Senator Chuck Grassley (R-Iowa) is pushing Commodity Futures Trading Commission nominees to commit to revitalizing the CFTC’s whistleblower program, which is hurting due to budgetary constraints.
In letters sent to the three CFTC nominees, Grassley pointed out the enormous value of the CFTC’s whistleblower program and urged the nominees to commit to supporting permanent solutions to the CFTC’s funding woes.
President Biden has nominated CFTC Commissioner Rostin Benham, who is serving as the acting chair, to be the commission chair, and Kristin Johnson and Christy Goldsmith Romero to fill two other vacancies on the commission.
In his letters, Grassley asks whether each nominee would provide “the necessary resources to the CFTC whistleblower program, and ensure that whistleblowers receive their awards in a timely manner.” He urges them to commit to working with Congress “to identify ways to strengthen the CFTC whistleblower program.”
The mechanism for funding the CFTC whistleblower program is causing a problem that only Congress can fix.
The CFTC pays for both whistleblower rewards and the whistleblower program’s operating expenses using its Customer Protection Fund, a pot of money that is replenished through the collection of penalties levied by the agency.
The Customer Protection Fund is capped at $100 million. Any fines collected after the fund reaches $100 million go to the US Treasury. Because CFTC penalties typically are below $5 million, it can take a while for the Consumer Protection Fund to be refilled.
A massive $100 million award that the CFTC expects to award to a CFTC whistleblower threatens to completely hollow out the CFTC’s operating budget for the whistleblower program. The whistleblower reportedly provided important information to the CFTC that the commission and the Justice Department used in their investigations into Deutsche Bank’s alleged manipulation of Libor, an international benchmark interest rate for short-term loans. Deutsche Bank agreed to pay approximately $2.5 billion to the government in 2015 to settle the charges.
The CFTC budget shortfall has been patched in the short term with the CFTC Fund Management Act, which temporarily created a separate account of up to $10 million with the US Treasury to supplement operating funds for the CFTC whistleblower program, distinct from the funds used to pay whistleblower awards. The secondary account will be maintained until Oct. 1, 2022, making a permanent fix to fund the CFTC whistleblower program a top priority for the CFTC.
Grassley was the key sponsor of the CFTC Fund Management Act. The funding measure was passed unanimously by the US Senate in May, promptly passed by the House in June and signed into law by Biden in July.
The CFTC has been without a permanent chair since Biden took office in January. The previous CFTC chair, Heath Tarbert, stepped down on Jan. 21. Currently there are only three commissioners on the five-member panel: Behnam, Dawn DeBerry Stump and Dan Berkovitz. The latter announced that he is resigning from the CFTC to join the SEC as its general counsel. This will create another vacancy on the commission.
Read Sen. Grassley’s letters to the CFTC nominees:
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.
Whistleblowers’ information has led to CFTC enforcement actions that now total over $1 billion in monetary sanctions. An estimated 30% to 40% of all active investigations at the CFTC are due to whistleblowers.
If you are considering becoming a CFTC whistleblower, contact us for a free, confidential review of your case.