The CFTC whistleblower program is similar to the program offered by the Securities and Exchange Commission although there are a few key differences between the laws. The number and size of rewards from the CFTC has also been smaller so far, but the program holds the potential to bring massive enforcement actions due to the size of the markets under its regulation. Our whistleblower attorneys can assist you with evaluating your options for reporting to the CFTC – please call 1-800-590-4116 to speak to a McEldrew Young attorney in a confidential initial consultation.
The initial tip to the CFTC must be on Form TCR. There is an online submission form but the form can also be mailed or faxed to them. We handle this process for our clients. Once the form has been submitted, the Whistleblower Office takes the tip and assigns it to the appropriate agents for investigation and enforcement. They begin to investigate the information provided. Sometimes the regulator will need to gather further information from the whistleblower during the course of its investigation. The process of investigation can be lengthy. If the tip has credibility, the agency will subpoena documents and emails from the company. Following the investigation, the CFTC will either pursue settlement talks or an enforcement action.
Dodd-Frank authorizes the CFTC to pay an award when the agency recovers at least $1 million in an enforcement action resulting from the information submitted by the individual to the government. The amount is set at between 10 and 30 percent of the recovery. The Office of the Whistleblower evaluates claims for rewards. Following a successful enforcement action, the office issues a notice providing 90 days to submit an application for a reward. The agency evaluates the action to determine whether the individual is eligible and complied with the rules of the program. If a monetary award will be made, they also consider the appropriate percentage of the reward according to the guidelines. There is a process for appeals following the determination.
There are complex rules set forth by Congress and the CFTC to determine when an individual may obtain a reward from the program.
Information must be:
- provided voluntarily
The individual may not be:
- certain government or self-regulatory personnel
- someone convicted of a crime in connection with the reported conduct.
There are other requirements. The individual must also comply with any special reporting requirements, such as the waiting period for compliance professionals.
THE TYPES OF CASES THE CFTC IS LOOKING FOR:
The CFTC program is not like the False Claims Act. It requires the agency to prosecute the enforcement action against the company. So one of the best ways to figure out whether it is a case they will be interested in pursuing is to look at the types of actions they have pursued in the past and the misconduct they are investigating right now. We have listed some representative examples below for you. Obviously, the Government is always looking for new misconduct. So don’t let the lack of a past enforcement action in your area stop you from contacting us. We will investigate your evidence and determine whether we think it is something that the CFTC would be interested in pursuing.
The CFTC is engaged in several major investigations. These investigations typically involve multiple companies in an industry and may extend for years before a decision is made to pursue an enforcement action or close the investigation. We have currently identified the following areas of investigation:
If you have evidence that will allow the CFTC to open up a new line of investigation, pursue enforcement against a different company, or materially contribute to its investigation, the U.S. Government would be interested in receiving a whistleblower tip from you.
Frequent Enforcement Actions
These are some of the enforcement actions that the CFTC brings on a regular basis:
Other activities the CFTC may be interested in include: Bitcoins, fraudulent misrepresentations, misappropriation, embezzlement, non-competitive trades, minimum capital requirements, record-keeping, customer segregated funds, and failure to supervise employees in operations or trade processing.
If you have evidence of a financial institution, trader or company engaged in a violation of the Commodity Exchange Act or the CFTC rules, please contact us for additional information about reporting it to the U.S. Government.
UBS – Interest Rate Manipulation – December 2012
The CFTC ordered UBS to pay $700 million for interest rate manipulation in December 2012. UBS made false submissions to interest rate benchmarks in order to benefit their derivatives positions or thwart negative media coverage. The CFTC specifically cited Yen and U.S. Dollar LIBOR rates. The Yen LIBOR rate submissions were manipulated by an influential senior trader in the Yen market who influenced the rate submissions of UBS and other banks in order to benefit his trading position. The U.S. Dollar LIBOR submissions were issued at the direction of managers in UBS Group Treasury and Asset and Liability Management to maximize public perception of UBS during the financial crisis. Initially, low rates were submitted in order to suggest that UBS was a strong bank. When the Wall Street Journal questioned its low submissions in April 2008, their rate submissions were subsequently in the middle of the pack despite events suggesting that the submissions were too low.
Past Enforcement Actions
Here are a few of the major actions brought by the CFTC recently.
Bank of America – Futures Trade Front Running – January 2014.
The CFTC is investigating BOA for front running futures trades. The FBI announced an investigation of market manipulation and front running of Fannie Mae and Freddie Mac orders by a U.S. bank and Canadian bank in January 2014. A Reuters news article concluded the bank practices under investigation happened at Bank of America.
DRW – Interest Rate Price Manipulation – November 2013
DRW Investments was charged by the CFTC with price manipulation in November 2013. It allegedly manipulated the settlement price on a Three-Month Interest Rate Swap Futures Contract by regularly placing bids which became the settlement price according to exchange rules. The bids never resulted in a transaction.
MF Global – Client Funds Segregation – November 2013
A Federal Court ordered MF Global Inc. to pay over $1 billion in restitution to customers and a $100 million sanction as part of a CFTC enforcement action. MF Global violated a number of laws and regulations when it used customer funds to support its proprietary trading operations in October 2011.
J.P. Morgan – Credit Default Swap Price Manipulation – October 2013
The financial institution agreed to pay $100 million to the CFTC in October 2013 to resolve claims of market manipulation following efforts to avoid losses in its derivatives portfolio by London traders. Traders sold a large number of credit default swaps in a short period in order to avoid larger losses on their short position from rising prices.
Confidentiality and Anonymity
The identity of a whistleblower is treated as confidential information by the CFTC and protected from disclosure except in limited circumstances. Whistleblowers who decide that they need additional protection from the disclosure of their identity can report their tip anonymously. Only if they are entitled to a reward will the whistleblower need to disclose their identity to the CFTC.
Worried About Your Job?
You must file Form TCR with the CFTC before you will be protected from retaliation. We can help you file and get protected. Learn more about their retaliation protections.
Do You Work in Compliance?
We can help you navigate the additional legal hurdles for compliance staff to receive a reward. Please contact us as soon as possible to discuss the rules that apply to you.
CFTC and Whistleblower News
For a confidential consultation regarding reporting violations of the Commodity Exchange Act and/or CFTC regulations under the whistleblower program, call 1-800-590-4116.