Securities Regulation Daily CFTC rewards whistleblower who first reported internally
Monday, May 6, 2019

CFTC rewards whistleblower who first reported internally

By Mark S. Nelson, J.D.

A CFTC whistleblower who reported internally before reporting to the CFTC won an enhanced award of $1.5 million in a matter that involved two regulators.

The CFTC announced that it has awarded nearly $1.5 million to an individual whistleblower who provided information in a matter that touched at least two federal regulators. According to a CFTC press release, the matter is significant because the whistleblower first reported internally before reporting to the CFTC.

Witness interviews. The CFTC's order noted that the whistleblower (Claimant 1) provided information that had a direct impact on “strategy involving witness interviews.” Claimant 1's efforts also helped to conserve CFTC resources by allowing the agency to comprehend a “complex scheme.”

Moreover, the order stated that Claimant 1 attempted to report internally before approaching the CFTC and another federal regulator. According to the order, this was a factor that “also weighs in favor of a high-percentage award.”

Under the CFTC's whistleblower regulation (17 C.F.R. §165.9(b)), the CFTC may increase an award if the whistleblower participated in an internal compliance system. Specifically, the CFTC may consider whether the whistleblower reported the information before or at the same time as he or she reported it to the CFTC and the degree of the whistleblower's assistance in an internal investigation. Other factors that can enhance an award include, the significance of the information provided, the whistleblower's assistance (e.g., agency resources conserved), and the law enforcement interest in the information.

Four other whistleblower claims in the CFTC matter were denied because the information provided was not useful to the CFTC. Only one of the remaining three whistleblowers challenged the preliminary determination not to make an award, a determination which the Commission then affirmed.

Award trend to continue. CFTC Enforcement Director James McDonald said this latest whistleblower award demonstrated the CFTC's focus on its whistleblower program and that the trend of making such awards as part of the agency's enforcement efforts was likely to continue. The CFTC's press release noted that the agency has, thus far, awarded $85 million under its whistleblower program, which began in 2014.

Speaking to the internal reporting aspect of the matter, Christopher Ehrman, director of the CFTC's Whistleblower Office, said “While there is no requirement that a whistleblower report internally before approaching the Commission, today's award demonstrates that the Commission may pay enhanced awards to those that do - that is one of the positive factors set out in our rules for the Commission to consider in making its award determination.”

Ehrman also reiterated that whistleblowers can report to the CFTC anytime: “To be clear, the Commission's rules do not require a whistleblower to undertake internal reporting efforts in order to be eligible for the benefits and protections of our program. Instead, a whistleblower can contact us directly whenever he or she wishes - and may do so anonymously.”

MainStory: TopStory CFTCNews DoddFrankAct WhistleblowerNews

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