CFTCs New Whistleblower Office Opens for Business
By Thomas A. Zaccaro, Adam D. Schneir, Eleanor K. Mercado and Kai S. Bartolomeo
On October 24, 2011, the Commodity and Futures Trading Commissions (CFTC) whistleblower rules became effective and its Whistleblower Office opened for business. The new Whistleblower Office is charged with implementing the CFTCs recently adopted whistleblower rules mandated by Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and Section 23 of the Commodity Exchange Act (CEA). Under the new rules, the CFTC may pay an award to an eligible whistleblower who voluntarily provides the agency with original information about a violation of the CEA that leads to a successful enforcement action.
The CFTC first published its proposed rules in December 2010 and invited public comment. During the comment period, industry groups urged the CFTC to require a whistleblower to first report the information internally to an entity to be eligible for an award in order to preserve the integrity of internal reporting systems. After the public comment period closed, the CFTC revised the proposed rules to promote harmonization with the Securities and Exchange Commissions (SEC) whistleblower rules and program, which became effective on August 12, 2011, and to respond to concerns raised during the public comment period.
The final rules, which largely mirror the SECs whistleblower rules, were adopted by the CFTC on August 4, 2011 in a 4-1 vote. While the final rules do not require a whistleblower to first internally report the information, they do provide incentives for whistleblowers to use a firms internal compliance system as part of the reporting process and disincentives for whistleblowers who bypass or thwart these systems.