In response to the 2008 financial crisis, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) to bolster its heightened priority to ensure open, transparent, competitive and financially sound markets to avoid systemic risk and protect market participants. Dodd-Frank added Section 23 to the Commodity Exchange Act (“CEA”), which authorized the creation of the CFTC Whistleblower Program to help detect and prevent fraud in the futures markets by offering Whistleblowers financial incentives to report wrongdoing.
A CFTC whistleblower may submit information about any possible violation of the CEA that has occurred, is ongoing, or is about to occur. Under the CFTC Whistleblower Program, eligible Whistleblowers may receive an award of between 10% and 30% of the monetary sanctions collected in a CFTC action or related actions where the imposed sanctions exceed $1 million.
Commodities Markets Fraud FAQs
- Who Regulates Commodities Trading?
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Futures contracts for agricultural commodities have been traded in the United States for more than 150 years and have been under some form of Federal regulation since the 1920s.
In 1936, Congress enacted the Commodity Exchange Act to regulate the commodity futures markets. These long-standing boards of trade (or exchanges) began with trading in agricultural commodities (corn, cotton, rice, wheat) and livestock commodities (cattle, hogs, milk), and futures in those markets. These commodities markets are also known as designated contract markets (DCMs). The breadth of DCMs has grown to include exchanges for other commodities such as soft agriculture (coffee, sugar, cocoa, orange juice, lumber), metals (copper, gold, silver, platinum, lithium), fuels (natural gas, crude oil, heating oil, gasoline, ethanol) as well as for financial and currency products (interest rates, stock indexes, foreign currency, bitcoin, ether), and futures in those markets.
The Commodity Futures Trading Commission Act of 1974 established the Commodity Futures Trading Commission (CFTC). The CFTC is charged with enforcing the CEA to protect investors and the integrity of the commodity markets. When the CFTC was created, most futures trading took place in the agricultural sector. Over the years, the futures industry has become increasingly varied and complex. The CFTC now regulates the various commodities markets and derivatives markets, including futures, options, and swaps trading markets, as well as the market participants. CFTC is vested with broad investigative powers and the ability to seek monetary penalty and other remedies through civil enforcement actions in federal court or administrative proceedings.
- What Does the CFTC Regulate?
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The CFTC regulates a variety of market participants and entities, including:
- Designated Contract Markets (DCMs) and Exchange Traded Derivatives
- DCMs are most like traditional futures exchanges, which may allow access to their facilities by all types of traders, including retail customers.
- DCMs may list for trading futures or option contracts based on any underlying commodity, index or instrument.
- Swap Dealers, Swap Execution Facilities, and Swap Data Repositories
- Dealers, platforms, and data repositories for financial Swap trading that provide pre-trade information and a mechanism for executing swap transactions among eligible participants. Swaps are also regulated by the Securities and Exchange Commission (SEC).
- Derivatives Clearing Organizations. (DCOs)
- Entities that provide clearing services or arrangements that mutualize or transfer credit risk among participants.
- Futures commission merchants (FCMs)
- Individuals or organizations involved in the solicitation or acceptance of buy or sell orders for futures or options on futures for commissions or other assets from customers.
- Commodity pool operators (CPOs)
- Individuals or organizations that solicit or receive funds to use in the operation of a commodity pool, syndicate, investment trust, or other similar fund, specifically for trading in futures, swaps, or options markets. Unless exempted, CPOs must register with the CFTC and follow CFTC regulations, including disclosure obligations. CPOs that wrongly claim to be exempt from registration may face CFTC enforcement actions.
- Exchanges
- Foreign currency trading (Forex) markets, including markets for spot transactions, swaps, currency options, and futures contracts.
- Designated Contract Markets (DCMs) and Exchange Traded Derivatives
- What Types of Fraud can be Reported Under the CFTC Whistleblower Programs?
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Generally, fraud can occur at every level of the derivatives markets where wrongdoers attempt to avoid the Commodity Exchange Act and regulations to defraud others and/or obtain an unlawful advantage. Commodities and Derivatives market fraud occurs primarily through misrepresentations and omissions about the value, cost, or nature of the derivative, or services, including accounting and financial reporting.
The kinds of fraudulent activity in the derivatives markets that a Whistleblower may report under the CFTC Whistleblower Program include, but are not limited to:
- Corrupt Practices: bribes or kickbacks in the commodities or derivatives markets.
- Fraud or deceit through misrepresentations or omissions in connection with the sale of commodities or derivative contracts.
- Manipulation or fixing of benchmark rates such as LIBOR, ISDAFIX and global foreign exchange rates.
- Illegal, off-exchange precious metals transactions.
- False statements to the CFTC or the National Futures Association.
- Manipulation of price or volume of commodities or derivatives to improperly mislead market participants.
- Front-running: trades placed in front of and based on advanced non-public knowledge of a client’s order.
- Spoofing: placement of trade orders with the intent to cancel before execution, thereby creating an untrue picture of actual demand for or supply of the commodity or derivative.
- Pump and Dump: artificially boosting the price of a commodity or derivative through false, exaggerated or misleading positive statements, then selling the position at the puffed-up higher price.
- Wash Trading: selling a quantity of a particular security to themselves, either directly or through a third party, to give the impression that there is higher demand for that commodity or derivative.
- Window Dressing: deliberately placing orders in such a way as to artificially increase the closing price of a commodity or derivative.
- Theft or Misappropriation of Funds or Commodities.
- Making fraudulent misrepresentations and/or omitting material information to actual and prospective investors or pool participants, including claiming falsely to be exempt from the CFTC’s registration requirement.
- Fraudulent trading platforms and unregistered exchanges.
- Insider Trading: trading of commodities or derivatives based on non-public, confidential material information to gain an unfair advantage over other investors and market participants.
- Failure to Register as a Derivative Intermediary who acts on behalf of another person in connection with trading futures, swaps, or options. Those subject to registration includes:
- Associated Persons (AP)
- Commodity Pool Operators (CPO)
- Commodity Trading Advisors (CTA)
- Floor Brokers (FB)
- Floor Traders (FT)
- Futures Commission Merchants (FCM)
- Introducing Brokers (IB)
- Principals
- Retail Foreign Exchange Dealers (RFED)
- Swap Dealers (SD)
- Registrants failing to comply with the Bank Secrecy Act (BSA) or related regulations.
- Forex Fraud: Ponzi Schemes, Pyramid Schemes, or High-Yield Trading Programs
- Soliciting money to invest in Forex with the promise of guaranteed returns. Payment on investments from funds derived from new investors, rather than from legitimate investment profits.
- Fraudulent business models based on promises of fund payment tied exclusively to one’s ability to enroll future members in the scheme, instead of actual profits from the business.
- Promoting fraudulent Forex trading platforms by promising too good to be true returns.
- Digital Asset Fraud – derivatives markets, including futures or options contracts, that use digital commodities (such as bitcoin or ether) as the underlying asset.
- Pump and Dump: artificially boosting the price of a digital asset derivative through false, exaggerated or misleading positive statements, then selling the position at the puffed-up higher price.
- Ponzi Schemes: Soliciting money to invest in digital asset derivatives with the promise of guaranteed returns. Payment on investments from funds derived from new investors, rather than from legitimate investment profits.
- Precious Metals Frauds
- Illegal unregistered investment advisors fraudulently persuade customers to rollover their retirement savings into Self-Directed IRAs, then encourage customers to buy as much precious metal as possible to obtain lucrative commissions and profits from the transactions.
- Carbon Market Frauds: fraud or manipulation related to carbon markets, carbon allowances, and other environmental commodities products linked to futures contracts.
- Accounting Fraud
- Accountants deceptively manipulate or fail to identify false information made by clients regarding their financial status.
- Investment and Financial Professional Violations.
- Acting without required licenses.
- Failure to disclose registration status, services offered, fees, conflicts of interest.
- Failure to safeguard client information from disclosure.
- Putting their own interests before the interests of their clients (i.e., inappropriate recommendations for higher fees, unauthorized trading, or knowingly recommending unsuitable investments).
- Digital Investment Schemes and Fraud
- Sale of derivatives for unregistered Crypto currencies, securities, and commodities.
- Sale of derivatives for Non-Fungible Token (NFT) schemes.
- Who Qualifies as a CFTC Whistleblower?
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A CFTC Whistleblower includes any person (including persons living outside the United States and non-U.S. citizens) who voluntarily provides in writing original information not previously known to CFTC about a possible violation of the Commodity Exchange Act that has occurred, is ongoing or is about to occur.
- A Whistleblower’s information is provided “voluntarily” if it is provided to the CFTC or another regulatory or law enforcement authority before a request, inquiry, or demand that relates to the same subject matter is directed to the Whistleblower or their legal representative. Information provided to the CFTC or another regulatory or law enforcement authority after receiving a request for that same information from the CFTC or other government agency may not be found to have been provided voluntarily.
- “Original Information” is information derived from the Whistleblower’s independent knowledge (facts known to the Whistleblower that are not derived from publicly available sources) or independent analysis (evaluation of information that may be publicly available, but which reveals an analytical result that is not generally known) that is not already known by the CFTC.
- Certain information is not deemed to be “original information,” including information subject to the attorney-client privilege or information learned because the Whistleblower held certain titles at a company (such as attorney, corporate officer, director, auditor, or compliance officer) and learned the information from another person or through the entity’s internal reporting systems. These individuals face additional hurdles as potential Whistleblowers and must carefully analyze how they came to learn the information they want to report and any obligations they may have to report that information through other processes.
- For a submission to qualify as “independent analysis,” the Whistleblower must do more than identify publicly available information and state that the information itself suggests a fraud or other violations. To qualify, the Whistleblower must use the publicly available materials to show important insights into the possible violations of the Commodity Exchange Act that are not readily apparent from the face of the materials. For example, a detailed and highly sophisticated analysis or an analysis in non-obvious ways of the publicly available information that reveals patterns indicating possible violations that would not be otherwise inferable.
- Whistleblowers do not have to be “insiders” or employees of a company or have been harmed by the commodity or derivative fraud in question to submit information about a company.
- The illegal conduct does not have to take place in the United States as long as it affects the U.S. commodities or derivatives market.
Specific, credible, and timely information, including examples of fraudulent transactions or non-public materials, is more likely to be investigated by the CFTC.
- Are There Any Rules About Which Employees or Insiders Can be a Whistleblower?
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Yes. For certain employees or individuals in certain positions in a company, the Whistleblower Program has rules that impose additional requirements before someone may become a Whistleblower.
For a narrow category of individuals, the CFTC does not consider their information to be “original” and derived from “independent knowledge” or “independent analysis” due to their status and/or role with the company or how they obtained the information. This includes certain company officials and third parties who learned of the wrongdoing:
- From sources generally available to the public such as corporate filings and the media, including the Internet;
- Through a communication that was subject to the attorney-client privilege, unless the disclosure is otherwise permitted by the applicable federal or state attorney conduct rules;
- In connection with the legal representation of a client on whose behalf the Whistleblower, or the Whistleblower’s employer or firm, has been providing services, and the Whistleblower seeks to use the information to make a Whistleblower submission for the Whistleblower’s own benefit, unless disclosure is authorized by the applicable federal or state attorney conduct rules;
- Because the Whistleblower was an officer, director, trustee, or partner of an entity and another person informed the Whistleblower of allegations of misconduct, or the Whistleblower learned the information in connection with the entity’s processes for identifying, reporting, and addressing possible violations of law;
- Because the Whistleblower was an employee whose principal duties involved compliance or internal audit responsibilities; or
- By a means or in a manner that violates applicable Federal or state criminal law.
However, a Whistleblower who is an internal company officer, director, trustee, partner, auditor, compliance officer, or an employee with compliance or internal audit responsibilities may still be eligible to be a Whistleblower, and to receive an award, if they satisfy one of the following:
- The Whistleblower reasonably believed that disclosure of the wrongful conduct to the CFTC was necessary to prevent likely and substantial injury to the financial interest or property of the entity or investors;
- The Whistleblower reasonably believed that the company was engaging in conduct that would impede an investigation of the misconduct (i.e., destroying documents, improperly influencing witnesses); or
- The Whistleblower, before reporting the wrongdoing to the CFTC, waits at least 120 days from:
- when they provided the information to the entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or their supervisor, or
- when they received the information, if the Whistleblower received the information under circumstances indicating that the entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or their supervisor was already aware of the information.
- Am I Required to Report Wrongdoing Internally Before Going to the Government?
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It depends. If the Whistleblower is a company officer, director, trustee, partner, auditor, compliance officer, or an employee with compliance or internal audit responsibilities, then there is a requirement to report internally first and to wait 120 days before reporting to the Government. See “Are There Any Restrictions about which Employees or Insiders Can be a Whistleblower?” for more information if this applies to you.
For anyone else, there is no requirement to report internally to the company in order to receive an award. However, participation in an internal compliance program is a factor considered in determining the appropriate award and may increase the award amount. An experienced Whistleblower Attorney will help a potential Whistleblower decide whether to report internally first before reporting to the CFTC.
If the Whistleblower elects to report internally, then they must report to the CFTC within 180 days of reporting internally to be eligible for an award. When the Whistleblower reports the information to the CFTC within 180 days of reporting internally, then:
- the CFTC will consider the Whistleblower’s information reported internally to be original information under the CFTC Whistleblower Program (provided it is not already known by the CFTC); and
- the CFTC will consider the Whistleblower’s information to be reported to the CFTC on the date it was reported internally and preserve the Whistleblower’s “place in line” in the event another Whistleblower provides the same or related information to the CFTC in the interim.
If the Whistleblower’s company self-discloses to the government either the original information or the results of an investigation initiated by the Whistleblower’s internal report, then the CFTC will give the Whistleblower credit for all information provided by the company to the government, which may include information not provided by the Whistleblower in their internal report. To receive this benefit, the Whistleblower must also report to the CFTC within 180 days of reporting internally.
The above “lookback” provision and procedure applies to original information voluntarily provided by the Whistleblower to the CFTC, Congress, any other authority of the federal government, a state Attorney General or securities regulatory authority, any registered entity, registered futures association, or SEC defined self-regulatory organization, foreign futures authority, or the Public Company Accounting Oversight Board, when the Whistleblower also reports the same information to the CFTC within 180 days of providing it to one of these authorities.
- How Does a Whistleblower Submit Information Under the CFTC Whistleblower Program?
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To be eligible for an award, Whistleblowers must submit their information directly to the CFTC using the CFTC’s “Tip, Complaint, or Referral,” or “TCR,” forms and procedures. The Whistleblower must personally execute a declaration under penalty of perjury on these forms. Unlike the False Claims Act, Whistleblowers do not file a complaint in any court.
There is no guarantee that the CFTC will proceed with an enforcement action with a Whistleblower’s original information as their enforcement priorities change. However, successful CFTC enforcement actions share certain characteristics that can increase the chances that the Whistleblower’s original information will lead to a successful CFTC enforcement action and an award, including:
- The more specific the information is, the easier it is for the CFTC to follow the lead in opening an investigation or pursuing a new line of inquiry.
- The more credible the information is, the more likely it is that the CFTC will pursue it.
- The more timely the information, the better able the CFTC is to discover any misconduct and put a stop to it before further damage can be done to markets and innocent participants.
If the Whistleblower provides information that leads to a successful CFTC action resulting in an order of monetary sanctions exceeding $1 million, the Whistleblower will have the opportunity to apply for a Whistleblower reward.
Generally, in CFTC enforcement actions, the applicable statute of limitations is five (5) years, beginning when the conduct giving rise to the claim occurred, not when it was discovered by authorities.
- What are the Whistleblower Rewards?
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To be eligible for an award, information provided by Whistleblowers must lead to a successful CFTC action resulting in an order of monetary sanctions exceeding $1 million.
The determination of the amount of an award is at the discretion of the CFTC. Assuming all eligibility conditions are met for a Whistleblower award, the CFTC will then decide the percentage amount of the award. The amount of award will be at least 10% and no more than 30% of the total monetary sanctions that the CFTC and other authorities were able to collect. The percentage awarded in connection with a CFTC action may differ from the percentage awarded in connection with a related action.
When the CFTC makes awards to more than one Whistleblower in connection with the same action or related action, the CFTC will determine each Whistleblower’s individual award percentage. The total amount awarded to all Whistleblowers in the aggregate will be at least 10% and no greater than 30% of the amount the CFTC or other authorities collect.
Whistleblowers may receive a reward of not less than 10% and up to 30% of any government recovery. In determining the award percentage, the CFTC considers factors such as the significance of the Whistleblower’s information and the extent of the Whistleblower’s assistance.
The CFTC will also consider the following factors in determining the amount of an award based on the facts and circumstances of each case:
- Factors that may increase the award percentage:
- The significance of the information provided by the Whistleblower.
- The timeliness of the Whistleblower providing the information to the CFTC.
- The extent of the Whistleblower’s assistance.
- Law enforcement priority in deterring violations of a certain area of the Commodity Exchange Act.
- The extent to which the Whistleblower participated in the company’s internal compliance systems.
- Factors that may reduce the award percentage:
- The Whistleblower’s participation in, or culpability for, the violations reported.
- If the Whistleblower unreasonably delayed reporting the violations to the CFTC.
- If the Whistleblower interfered with the company’s internal compliance and reporting systems (i.e., making false statements that hindered the compliance department’s efforts to investigate possible wrongdoing).
The Whistleblower can appeal a Final Order of the CFTC regarding their award claim to an appropriate federal court of appeals no later than 30 days after the Final Order is issued.
- Factors that may increase the award percentage:
- How Does a Whistleblower’s Tip “lead to a successful CFTC action”?
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To be eligible for an award, a Whistleblower’s tip must “lead to a successful CFTC action,” which may be found if their tip causes the CFTC to:
- open a new investigation, re-open a previously closed investigation, or pursue a new line of inquiry in connection with an ongoing investigation; and
- the CFTC brings a successful enforcement action based at least in part on the tip provided.
The Whistleblower may be eligible for an award if the information provided to an ongoing investigation significantly contributes to the success of the CFTC enforcement action.
The Whistleblower may also be eligible for an award if the information was reported internally first to the company and the company later reports the Whistleblower’s information to the CFTC or reports the results of an internal investigation to the CFTC that was prompted by the Whistleblower’s information, provided that the Whistleblower also reports directly to the CFTC within 180 days of the internal report.
- How Does a Whistleblower Know to Apply for an Award?
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The CFTC will post on the CFTC Whistleblower Program website a Notice of Covered Action for all actions exceeding $1 million in sanctions. All Whistleblowers who believe they voluntarily submitted original information used in a Covered Action may then apply for a Whistleblower Award in the action. The responsibility to timely apply for an award before the deadline lies solely with the Whistleblower.
The CFTC Whistleblower Program also provides an email update to enrollees when the Notices of Covered Action is updated on the CFTC Whistleblower Program website. However, the CFTC Whistleblower Program does not post information about “Related Actions” brought by other government agencies.
- How Does a Whistleblower Apply for an Award in an Action?
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To apply for an Award, a Whistleblower must timely complete and return Form WB-APP to the CFTC’s Office of the Whistleblower by mail, email or fax within 90 days from issuance of the Notice of Covered Action. A Whistleblower’s award application must explain in detail all factual issues in support of their award eligibility, including when the Whistleblower learned of the wrongful conduct, if there was a delay in reporting, and any involvement in the wrongful activity if applicable.
- What Happens When Tips Are Used in non-CFTC Related Actions or Other Whistleblower Programs?
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CFTC Whistleblowers may also be eligible to receive an award for orders obtained by other authorities in actions that are related to a successful CFTC action, known as “Related Actions,” if the Related Action is based on the same information provided by the Whistleblower in the CFTC Covered Action.
A “Related Action” under the CFTC Whistleblower Program is:
- A judicial or administrative action brought by either:
- The Attorney General of the United States;
- An appropriate regulatory department or agency of the Federal Government, acting within its scope of its jurisdiction (i.e., the Federal Energy Regulatory Commission, National Futures Association, and others);
- A State criminal or appropriate civil agency, acting within the scope of its jurisdiction; or foreign futures authority; and
- Is based on the same original information that the Whistleblower voluntarily submitted to the CFTC and led to a successful resolution of the CFTC action.
The CFTC will not make an award to a Whistleblower in a Related Action if the Whistleblower has already been granted an award by the Securities and Exchange Commission (SEC) Whistleblower Program. If the SEC has previously denied an award to the Whistleblower in a Related Action, the Whistleblower will be precluded from relitigating any issues before the CFTC that the SEC resolved against the Whistleblower as part of the award denial.
- A judicial or administrative action brought by either:
- How Does a Whistleblower Apply for an Award for a Related Action?
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If a final order imposing monetary sanctions has been entered in a Related Action when the Whistleblower submits their CFTC award application, then the Whistleblower must also submit their claim for the Related Action award on Form WB-APP (Section E) used for the CFTC Covered Action. If the final order has not been entered yet in the Related Action, then the Whistleblower must submit another Form WB-APP within 90 days from the date of entry of the final order in the Related Action.
- What Happens if the Wrongdoer Does Not Pay All of the Sanctions Ordered?
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Where sanctions collected in a Covered Action or Related Action are less than the full amount ordered, any Whistleblower award will amount to the percentage determined by the CFTC multiplied by the sanctions collected. Sanctions collected in a Covered Action or Related Action are only used for purposes of calculating awards to Whistleblowers. Awards are paid from the CFTC Customer Protection Fund and do not reduce the amounts otherwise ordered to go to harmed investors. A Whistleblower remains eligible for a pro rata award payout, even if the CFTC is unable to collect the full amount of sanctions ordered. If at a later point in time the CFTC collects more money under a Covered Action, then the Whistleblower will get the same percentage of the additional amount collected.
- Can Whistleblowers Remain Anonymous Under the CFTC Whistleblower Program?
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By properly submitting your information through an experienced Whistleblower attorney, like those at Keller Grover, you need not disclose your identity to the CFTC at all. Your attorney will submit your information to the CFTC through the Form TCR by completing the required attorney certification. You will maintain complete anonymity. Your attorney will interact with the CFTC on your behalf. All that is required is that you must provide your attorney with a completed hard-copy Form TCR signed by you under penalty of perjury at the time of your anonymous submission.
Additionally, Dodd-Frank prohibits the CFTC and its staff from disclosing any information that reasonably could be expected to reveal the identity of a Whistleblower. For example, information that could reasonably be expected to reveal a Whistleblower’s identity is redacted from CFTC orders granting or denying awards before they are issued publicly. Protecting Whistleblower confidentiality is a cornerstone of the Program. Without it, Whistleblowers would be less incentivized to come forward and report their information to the agency.
- If a Whistleblower Reports Wrongdoing, Is There Any Protection Against Retaliation?
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Employers may not discharge, demote, suspend, threaten, harass, or in any way discriminate in the terms and conditions of employment an employee who has reported potential wrongdoing in violation of the Commodity Exchange Act to the CFTC.
The Commodity Exchange Act provides the Whistleblower a private right of action and authorizes the CFTC to take enforcement actions against companies who retaliate against Whistleblowers. However, the CEA anti-retaliation protections apply only to Whistleblowers who reported wrongdoing to the CFTC.
Whistleblowers who report potential CEA violations to the CFTC in writing (TCR Form) and then experienced retaliation because of the report, may sue their employer in federal court and seek back pay (with interest), reinstatement, reasonable attorneys’ fees, and reimbursement for certain costs in connection with the litigation. The Whistleblower must bring the action within two (2) years of the retaliation.
Additionally, the CFTC is authorized to take enforcement against employers that retaliate against employee Whistleblowers.
- What if a Whistleblower Signs an Agreement Containing Confidentiality Provisions?
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Employees and outside contractors are often subject to Confidentiality Agreements (CAs), which are commonly found in employment, severance, and settlement contracts.
However, since the enactment of the CFTC Whistleblower Program, CAs may not obstruct or interfere with a Whistleblower’s right to report potential Commodity Exchange Act violations to the CFTC.
Confidentiality agreements and similar non-disclosure provisions in agreements cannot prohibit individuals from blowing the whistle on possible Commodity Exchange Act violations to the CFTC. Specifically, CEA Rule 165.19 provides:
- The Whistleblower’s rights and remedies provided by the Commodity Exchange Act “may not be waived by any agreement, policy, form, or condition of employment, which includes confidentiality agreements, non-disclosure agreements, and the like.
- Additionally, “[n]o person may take any action to impede [a Whistleblower] from communicating directly with the [CFTC] about a possible violation of the Commodity Exchange Act, including by enforcing, or threatening to enforce, a confidentiality agreement or predispute arbitration agreement.”
(underline emphasis added)
Ultimately, whether a particular provision in a proffered agreement violates the CEA’s Rule is going to depend on the specific language in it.
- How Does the CFTC Whistleblower Program Differ from the SEC Whistleblower Program?
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All CFTC Whistleblower awards are paid from the CFTC Customer Protection Fund established by Congress and financed entirely through monetary sanctions paid to the CFTC by violators of the CEA. No money is taken or withheld from harmed investors to fund whistleblower awards.
All SEC Whistleblower awards are paid from the SEC Investor Protection Fund established by Congress and financed entirely through monetary sanctions paid by securities law violators to the SEC. The Investor Protection Fund was established in August 2010 with approximately $452 million of non-exchange revenue that was transferred to the fund from the SEC’s disgorgement and penalties deposit fund. If the Investor Protection Fund balance drops below $300 million, the SEC will replenish it by identifying qualifying receipts for deposit.
While both the CFTC and SEC Funds are financed by monetary sanctions, the SEC is a larger agency with more expansive enforcement oversight that has historically obtained much larger and more frequent monetary sanctions from wrongdoers than the CFTC.
Additionally, the CFTC Customer Protection Fund does not have an automatic funds replenishment mechanism like the SEC Investor Protection Fund. Moreover, the CFTC Fund is capped at $100 million with the directive that any money collected and retained by the CFTC exceeding the $100 million threshold are to be deposited into the general fund of the U.S. Treasury, not retained in the CFTC Fund. Thus, awards from the CFTC Fund can be a more time-consuming and complicated process than the near automatic replenishment for the SEC Investor Protection Fund.
- Helpful CFTC Whistleblower News and Articles
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