September 16, 2021

Volume XI, Number 259

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Senate Enacts Legislation to Fix Funding Crisis at the CFTC Whistleblower Office

As reported in a recent Wall Street Journal article, the CFTC Whistleblower Program is confronting a funding crisis that could require it to furlough staff because the fund from which it pays whistleblowers could soon be depleted with the payment of a large whistleblower award.  The CFTC Whistleblower Program has essentially become a victim of its success by attracting high-quality whistleblower tips that have enabled the CFTC to recover more than $1 billion in sanctions for violations of the Commodity Exchange Act.  Indeed, approximately 40 percent of current CFTC enforcement investigations stem from whistleblower tips.

CFTC Customer Protection Fund

Whistleblower awards and the operations of the CFTC Whistleblower Office are not paid from taxpayer funds.  Instead, the Dodd-Frank Act created a revolving fund known as the Commodity Futures Trading Commission Customer Protection Fund (“Fund”), which is used to pay whistleblower awards and to fund the CFTC Whistleblower Office.  Deposits into the Fund are credited from monetary sanctions collected by the CFTC in covered judicial or administrative actions not otherwise distributed to victims of a violation of the Dodd-Frank Act or the rules and regulations underlying such actions, unless the balance of the Fund at the time the monetary judgment is collected exceeds $100 million.  Pursuant to a GAO opinion, if an award exceeds the available balance of the Fund, the CFTC may not fund the operation of the Whistleblower Office.

CFTC Fund Management Act

To address this funding crisis, Senator Grassley sponsored the CFTC Fund Management Act (S. 409), which establishes a separate account at the U.S. Treasury to house funds used to pay the administrative, programmatic, and personnel expenses of the Whistleblower Office and the Office of Customer Education and Outreach of the CFTC.  The creation of a separate account guarantees that the CFTC Whistleblower Office will be able to continue operations should the overall amount held in the Fund drop to a critical level.  The Senate passed S. 409, which is cosponsored by Sens. Maggie Hassan (D-N.H.), Joni Ernst (R-Iowa), Tammy Baldwin (D-Wis.) and Susan Collins (R-Maine), by unanimous consent on May 28, 2021.  Hopefully the House will act swiftly to enact this legislation and enable the CFTC to continue operating its effective whistleblower program.

CFTC Whistleblower Program

The CFTC pays awards to whistleblowers who provide original information that leads to CFTC enforcement actions with total civil penalties in excess of $1 million (see how the CFTC calculates monetary sanctions).  A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected.

Original information “leads to” a successful enforcement action if either:

  1. The original information caused the staff to open an investigation, reopen an investigation, or inquire into different conduct as part of a current investigation, and the Commission brought a successful action based in whole or in part on conduct that was the subject of the original information; or

  2. The conduct was already under examination or investigation, and the original information significantly contributed to the success of the action.

In determining award percentage, the CFTC considers the particular facts and circumstances of each case.  For example, positive factors may include the significance of the information, the level of assistance provided by the whistleblower and the whistleblower’s attorney, and the law enforcement interests at stake.

A whistleblower may submit a tip anonymously to the CFTC.  In certain circumstances, a whistleblower may remain anonymous, even to the CFTC, until an award determination.  However, even at the time of a reward, a whistleblower’s identity is not made available to the public.

© 2021 Zuckerman LawNational Law Review, Volume XI, Number 151
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About this Author

Jason Zuckerman, Whistleblower Litigation Attorney, Washington DC  Law Firm
Principal

Described by the National Law Journal as a “leading whistleblower attorney,” Jason Zuckerman litigates whistleblowe r retaliation, whistleblower rewards, wrongful discharge, and other employment-related claims. His practice focuses on representing senior executives and senior professionals in high-...

(202) 262-8959
Matthew Stock, CPA, Auditor, Zuckerman Law Firm
Certified Public Accountant

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He is an attorney, Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor. Mr. Stock has audited a broad range of industries, both domestically and internationally, including large public companies and financial institutions. As an auditor, Mr. Stock developed an expertise in financial statement analysis and fraud recognition.

At Zuckerman Law, Mr. Stock leverages his experience as an attorney, CPA, CFE and external auditor to...

202-930-5901
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