In July 2010, the Dodd-Frank Wall Street Reform and Protection Act (Dodd-Frank) created the CFTC Whistleblower Reward Program. It provides whistleblowers with a strong monetary incentive, as well as anti-retaliation protections, for reporting wrongdoing to the CFTC. This includes violations or fraud in connection with:
- Commodity futures;
- Commodity options; and
- Swap trading markets.
Common market manipulation schemes include pump-and-dumps, spoofing, and manipulating the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) benchmark swap rates, LIBOR, Euribor, and other foreign interest rate benchmarks. After issuing millions in recent rewards, the CFTC Whistleblower Reward Program appears to be picking up steam.
CFTC Whistleblower Rewards
Under the program, the CFTC will issue rewards to whistleblowers who provide original information that leads to CFTC enforcement actions with total civil penalties in excess of $1 million. A whistleblower may receive a reward of between 10-30 percent of the total sanctions imposed. In April 2016, a whistleblower received a reward of more than $10 million for providing the CFTC with key original information that led to a successful enforcement action.
Original information “leads to” a successful enforcement action if either: (i) the original information caused the staff to open an investigation, reopen an investigation, or inquire into different conduct as part of a current investigation, and the Commission brought a successful action based in whole or in part on conduct that was the subject of the original information; or (ii) the conduct was already under examination or investigation, and the original information significantly contributed to the success of the action.
In determining a reward percentage, the CFTC considers the particular facts and circumstances of each case. For example, positive factors may include the significance of the information, the level of assistance provided by the whistleblower and the whistleblower’s attorney, and the law enforcements interests at stake.
Whistleblowers are still eligible for a reward under the CFTC Whistleblower Reward Program even if they have already received a reward under the SEC Whistleblower Reward Program.
Anonymous Whistleblowing to the CFTC
If represented by counsel, a whistleblower may submit a tip anonymously to the CFTC. In certain circumstances, a whistleblower may remain anonymous, even to the CFTC, until a reward is issued. However, even at the time of a reward, a whistleblower’s identity is not made available to the public.
Protections Against Whistleblower Retaliation
Whistleblowers are also afforded substantial protection against retaliation. Specifically, an employer may not “discharge, demote, suspend, threaten, harass, directly or indirectly, or in any manner discriminates against, a whistleblower” for legally reporting wrongdoing. In the event that an employer retaliates against a whistleblower, the law provides for substantial relief. This may include reinstatement, back pay, and compensation for related expenses such as litigation costs and reasonable attorneys’ fees.
Whistleblower are entitled to this protection even if they do not receive a reward. The anti-retaliation provision applies to any whistleblower who possesses “a reasonable belief that the information the whistleblower is providing relates to a possible violation of the Commodity Exchange Act (CEA), or the rules or regulations thereunder, that has occurred, is ongoing, or is about to occur.” Furthermore, the rights and remedies provided for in the anti-retaliation provision may not be waived by any agreement, policy, form, or condition of employment, including by a predispute arbitration agreement.
The whistleblower must bring this claim within two years after the alleged retaliation occurs. If the whistleblower is an employee of the federal government, the claim must be brought in accordance with 5 U.S.C. §1221.