The Commodity Futures Trading Commission (“CFTC”) recently announced the largest ever award under its Whistleblower Program created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The whistleblower is set to receive more than $10 million for providing valuable information about violations of the Commodity Exchange Act (“CEA”) that caused the CFTC to open an investigation. In addition to providing original information, the whistleblower also cooperated with the agency’s investigation and provided documents upon request.
The CFTC has previously issued only two awards under its Whistleblower Program, one in May 2014 and the other in September 2015. Each of the previous awards totaled less than $300,000. Despite the limited reach of the program to date, Christopher Ehrman, director of the CFTC’s Whistleblower Office, stated that, “[t]he Whistleblower Program is working. My hope is that this multimillion dollar award will encourage others to come forward with information that will assist the Commission in protecting our markets.” Aitan Goelman, director of the CFTC’s Division of Enforcement, added that “[a]n award this size shows the importance that the Commission places on incentivizing future whistleblowers.”
Emphasizing its commitment to protect whistleblower confidentiality, the CFTC withheld all specifics of the award that could be used to identify the whistleblower’s identity or the enforcement action with which he or she was involved. The CFTC also declined to state the percentage of sanctions represented by the award – which, under the Dodd-Frank Act, may range from 10 to 30 percent of the amount recovered by the CFTC. The CFTC’s continued commitment to protecting whistleblower anonymity is intended to lend greater confidence to potential whistleblowers who may be considering filing tips.
The Dodd-Frank Act also created a similar program providing monetary incentives for individuals to report violations of the federal securities laws to the Securities and Exchange Commission (“SEC”). Eligible whistleblowers under the SEC Whistleblower Program are subject to the same requirements as those established under the CFTC’s program, but the SEC’s Whistleblower Program has been much more active, issuing more than $57 million to whistleblowers since the Program’s inception in 2011, more than $37 million of which was awarded in FY 2015. The SEC has also issued larger individual whistleblower awards, the largest of which totaled more than $30 million. The greater number and value of awards issued by the SEC is likely at least in part responsible for the substantially larger number of whistleblower tips received by the SEC, nearly 4,000 in FY 2015 versus the CFTC’s 232.
The recent CFTC whistleblower award comes amid a review of the Whistleblower Program by the CFTC’s Inspector General into the reasons for the limited number of whistleblower awards issued by the CFTC compared to the SEC. Despite the limited number of awards the CFTC has issued, the agency reported that the balance of its Customer Protection Fund, which is used to pay whistleblower awards, was nearly $269 million as of September 30, 2015.
Given the likelihood of increased whistleblower activity, companies should ensure they have compliance programs in place to prevent and detect potential violations of the CEA, and to mitigate penalties that may result from inadvertent violations. The Dodd-Frank Act prohibits retaliation against employees who provide the CFTC with information about possible violations, meaning companies also should ensure they have appropriate policies prohibiting whistleblower retaliation and providing a complaint procedure for any employee who believes he or she has suffered from retaliation.