The Commodity Futures Trading Commission (“CFTC”) regulates the U.S. derivatives markets, and the CFTC Whistleblower Program was designed to provide monetary incentives to individuals to come forward and report possible violations Commodity Exchange Act (“CEA”) to the CFTC. Violations of the CEA can take many forms, but some of the most common include:
- Fraud: fraudulent solicitation, misappropriation or mishandling of customer funds, Ponzi schemes, etc.
- Market manipulation, attempted market manipulation, and other disruptive trading practices (i.e., fictitious and/or non-competitive transactions, spoofing)
- Trade Practice Violations: wash sales, violations of position limits, unauthorized swap transactions, undercapitalization, improper handling or segregation of customer funds, failing to comply with record-keeping and audit trail rules, etc.
This list is not exhaustive; any violation of the CEA may be of interest to the CFTC, including violations of past CFTC orders.
The CFTC Whistleblower Program was modeled on the earlier SEC program (see our summary here), and the requirements are very similar. Like the SEC program, to be eligible for a reward, a successful CFTC whistleblower is one who “(1) provide[s] a voluntary submission to the commission; (2) that contains original information; and (3) that leads to the successful resolution of a covered judicial or administrative action or successful enforcement of a Related Action or both,” where a “covered action” is defined to mean one resulting in monetary sanctions exceeding $1,000,000. This means that a whistleblower must provide the information before they receive a request for information (the “voluntary” requirement), and that information must be the result of either independent knowledge—facts not known to the general public—or independent analysis—the individual’s own evaluation of publicly available information that yields information not generally known or available to the public (the “original information” requirement).
Where the CFTC does successfully enforce an action based on information received from a whistleblower, the whistleblower is entitled to an award ranging from ten to thirty percent of any monetary sanctions ordered. This range remains the same whether there is one whistleblower or several, so if the CFTC finds that multiple whistleblowers are entitled to an award, the total amount of the awards given to all whistleblowers cannot exceed 30% of the sanctions ordered. The amount of an award is at the discretion of the CFTC, and they balance multiple factors: the significance of the information, the amount of assistance provided by the whistleblower, the timeliness of the report, etc.
A whistleblower meeting the above criteria may also be able to eligible to receive an award if the information they provided also led to a successful “related action” brought by another authority. For example, information provided by one whistleblower may spark both an enforcement action by the CFTC and an action by the Department of Justice; in this case, the whistleblower may be eligible for awards based on sanctions received from both actions.
For information on how to submit information to the CFTC, see How to File a Whistleblower Complaint or contact Lundin PLLC Senior Attorney Alexandra Douglas.