The Commodity Futures Trading Commission's Whistleblower Program was created with the 2010 passage of the Dodd-Frank Act. The program rewards individuals who report possible Commodity Exchange Act (CEA) violations. The program also extends anti-retaliation protections for whistleblowers who file claims.
Whistleblowers who voluntarily report Commodity Exchange Act violations and whose information leads to a successful enforcement action that result in monetary sanctions exceeding $1,000,000. Awards to whistleblowers are paid out of the Congress-established CFTC Consumer Protection Fund. The Fund is financed by money seized by individuals who violated the Commodity Exchange Act. As of October 2021, the CFTC Whistleblower Program has awarded $300 million in whistleblower awards since it issued the first award in 2014.
History and operations
The Dodd-Frank Wall Street Reform and Consumer Act was passed in 2010 after the 2008 Great Recession. The Act aimed to reinforce financial regulation and empower the CFTC's authority to oversee the swaps market. The Dodd-Frank Act amended the Commodity Exchange Act's with adding Section 23, named the "Commodity Whistleblower Incentives and Protection." Section 23 and the rules and regulations the CFTC has issued to implement the section's provisions govern the Whistleblower Program. The section also sets out the rules and procedures prospective whistleblowers must follow to obtain an award. Of note, whistleblowers must "provide original information that leads to CFTC enforcement actions with total civil penalties in excess of $1 million." The Whistleblower Rules went into effect in October 2011 and were amended in July 2017.
According to the CFTC's 2021 annual report to Congress, the agency doled out 6 whistleblower awards that totaled over $3 million in the 2020 fiscal year, which ranged from October 1, 2020 through September 30, 2021. During the 2021 fiscal year, the CTFC Whistleblower Program issued 65 Final Orders addressing 74 whistleblower award applications and noted that numerous award recipients first made their disclosures to other agencies like the U.S. Securities and Exchange Commission.
All CFTC whistleblower awards are paid out of the Customer Protection Fund. On July 6, 2021, President Joe Biden signed emergency legislation into law that saved the CFTC Whistleblower Program from collapse. The program was on the brink of collapse because of a large whistleblower award that threatened to deplete the Customer Protection Fund. Thus, the emergency legislation addressed the crisis by creating a separate fund specifically for the CFTC's Office of the Whistleblower's operations. This new fund is separate from the fund out of which CFTC whistleblower awards are paid, ensuring that the Office of the Whistleblower can continue to function even if a whistleblower receives a large award.
The CFTC provides confidentiality and anti-retaliation protections to whistleblowers.
Notable awards
Violations
There are numerous violations on which individuals can blow the whistle to the CFTC. Below is a list of examples of violations that CFTC whistleblowers have blown the whistle on.
Corrupt practices
The CFTC states that the agency "will enforce the CEA provisions that encompass corrupt practices," which can include actions that "impact the prices in commodity markets that drive U.S. derivatives prices or that are used to manipulate benchmarks," "corrupt payments used to secure business in connection with regulated activities like trading, advising, or dealing in swaps or derivatives, paid out of funds investors believed were being used to invest," and "corrupt practices used to misappropriate material nonpublic information that traders would want to know." Other examples of corrupt practices include cases of bribes or kickbacks. In this section, the CFTC reminds readers that per the Whistleblower Rules, a whistleblower is defined as one or more individuals: thus, this excludes "a company or another entity" from the Rules' definition of "whistleblower." The CFTC provides instructions for individuals who want to report fraud in each individual section.
Spoofing
Spoofing is a practice in which a trader "places an order in a futures market with the intention to cancel the order prior to execution." The intended outcome of spoofing is to manipulate the appearance of supply or demand and lead other traders to make decisions in the spoofer's favor, and spoofing "is a federal crime punishable by up to 10 years' imprisonment per violation."