ISDAfix Whistleblowers: Report Information to the CFTC

The CFTC has been investigating a number of banks for improper manipulation of the ISDAfix since November 2012.  The media reported that the regulator had more than 1 million emails and taped phone calls to review.  If you have information that may assist with the investigation, your statement and any evidence that you have can be submitted to the U.S. Government through the CFTC whistleblower program.

The CFTC has already demonstrated its commitment to pursuing banks for interest rate manipulation with more than $1 billion in penalties related to LIBOR.  The ISDAfix has been called the “Next LIBOR” in the media because of similarities in the facts.  If you have information about misconduct related to the ISDAfix, a McEldrew Young attorney can guide you through the process of reporting it.

Overview

About the CFTC Investigation

In November 2012, the CFTC issued subpoenas to a number of financial institutions seeking documents, emails and recordings concerning their involvement with the ISDAfix.

In 2013, Bloomberg reported that the CFTC has reviewed recorded phone calls and emails indicating that traders at some banks ordered brokers to buy or sell interest rate swaps to a certain level so that they could benefit in separate derivatives transactions made between the banks and clients.

The CFTC is also reportedly investigating whether ICAP employees delayed the entry of swaps pricing.  There have been allegations made by a former broker that there were intentional delays in the reporting of the pricing for some swaps trades into the system.

The CFTC is also reportedly investigating whether ICAP employees delayed the entry of swaps pricing.  There have been allegations made by a former broker that there were intentional delays in the reporting of the pricing for some swaps trades into the system.

A lawsuit filed in September 2014 by a pension fund also accused the banks of using online chat programs to collude and manipulate the rate similar to the allegations that came out of the LIBOR investigation.  Although we have not seen reports that this is part of the government’s investigation, it seems likely that it is also part of the review.

The derivatives regulator reported some of the findings from its investigation to the Department of Justice, according to a 2014 Bloomberg article.  The CFTC found evidence of criminal behavior during its investigation into the manipulation of ISDAfix and passed it on for further information and possible criminal prosecution.

About the ISDAfix

The ISDAfix is a benchmark rate for fixed interest rate swaps frequently used by pension funds. It is relied upon in corporate bonds, the swaptions market (options on market) and asset valuation of pensions.  Derivatives products worth trillions of dollars are influenced by the ISDAfix rate.  to establish borrowing costs for in a variety of products, including pension annuities and real estate construction projects.

The rates were set by submissions from a group of banks.  During the window for calculating the rate, transactions of a certain value were reported to either Thomson Reuters or ICAP (an electronic broker).  The four highest and lowest submissions were removed and the remaining rates averaged to determine the next day’s fix.

It is Not Too Late To Help

Provide New Information

The CFTC will accept assistance from whistleblowers even though it is already pursuing an investigation into the industry.  If you are aware of information that might cause the CFTC to explore a new line of investigation, or otherwise materially contribute to the enforcement action, please contact Eric Young or another attorney at McEldrew Young immediately to discuss your information.

For example, a whistleblower brought information the the Department of Justice concerning the actions of a bank during the mortgage crisis.  The DOJ had been in settlement talks with the bank.  The individual was able to point the investigators in a different direction – they had been looking in the wrong place and hadn’t discovered the most important information.  His information eventually became central to the subsequent investigation and settlement under FIRREA and the False Claims Act.

The investigation may have been going on for some time now, but that doesn’t mean that your information won’t have value.  The U.S. Government frequently needs whistleblowers to help point them in the right direction while investigating a group of companies.

Already helping the investigation?

If you have been helping the CFTC and have not yet filed the Form TCR, we can help ensure that you fulfill the technical requirements to earn a reward under the terms of the whistleblower program.

The Benefits of Reporting

The Right Thing to Do

Whistleblowers have become an increasingly important tool for law enforcement agencies.  Without tips from individuals with non-public information, a company’s violation of the securities laws and fraud against investors may go unnoticed for years.  In order to facilitate disclosures, the CFTC allows anonymous reporting and takes measures to protect the identity of its whistleblowers.

Whistleblower Rewards

The CFTC will pay eligible whistleblowers a reward of between 10 and 30 percent of the amount recovered from enforcement actions over $1 million.  The program was authorized by Congress and the President in the Dodd-Frank Act.

Retaliation Protections

According to CFTC Rules, the retaliation protections offered to whistleblowers begin when an individual files Form TCR with the agency.  It is important to file the initial tip in order to be covered in case of retaliation by an employer.

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