This week the Commodity Futures Trading Commission finalized several changes to its whistleblower rules that will strengthen the CFTC’s whistleblower program. Chief among them are rules that better protect whistleblowers from job retaliation, broaden whistleblower award eligibility and make the whistleblower award process more transparent.
The changes help make the CFTC’s approach to whistleblowers more consistent with the Securities and Exchange Commission’s whistleblower program, which has seen tremendous success over the last few years.
Strong protection from whistleblower retaliation
Included in the new rules is a broader interpretation of the CFTC’s authority to take affirmative enforcement action against employers that retaliate against whistleblowers.
The Commodity Exchange Act (CEA) has always provided for certain protections for whistleblowers, but the CFTC had not previously taken the position that it has the authority to punish employers for retaliating against whistleblowers.
Under the new rules, the CFTC explicitly says it can bring an action against an employer who retaliates against a whistleblower, even if the whistleblower doesn’t qualify for a reward. Whistleblowers still retain the right to pursue a private lawsuit against their employer.
The SEC, which has similar rules, has been a forceful advocate for whistleblowers by going after employers that retaliate against whistleblowers (even internal ones) or force employees to sign restrictive employment or severance agreements.
Whistleblower awards now based on aggregate of “covered” and “related actions”
CFTC whistleblowers will now be able to collect awards based on amounts recovered in both “covered actions”—enforcement actions undertaken by the CFTC—and in “related actions” by other government agencies.
Under the old rules, CFTC whistleblowers were limited to awards based on amounts recovered in either a covered or related action, but not both. This had a significant impact on the size of the potential financial reward in successful CFTC whistleblower cases.
Given the increasingly complex nature of commodity fraud, and the potential for multiple actions by various government enforcement authorities, the change represents a huge new incentive for potential whistleblowers. It also brings the CFTC rules in line with the SEC’s provisions for government awards in related actions.
Whistleblowers reporting to foreign authorities first are eligible for awards
The revised rules also clarify that individuals who first report wrongdoing to a “foreign futures authority” are potentially eligible for an award if they later report to the CFTC. The Commission specifically noted “the global nature of the futures and swaps markets” when explaining this change. Many of the tips and awards under the Dodd-Frank program have gone to overseas whistleblowers, and this change ensures that they have a continued incentive to report to all the relevant authorities, in their home countries and in the United States.
A more transparent whistleblower reward process
The amended rules also establish a more transparent award process for whistleblowers. The CFTC has done away with its Whistleblower Award Determination Panel in favor of Claims Review Staff, which is similar to what is used at the SEC.
Among the improvements that come with this change will be the ability for whistleblowers to receive preliminary award determinations and contest preliminary determinations before they become final.
The amended CFTC whistleblower rules should encourage more whistleblowers to come forward
Created by the Dodd-Frank Act, both the CFTC and SEC whistleblower programs offer financial rewards to whistleblowers whose information and assistance leads to government sanctions totaling more than $1 million.
The SEC has paid out $154 million to 44 whistleblowers so far under its whistleblower program. The CFTC, which is much smaller, has awarded $10.5 million in whistleblower awards, most of which came from the record $10 million award paid out in April 2016. But the new CFTC rules should encourage more CFTC whistleblowers to come forward.
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