We are approaching the end of the U.S. Government’s 2017 fiscal year on September 30th. We haven’t written too much about the CFTC whistleblower program this year because there have only been a handful of newsworthy events in the enforcement of the Commodity Exchange Act. However, after reading the news stories this week concerning the CFTC’s push for self-reporting of financial wrongdoing, we realized that there hasn’t been a single award determination yet in the first nine months of the calendar year. We thought it worth taking a look back at the CFTC Whistleblower program and what has happened over the past twelve months.
The CFTC typically receives only a fraction of the tips that is received by the SEC. Correspondingly, it has issued a smaller number of whistleblower awards. While the SEC program has paid out nearly $160 million to just over 45 whistleblowers since the Dodd-Frank Act, the CFTC has only paid approximately $11 million in four award determinations.
The CFTC hasn’t approved an award application since it announced its fourth whistleblower award on July 19, 2016. Such a delay isn’t too far out of the ordinary. There was one award in 2014, one award in 2015, and two awards in 2016 (including its largest for approximately $10 million). There had been some speculation that the CFTC program was beginning to show signs of picking up momentum.
However, the absence of any award denials in 2017 is definitely unusual. Looking back at the past few years, there were 25 denials in calendar year 2013, 5 denials in calendar year 2014, 5 denials in calendar year 2015, and 8 denials in calendar year 2016. For the government’s fiscal year 2016, there have been two denials of award applications (one in October and the other in November 2016).
One possible explanation for the absence of award determinations is the recent change in the CFTC Whistleblower rules. The CFTC proposed modifications to its whistleblower rules last year. After the comment period and further consideration, the new rules were adopted in May 2017. This could have resulted in some delay in the consideration of award applications as well as implementation issues regarding the new regulations.
Another potential explanation is the changing of the guard with the incoming Presidential administration. CFTC Chairman Timothy Massad tendered his resignation to President Obama in early January effective on January 20, 2017. J. Christopher Giancarlo was designated Acting Chairman on January 20th and confirmed in August with two other commissioners – one Democrat and one Republican.
One explanation that we can reject is the absence of qualifying enforcement actions. There have been 38 Notices of Covered Action issued in 2016 and 23 issued so far in 2017. So it appears that there has been a sufficient flow of enforcement actions over $1 million to ensure that there would have been at least some applications made by whistleblowers.
It also could be that they have made determinations but they simply haven’t been updating the website with them anymore.