The Commodity Futures Trading Commission (“CFTC”) recently released its 2020 Annual Report on the status of its whistleblower program for the fiscal year ending on September 30, 2020.
The report, prepared by the CFTC’s Whistleblower Office (“WBO”), contains statistics on the tips received and awards granted during the previous fiscal year, describes the WBO’s recent outreach and education initiatives, and provides an update on the CFTC Customer Protection Fund, which finances these efforts.
Under the CFTC’s whistleblower program, whistleblowers who voluntarily provide original information about violations of the Commodity Exchange Act are eligible to receive between 10 and 30 percent of resulting sanctions that exceed $1 million. Eligible sanctions can be collected via CFTC enforcement actions or related actions by other federal regulators.
Whistleblower Tips Received
In FY 2020, the WBO received a record high of 1,030 whistleblower tips and complaints, which represents an increase of 126% over the 455 tips received in FY 2019, as well as an increase of 36% over the previous record of 760 tips in FY 2018. These tips and complaints concerned activities such as failures to supervise; record keeping or registration violations; swap dealer business conduct; wash trading; solicitation, misappropriation, and other types of fraud; use of deceptive or manipulative devices in trading; as well as spoofing and other forms of disruptive trading or market manipulation.
The WBO also received 191 non-whistleblower tips, including 64 referrals from the Securities and Exchange Commission.
Whistleblower Awards Granted
During FY 2020, the CFTC issued 11 whistleblower awards to 16 individuals, several of whom contributed to the same enforcement action. The CFTC also denied 80 award applications, primarily because they did not relate to a qualifying sanction obtained by the CFTC or another regulatory agency.
The 11 awards combined for a total of approximately $20 million, down from the $75 million issued last year in just 5 whistleblower awards. Since the inception of the Whistleblower Program in FY 2012, the CFTC has issued 25 whistleblower awards for a total of more than $120 million. The actions associated with these awards have resulted in nearly $1 billion in sanctions.
The awards issued during FY 2020 illustrate that the award amount is determined not just by the size of the sanction collected, but also by several additional considerations. One award was reduced because the whistleblower declined to provide a declaration in support of the CFTC’s enforcement action; another award of $250,000 was reduced because the whistleblower did not promptly report the violations. Multiple whistleblowers can report the same illegal activity: an award of more than $2 million was shared between four whistleblowers, who had jointly submitted a tip to the CFTC and “individually provided significant, ongoing assistance” to the investigation. Another award was shared by two whistleblowers, one based in the US, who first alerted the CFTC to the fraudulent activity, and the other based overseas, who provided additional information, including about efforts by the perpetrators to avoid detection.