The U.S. Commodity Futures Trading Commission (“CFTC” or the “Commission”) has proposed numerous amendments to the Whistleblower Rules found in Part 165 of the CFTC’s Regulations. The Commission seeks to enhance the process for reviewing whistleblower claims and clarify staff authority to administer the whistleblower program through the proposed amendments. Significantly, the CFTC has proposed regulations that would give it authority to take enforcement action for whistleblower retaliation and prohibit confidentiality and pre-dispute arbitration clauses in employment contracts that deter employees from reporting violations to the CFTC.
The Commission acknowledged that “[s]ince the whistleblower program was established in 2011, the need for certain improvements has become apparent.” The rulemaking proposal “addresses that need with targeted revisions to the claims review process and to the authority of staff to administer the whistleblower program.”
Accordingly, the CFTC is revisiting the issue of whether it has its own authority to implement anti-retaliation measures. In 2011, the Commission had stated that it lacked “the statutory authority to conclude that any entity that retaliates against a whistleblower” could be subject to enforcement action “as a separate and independent violation of the CEA.” However, the Commission now seeks to set aside its 2011 interpretation, as it overlooks both the Commission’s broad rulemaking authority under the CEA and its general authority to prosecute violations of any CEA provisions as well as violations of the Commissions’ rules and orders. Having concluded that it has the authority to take enforcement action for whistleblower retaliation, the Commission announced that it is “taking a necessary step to end the incongruous situation where whistleblowers enjoy protection from retaliation through SEC enforcement action under the securities laws, but no such protection through Commission enforcement action under the CEA.”
The CFTC also proposes to add a new § 165.19(b) to prohibit the enforcement of confidentiality and pre-dispute arbitration clauses regarding potential whistleblowing in any pre-employment, employment or post-employment agreements. Those proposals are consistent with the SEC’s whistleblower rules and are especially significant, in light of the SEC’s recent charges against Health Net Inc. and BlueLinx Holdings Inc. for using employment agreements that prohibited their employees from receiving whistleblower awards from the SEC. The Commission also proposes to add a new § 165.20(a) and (c) that would prohibit employers from threatening, harassing, or retaliating against those who participate in the Commission’s whistleblower program.
The following are additional highlights from the CFTC’s proposed amendments:
- The CFTC proposes to revise § 165.5 to clarify that a claimant, without being the source of original information, may still be eligible to receive an award by providing that information to the Commission.
- The CFTC proposes to revise § 165.7, which provides for the review of whistleblower award claims, to “better define and specify each step in the award review process.” Specifically, the Commission proposes to discontinue the Whistleblower Award Determination Panel and replace it with a Claims Review Staff, who will be assisted by the Whistleblower Office staff within the Division of Enforcement.
- Additional amendments to § 165.7 would give the Claims Review Staff the authority to (1) evaluate all timely award applications submitted on a Form WB-APP in response to Notices of Covered Actions (“NCAs”) or a final judgment in a related action and (2) issue a Preliminary Determination setting forth a preliminary assessment as to whether the claim should be granted or denied and, if granted, setting forth the proposed award percentage amount. Under the proposed amendments, the claimant will receive a copy of the Preliminary Determination and have the opportunity to contest it. In the event the claimant fails to contest a Preliminary Determination recommending an award, it will be treated as a Proposed Final Determination, which may ultimately be reviewed by the Commission upon request.
- Proposed amendments to § 165.11 would allow claimants, who are eligible for an award in a covered judicial or administrative action, to also receive an award based on the monetary sanctions that are collected from a final judgment in a related action. In order to prevent a claimant from “double dipping,” the Commission will not award a claimant for a related action if that claimant has already been granted an award by the SEC for the same action under the SEC’s whistleblower program.
- In an effort to further accomplish the customer protection and law enforcement goals of the whistleblower program, the CFTC proposes amendments to § 165.4 that would authorize the Director of the Division of Enforcement to act on the Commission’s behalf in making decisions on what whistleblower identifying information to disclose.
The Commission said it would take comments on the proposed changes through September 29. For more details on the proposed amendment, see the CFTC’s Proposed Rule here.