Commodity Futures Trading Commission pays whistleblower a record $10 million

The U.S. Commodity Futures Trading Commission (CFTC) announced their first big, multi-million-dollar whistleblower award on Monday, under a program that’s similar to the one adopted by securities regulators. The whistleblower in this case received over $10 million. The CFTC does not reveal whistleblower names or identifying information.The CFTC did not reveal the details of whistleblower cases in order to protect the identity and confidentiality of whistleblowers. As with the U.S. Securities and Exchange Commission’s (SEC) program, the CFTC’s whistleblower program was created in the wake of the financial crisis to pay monetary awards to tipsters that come forward with information that leads an enforcement action that results in monetary sanctions of at least US$1 million. Under the program, whistleblowers are eligible to receive between 10% and 30% of the monetary sanctions collected. The CFTC said that future awards are expected to exceed this $10 million award.

The $10 million award is by far the largest made under the CFTC’s whistleblower program so far. The two previous awards were for US$240,000 and US$290,000.

“By providing robust financial incentives and enhanced protections to whistleblowers, the commission incentivizes people to come forward with high quality information about serious violations of the law that we might not otherwise uncover. An award this size shows the importance that the commission places on incentivizing future whistleblowers,” says Aitan Goelman, director of the CFTC’s enforcement division, in a statement.

“The whistleblower program is working. My hope is that this multi-million-dollar award will encourage others to come forward with information that will assist the commission in protecting our markets,” added Christopher Ehrman, director of the CFTC’s Whistleblower Office.

The mission of the Commodity Futures Trading Commission (CFTC) is to foster open, transparent, competitive, and financially sound markets, to avoid systemic risk, and to protect the market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act.

In carrying out this mission and to promote market integrity, the Commission polices the derivatives markets for various abuses and works to ensure the protection of customer funds. Further, the agency seeks to lower the risk of the futures and swaps markets to the economy and the public.

To fulfill these roles, the Commission oversees designated contract markets, swap execution facilities, derivatives clearing organizations, swap data repositories, swap dealers, futures commission merchants, commodity pool operators and other intermediaries.

The CFTC’s predecessors in the Department of Agriculture date back to the 1920s, but the Commission was formally created as an independent agency in 1974. The Commission historically has been charged by the Commodity Exchange Act (CEA) with regulatory authority over the commodity futures markets. These markets have existed since the 1860s, beginning with agricultural commodities, such as wheat, corn and cotton.

Over time, the markets regulated by the Commission have grown to include contracts on energy and metals commodities, such as crude oil, heating oil, gasoline, copper, gold and silver, and contracts on financial products, such as interest rates, stock indexes and foreign currency.

In the aftermath of the 2008 financial crisis “caused in part by the unregulated swaps market,” President Obama and Congress charged the CFTC with reforming this market. The agency now also has regulatory oversight of the over $400 trillion swaps market, which is about a dozen times the size of the futures market.

The futures and swaps markets are essential to our economy and the way that businesses and investors manage risk. Farmers, ranchers, producers, commercial companies, municipalities, pension funds and others use these markets to lock in a price or a rate and focus on what they do best “ñ innovating, producing goods and services for the economy, and creating jobs. The CFTC works to ensure these hedgers and other market participants can use these markets with confidence.

In Canada, the Ontario Securities Commission (OSC) is planning to introduce its own whistleblower program modeled on the SEC/CFTC approach, albeit with some differences in how awards are calculated and funded.

Jeffrey Newman represents whistleblowers.