred to the Customer Protection Fund.
Recognizing the urgency of the matter, the US Senate passed the bill by unanimous consent on May 28. The House of Representatives passed the legislation under suspension of the rules on June 23, along with a number of other bills. The bill is awaiting President Biden’s signature before becoming law.
While a nerve-wracking situation, the CFTC Whistleblower Office’s budget woes also are an encouraging sign of the program’s success. Such a huge CFTC whistleblower award demonstrates that the information of well-positioned insiders can yield incredibly large-scale enforcement efforts that protect countless investors and the integrity of national and global markets.
About the CFTC whistleblower program
The CFTC’s whistleblower program was created by the Dodd-Frank Act in 2010. The program offers whistleblowers rewards, confidentiality and protections for reporting commodity law violations.
CFTC whistleblower rewards range between 10% and 30% of the monetary sanctions collected by a CFTC action if they total over $1 million. Whistleblowers also are eligible for rewards based on sanctions collected in related enforcement actions, if there is a successful CFTC enforcement action.
Whistleblowers’ identities are kept anonymous and confidential, with certain rare exceptions. The Dodd-Frank Act prohibits employers from firing, demoting, suspending, threatening, or otherwise retaliating against whistleblowers who report to the CFTC.
If you are considering becoming a CFTC whistleblower, contact us for a free, confidential review of your case.