On Thursday, August 4th, during a public meeting to consider the adoption of several final rules under the Dodd-Frank Act, the U.S. Commodity Futures Trading Commission (CFTC) voted 4-1 in favor of adopting final regulations implementing its Whistleblower Incentives and Protection program. According to a Fact Sheet available on the CFTC website, Section 748 of the Dodd-Frank Act amended the Commodity Exchange Act, mandating the creation of rules regulating a whistleblower incentives and protection program.
The CFTC whistleblower program rewards tipsters who provide the CFTC with original information that leads to a successful enforcement action resulting in monetary sanctions in excess of $1 million. In such a case, the whistleblower is eligible for an award of 10-30% of the sanctions collected in a CFTC enforcement matter and/or a related action based on the same original information. The CFTC will, in is discretion, determine the amount of any such award based on criteria set out in the final rules. On its website, the CFTC provides a useful “Q&A” summarizing the final rules in greater detail.
The final CFTC whistleblower rules closely mirror the whistleblower rules adopted by the SEC earlier this year. Like the SEC, the CFTC declined to put in place a requirement that whistleblowers report potential violations internally before submitting a tip or complaint to the CFTC. The CFTC insists, however, that its final rules “include[ ] provisions to incentivize internal reporting by whistleblowers.” According to an article on reuters.com, a CFTC official explained that under the final rules “the commission will consider a whistle-blower’s decision to report internally as a factor that can potentially increase the amount of the award.”
The rules make clear that whistleblowers may be eligible to receive an award based on the submission of information related to violations that occurred prior to the enactment of the Dodd-Frank Act. Whistleblowers who submit information after the enactment of Dodd-Frank, but before the final rules become effective, will also eligible for an award.
The final rules are not yet effective, but will be in force no later than 60 days from publication in the Federal Register. As with the SEC’s new whistleblower program, the impact of the CFTC’s whistleblower incentives and protection program is yet to be determined. At the very least, we should expect to see a noticeable uptick in CFTC whistleblower complaints. Whether that will lead to more investigations and enforcement actions is an open question.