On November 22, 2021, the Commodity Futures Trading Commission (“CFTC”) announced awards totaling nearly $1 million to two whistleblowers whose information led the CFTC to bring a successful enforcement action. Both whistleblowers provided significant information and substantial assistance to CFTC staff during the underlying investigation.
While each whistleblower’s information supported and, ultimately, led to different charges the CFTC brought in the enforcement action, the CFTC allocated a higher award percentage to one claimant because of the key role that claimant’s information played in causing the CFTC to open the investigation in question and focusing CFTC staff’s efforts during the investigation’s earliest stages. The other claimant reported to the CFTC after that investigation was already underway. Opening investigations is crucial to the success and effectiveness of the CFTC’s enforcement program, and the first claimant’s provision of information during the earliest stages of the matter also helped CFTC staff conserve time and resources and better focus their investigative efforts. Granting a larger award to the first claimant recognized this added value.
The CFTC’s Whistleblower Program
The CFTC’s Whistleblower Program was created under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFTC issues awards related not only to the agency’s enforcement actions, but also in connection with actions brought by other domestic or foreign regulators if certain conditions are met. Since issuing its first award in 2014, the CFTC has granted whistleblower awards amounting to approximately $300 million. Those awards are associated with enforcement actions that have resulted in monetary sanctions totaling more than $3 billion.
The Commodity Exchange Act (“CEA”) provides confidentiality protections for whistleblowers. Regardless of whether the CFTC grants an award, the CFTC will not disclose any information that could reasonably be expected to reveal a whistleblower’s identity, except in limited circumstances. Consistent with this confidentiality protection, the CFTC will not disclose the name of the enforcement action in which the whistleblower provided information or the exact dollar amount of the award granted.
Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected. All whistleblower awards are paid from the CFTC Customer Protection Fund, which was established by Congress, and is financed entirely through monetary sanctions paid to the CFTC by violators of the CEA. No money is taken or withheld from injured customers to fund the program.
How Does One Become Eligible For A Whistleblower Award?
The first step to becoming eligible for a whistleblower award is for an individual or group of individuals to submit a tip, complaint, or referral on a Form TCR that contains information about a potential violation of the CEA. Whistleblowers can be anyone, such as corporate insiders, market observers, investors, customers, and fraud victims. A whistleblower need not be a company insider. But entities cannot be eligible for awards themselves, and not every whistleblower will be eligible for an award.
Information provided by a whistleblower could lead the CFTC to open a new investigation, re-open a closed investigation, pursue a new line of inquiry in an ongoing investigation, or significantly contribute to the success of an enforcement action. This could result in a successful enforcement action or a Related Action, which could be brought by another governmental authority. Only those whistleblowers who submit information before the CFTC contacts them will be eligible for an award. In order for information to be voluntarily submitted, it must be submitted before the CFTC or certain other authorities request, inquire, or demand information from the whistleblower related to the original information being provided.
Individuals can submit a tip anonymously, with or without a lawyer’s help. Because the CFTC may need to contact a whistleblower for more information, individuals should provide some means of contact, such as an email address or telephone number. Likewise, there are detailed requirements for submitting an award application anonymously. If you have any questions about submitting anonymously, you are encouraged to contact the Whistleblower Office before you file.
Whether or not an individual submits anonymously, the CFTC is committed to protecting the identities of whistleblowers. The CFTC treats information learned during the course of an investigation—including the identity of sources—as non-public and confidential.
The exception to this policy is that in an administrative or court proceeding, the CFTC may be required to produce documents or other information which would reveal a whistleblower’s identity. Likewise, the CFTC may also provide the information provided by whistleblowers, subject to confidentiality requirements, to other government or regulatory entities.
CFTC Whistleblower Prerequisites & Eligibility Requirements
The Whistleblower Rules specify the prerequisites and eligibility requirements. The prerequisites include the following:
- Whistleblower information must be provided voluntarily, prior to a request, inquiry, or demand for information;
- The information must be original information not previously known to the CFTC, but if the whistleblower is the original source of the information, it would be deemed original information;
- The information must have led to a successful resolution of CFTC action or a Related Action;
- The whistleblower, upon CFTC staff’s request, must provide certain additional information;
- The whistleblower must have submitted an award application (Form WB-APP) in response to a Notice of Covered Action or a final judgment in a Related Action or both.