Global Currency Settlements Could Create First Major Test of Related Actions for Dodd-Frank Whistleblowers.


The Office of Comptroller of the Currency (OCC) has just added $950 million to the $3.1 billion settlement announced earlier by the United Kingdom Financial Conduct Authority (FCA) and the U.S. Commodity Futures Trading Commission (CFTC), bringing total fines against six banks by four regulators (including Swiss Finma) to $4.3 billion.

The OCC settlement for currency rigging included $350 million fines each against JPMorgan Chase and Citigroup. Bank of America, not included in the earlier settlements by the CFTC or FCA, settled with the OCC for $250 million.

Reports are that the New York State Department of Financial Services (NYDFS) believed the fines too weak and will pursue its own settlement (or prosecution) with the banks it regulates. Pressure by NYDFS reportedly led Barclays to pull out of today’s FX settlement.

First Major Test of a Related Action Award?

The Dodd-Frank Act contemplated payments to whistleblowers when agencies without a compensation program benefit as a result of a tip to the SEC or CFTC. Dodd-Frank requires the SEC and CFTC to also pay rewards on “related actions” by certain agencies as well as on their own enforcement actions.

Of the six government agencies reported to be a part of settlement negotiations, only the CFTC has an incentive program for whistleblowers. There has been a proposal for the NYDFS to pay rewards but the measure has not passed the New York State legislature. The Department of Justice has been investigating criminal charges but this is not covered by either of its incentive programs (the False Claims Act or FIRREA).

The CFTC defines a related action as “any judicial or administrative action brought by an entity listed in § 165.11(a) that is based upon the original information voluntarily submitted by a whistleblower to the Commission pursuant to § 165.3 that led to the successful resolution of the Commission action.” § 165.2(m). Related actions include judicial or administrative actions brought by the Department of Justice, a department or agency of the Federal Government, a state civil agency and a foreign futures authority. § 165.11(a). Although not named specifically, this would appear to cover fines by the OCC, DOJ, NYDFS, FCA and Finma.

The dollar amounts involved in this settlement mean that any whistleblower that emerges could stand to gain millions of dollars depending on how the CFTC pays out for a “related action”. Additionally, as the related action settlements are double the CFTC settlement, how it is handled will ultimately matter a great deal in the size of the award. Will it pay out the same percentage as for an enforcement action by the CFTC? Is there other language which could impact the decision to payout for a related action in this case?

The $30 million reward for the international whistleblower issued by the SEC in September 2014 involved an unspecified related action. However, the award proceeding order did not include any special discussion of how the process for the related action worked. The decision also did not discuss the size of the related action compared to the SEC enforcement.

Stay tuned.