THE CFTC WHISTLEBLOWER PROGRAM

Congress created the CFTC in 1974 to enforce the Commodity Exchange Act, and to support the integrity of the commodities futures markets.[1] The Commodity Exchange Act regulates the trading of commodity futures in the United States, which includes futures, options, and swaps made in connection with a contract of sale of any commodity in interstate commerce.[2] The CFTC’s jurisdiction over the commodities futures markets has grown since the agency’s formation, and now includes a wide range of commodities, from energy and metals commodities, to agriculture products, to financial products, such as interest rates, stock indexes, and foreign currency.[3] The broad array of the CFTC’s jurisdiction matches the broad definition of “commodity”: “It can mean a physical commodity, such as an agricultural product (e.g., wheat, cotton) or natural resource (e.g., gold, oil). It can mean a currency or interest rate. The CEA definition of 'commodity' also includes ‘all services, rights, and interests . . . in which contracts for future delivery are presently or in the future dealt in.’”[4] Violations of the Commodity Exchange Act include fraud in connection with the sale of commodities, and manipulation of commodities markets.[5]

The Dodd-Frank Act was enacted in 2010 in an effort to address the causes of the financial crisis of 2008 and 2009.[6] Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1841 (2010), created the CFTC’s whistleblower program to encourage whistleblowers to come forward with information relating to violations of the Commodity Exchange Act.  The Dodd Frank Act’s legislative history states that the purpose for providing for whistleblower awards was to elicit high-quality tips by motivating those with insider knowledge of violations “to come forward and assist the Government to identify and prosecute persons who have violated the securities laws.”[7]  The legislative history also recognized the potential for peril that whistleblowers sometimes confront, stating: “whistleblowers often face the difficult choice between telling the truth and the risk of committing ‘career suicide.’”[8] On August 4, 2011, the CFTC issued final rules implementing its whistleblower program.[9] The CFTC amended the rules governing the whistleblower program in 2017 to:  strengthen protections against retaliation; preclude employers from relying on confidentiality or arbitration clauses to prevent employees from reporting to the CFTC; clarify that the CFTC can bring enforcement actions based on retaliation; clarify whistleblower eligibility standards; and make procedural amendments.[10] The rules can be found at 17 C.F.R. Part 165.

[1] Written Testimony of Chairman J. Christopher Giancarlo before the Senate Banking Committee, Washington, D.C., February 6, 2018, https://www.cftc.gov/PressRoom/SpeechesTestimony/opagiancarlo37.

[2] 7 U.S.C. § 6c.

[3] Id.

[4] Id. (quoting 7 U.S.C. § 1a(9)).

[5] https://www.whistleblower.gov/aboutcftc.

[6] S. Rep. No. 111-176, at 2 (2010). 

[7] S. Rep. No. 111-176, at 110 (explaining the rationale behind the bounty program).  

[8] Id. at 111.  

[9] 76 Fed. Reg. 53172 (Aug. 25, 2011).

[10] 82 Fed. Reg. 24487 (May 30, 2017). 

Under the Program, the CFTC is mandated to pay awards to eligible whistleblowers who voluntarily provide the Commission with original information that leads to a successful enforcement action in which the CFTC recovers monetary sanctions in an amount over $1,000,000.[1] The whistleblower must satisfy several criteria to be eligible: 

First, he or she must meet the definition of a “whistleblower.” A whistleblower is defined as someone who, alone or with others, “provides information relating to a potential violation of the Commodity Exchange Act to the [CFTC].”[2] The whistleblower’s information must “relate[] to a possible violation of the [Commodity Exchange Act], or the rules or regulations thereunder, that has occurred, is ongoing, or is about to occur.”[3] The possible violation must be of federal commodities laws or a rule or regulation promulgated by the CFTC; information relating to the violation of other laws does not qualify. The whistleblower must also be a person’ “[a] company or another entity is not eligible to be a whistleblower.”[4]

Second, the whistleblower must “voluntarily” provide his or her information to the CFTC.[5] To “voluntarily” provide information, a whistleblower must do so before any request for the information is made from the CFTC, Congress, any other federal or state authority, the DOJ, a registered entity, a registered futures association, or a self-regulatory organization.[6] “If the Commission or any of these other authorities makes a request, inquiry, or demand to the whistleblower or the whistleblower's representative first, the whistleblower's submission will not be considered voluntary, and the whistleblower will not be eligible for an award, even if the whistleblower's response is not compelled by subpoena or other applicable law.”[7] A request received by the whistleblower’s employer will even disqualify the whistleblower unless the employer fails to respond to the request in a timely manner.[8] “In addition, the whistleblower’s submission will not be considered voluntary if the whistleblower is under a pre-existing legal or contractual duty to report the violations that are the subject of the whistleblower’s original information . . . .”[9]

Third, the whistleblower must provide “original information” to qualify. To be original, information must be: (1) derived from the whistleblower’s “independent knowledge or independent analysis;” (2) not already known to the CFTC from any other source, unless the whistleblower is the “original source” of the information; (3) not exclusively derived from an allegation made in a judicial or administrative hearing, in a government report, hearing, audit, or investigation, or from the news media, unless the whistleblower is a source of the information; and (4) is submitted after July 21, 2010.[10]  

Fourth, the whistleblower must have independent knowledge, or must have conducted independent analysis. “Independent knowledge” is defined by CFTC regulations as “factual information in the whistleblower’s possession that is not generally known or available to the public.”[11] “The whistleblower may gain independent knowledge from the whistleblower’s experiences, communications and observations in the whistleblower’s personal business or social interactions.”[12] The whistleblower’s knowledge may be based on first-hand experiences, but it may also be based on information gleaned from other sources. The CFTC recognized “that there are circumstances where individuals might review publicly available information, and, through their additional evaluation and analysis, provide vital assistance to the Commission staff in understanding complex schemes and identifying potential violations of the CEA.”[13] “Analysis” is defined as the whistleblower’s “examination and evaluation of information that may be publicly available, but which reveals information that is not generally known or available to the public.”[14] This definition of “independent knowledge” recognizes that there are situations where a whistleblower can review publicly available information, and through his or her analysis of that information, provide critical assistance to the CFTC.

Fifth, there must be a “successful enforcement” action that “results in monetary sanctions exceeding $1 million.”[15] A whistleblower’s information leads to a successful enforcement action if:

• It led to a successful judicial or administrative action: “The whistleblower gave the Commission original information that was sufficiently specific, credible, and timely to cause the Commission staff to commence an examination, open an investigation, reopen an investigation that the Commission had closed, or to inquire concerning different conduct as part of a current examination or investigation, and the Commission brought a successful judicial or administrative action based in whole or in part on conduct that was the subject of the whistleblower's original information.”

• It significantly contributed to an ongoing investigation: “The whistleblower gave the Commission original information about conduct that was already under examination or investigation . . . and the whistleblower's submission significantly contributed to the success of the action.”

• The whistleblower internally reported the information, and it either led to a successful judicial or administrative action or significantly contributed to an ongoing investigation: “The whistleblower reported original information through an entity’s internal whistleblower, legal, or compliance procedures for reporting allegations of possible violations of law before or at the same time the whistleblower reported them to the Commission; the entity later provided the whistleblower’s information to the Commission, or provided results of an audit or investigation initiated in whole or in part in response to information the whistleblower reported to the entity; and the information the entity provided to the Commission satisfies either [of the above two provisions]. . . . [T]he whistleblower must also submit the same information to the Commission in accordance with the procedures set forth in § 165.3 within 180 days of providing it to the entity.”

Awards can be aggregated to satisfy the over $1 million threshold.[16]

Additionally, certain individuals such as those involved with regulatory enforcement or those who have engaged in criminal conduct related to the reported violation are categorically excluded from receiving an award through the CFTC.[17]

[1] 7 U.S.C. § 26(a), (b).

[2] 17 C.F.R. § 165.2(p)(1).

[3] 17 C.F.R. § 165.2(p)(2)(i).

[4] 17 C.F.R. § 165.2(p)(1).

[5] 7 U.S.C. § 26(b)(1).

[6] 17 C.F.R. § 165.2(o)(1). 

[7] Id.

[8] Id.

[9] 17 C.F.R. § 165.2(o)(2).

[10] 17 C.F.R. § 165.2(k).

[11] 17 C.F.R. § 165.2(g).

[12] Id.

[13] 76 Fed. Reg. 53,172, 53,174 (Aug. 4, 2011).

[14] 17 C.F.R. § 165.2(c).

[15] 7 U.S.C. § 26(a)(1), (b)(1).

[16] 17 C.F.R. § 165.2(b).

[17] 7 U.S.C. § 26(c)(2); 17 C.F.R. § 165.6.

A whistleblower can submit a tip through form TCR (Tip, Complaint, or Referral).[1] The form asks for information from the whistleblower, including background about the person that submits the complaint, the person or entity the whistleblower is complaining about, the acts the whistleblower is complaining about, how the whistleblower obtained the information, and for any relevant documents.[2] The CFTC also provides a document providing an overview of the submission procedures, and form completion instructions.[3]

[1] https://forms.cftc.gov/Forms/Whistleblower.aspx.

[2] Id.

[3] Id.

The CFTC can award a whistleblower anywhere between 10% to 30% of what it recovers.[1] Where the CFTC awards multiple whistleblowers in connection with the same recovery, it cannot award an aggregate total award of less than 10% or more than 30% of the recovery.[2] The CFTC takes several factors into account when determining the appropriate award.[3] Factors that can increase an award include: the significance of the information to the ultimate success of the CFTC’s action; the degree of assistance provided by the whistleblower; the CFTC’s programmatic interests in deterring violations of the Commodity Exchange Act; and the whistleblower’s participation in internal compliance systems.[4] On the other hand, factors that can decrease an award include: the level of the whistleblower’s culpability in the misconduct; whether there was an unreasonable reporting delay; and whether the whistleblower interfered with internal compliance and reporting systems.[5]

[1] 7 U.S.C. § 26(b)(1); 17 C.F.R. § 165.8.

[2] 17 C.F.R. § 165.8(b).

[3] 17 C.F.R. § 165.9.

[4] 17 C.F.R. § 165.9(b).

[5] 17 C.F.R. § 165.9(c).