The Commodity Futures Trading Commission (“CFTC” or “Commission”) recently announced two awards to whistleblowers under its Whistleblower Program pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. These awards represent the Commission’s largest ever award and its first award to a foreign national.
In one case, a whistleblower is set to receive approximately $30 million for alerting the Commission to potential violations of the Commodity Exchange Act (“CEA”) and providing key original information about those violations that led to a successful enforcement. In assessing the whistleblower’s claim to an award, the Commission noted that the individual was extensively involved in the investigation and provided ongoing, extensive, and timely assistance that helped to conserve Commission resources. Noting the size of the award, Christopher Ehrman, Director of the CFTC’s Whistleblower Office, said “The award today is a commitment to reward those who provide quality information to the CFTC…We hope that this award will continue to facilitate the upward momentum and success of the CFTC’s Whistleblower Program by attracting those with knowledge of wrongdoing to come forward.”
In a separate case announced on the same day, a whistleblower will receive more than $70,000 for significantly contributing to an ongoing investigation and aiding the CFTC in securing a successful settlement. This is the first CFTC award to a whistleblower living outside the United States. In trumpeting the award, James McDonald, Director of the CFTC’s Division of Enforcement, stated: “This award is significant because it signals to whistleblowers around the world that anyone with information about potential violations of the Commodity Exchange Act can participate in the CFTC’s Whistleblower Program.” He further noted that the award, “serves as another example of the increasing significance of whistleblowers in our enforcement program, a trend I expect to continue going forward.”
As is standard in these cases, the CFTC withheld all specifics of the awards that could be used to identify the whistleblowers’ identities or the enforcement actions with which they were associated. The CFTC also declined to state the percentage of sanctions represented by the awards – which, under the Dodd-Frank Act, may range from 10 to 30 percent of the amount recovered. Notably, the Commission highlighted in its orders that award amounts may be based on collected sanctions ordered to be paid by the CFTC even if those sanctions are not collected by the CFTC directly.
The Dodd-Frank Act created similar programs providing monetary incentives for individuals to report legal violations to the CFTC and the Securities and Exchange Commission (“SEC”). Eligible whistleblowers under the SEC Whistleblower Program are subject to the same general requirements as those established under the CFTC’s program, but the SEC’s Whistleblower Program has been much more active, issuing 55 awards to date totaling more than $266 million stemming from almost $1.5 billion in monetary sanctions ordered against wrongdoers based on actionable information received from whistleblowers. Conversely, the CFTC has issued only six awards award, and the awards issued last week are the first in nearly two years. In 2017, the CFTC amended its rules relating to whistleblowers, strengthening anti-retaliation protections and streamlining the award claims process. The two newest awards were the first issued under these enhanced rules.
In light of the continued efforts of both the CFTC and the SEC to publicize monetary awards to whistleblowers, companies should ensure they have compliance programs in place to prevent and detect potential violations of the CEA and the securities laws, and to mitigate penalties that may result from inadvertent violations. The Dodd-Frank Act prohibits retaliation against employees who provide regulators with information about possible violations, so 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.