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FR Doc 2010-29022[Federal Register: December 6, 2010 (Volume 75, Number 233)]
[Proposed Rules]
[Page 75727-75760]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de10-18]
[[Page 75727]]
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Part II
Commodity Futures Trading Corporation
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17 CFR Part 165
Implementing the Whistleblower Provisions of Section 23 of the
Commodity Exchange Act; Proposed Rule
[[Page 75728]]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 165
RIN 3038-AD04
Implementing the Whistleblower Provisions of Section 23 of the
Commodity Exchange Act
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (“Commission” or
“CFTC”) is proposing rules to implement new statutory provisions
enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. These proposed rules apply to the whistleblowers
incentives and protection of section 748. The proposed rules establish
a whistleblower program that enables the Commission to pay an award,
under regulations prescribed by the Commission and subject to certain
limitations, to eligible whistleblowers who voluntarily provide the
Commission with original information about a violation of the Commodity
Exchange Act that leads to the successful enforcement of a covered
judicial or administrative action, or a related action. The proposed
rules also provide public notice of section 748’s prohibition on
retaliation by employers against individuals that provide the
Commission with information about potential violations.
DATES: Comments must be received on or before February 4, 2011.
ADDRESSES: You may submit comments, identified by RIN number 3038-AD04,
by any of the following methods:
Agency Web site, via its Comments Online process: http://
comments.cftc.gov. Follow the instructions for submitting comments
through the Web site.
Mail: David A. Stawick, Secretary of the Commission,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581.
Hand Delivery/Courier: Same as mail above.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Please submit your comments using only one method.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
http://www.cftc.gov. You should submit only information that you wish
to make available publicly. If you wish the Commission to consider
information that you believe is exempt from disclosure under the
Freedom of Information Act, a petition for confidential treatment of
the exempt information may be submitted according to the procedures
established procedures in CFTC Regulation 145.9, 17 CFR 145.9.
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse or remove any or all of your
submission from http://www.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT: Edward Riccobene, Chief, Policy and
Review, Division of Enforcement, 202-418-5327, [email protected],
Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st
Street, NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act (“Dodd-Frank Act”).1 Title VII
of the Dodd-Frank Act 2 amended the Commodity Exchange Act (“CEA”)
3 to establish a comprehensive new regulatory framework for swaps and
security-based swaps. The legislation was enacted to reduce risk,
increase transparency, and promote market integrity within the
financial system by, among other things: (1) Providing for the
registration and comprehensive regulation of swap dealers and major
swap participants; (2) imposing clearing and trade execution
requirements on standardized derivative products; (3) creating robust
recordkeeping and real-time reporting regimes; and 4) enhancing the
Commission’s rulemaking and enforcement authorities with respect to,
among others, all registered entities and intermediaries subject to the
Commission’s oversight.
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1 See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act may be accessed at http://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
2 Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the “Wall Street Transparency and Accountability Act of
2010.”
3 7 U.S.C. 1 et seq. (2006).
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In addition, Title VII of the Dodd-Frank Act contains provisions to
provide incentives and protections for whistleblowers.
Section 748 of the Dodd-Frank Act amends the CEA by adding Section
23, entitled “Commodity Whistleblower Incentives and Protection.” 4
Section 23 directs that the Commission must pay awards, subject to
certain limitations and conditions, to whistleblowers who voluntarily
provide the Commission with original information about a violation of
the CEA that leads to successful enforcement of an action brought by
the Commission that results in monetary sanctions exceeding $1,000,000,
and of certain related actions.
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4 Section 922(a), Public Law 111-203, 124 Stat. 1841 (2010).
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The Commission is proposing Regulation 165 to implement Section 23
of the CEA. As described in detail below, the rules contained in
proposed Regulation 165 define certain terms critical to the operation
of the whistleblower program, outline the procedures for applying for
awards and the Commission’s procedures for making decisions on claims,
and generally explain the scope of the whistleblower program to the
public and to potential whistleblowers. Further, Proposed Regulation
165 includes an appendix informing whistleblowers of their protections
from employer retaliation under Section 23 of the CEA.
Section 23 of the CEA also requires the Commission to fund customer
education initiatives designed to help customers protect themselves
against fraud or other violations of the CEA, or rules or regulations
thereundeCr. The Commission will, in a future rulemaking, address
related internal procedural and organizational issues, including
establishment of, and delegation of authority to, an office or offices
to administer the Commission’s whistleblower and customer education
programs.
Accordingly, the Commission is proposing rules to implement Section
748 and establish a whistleblower program. The Commission requests
comment on all aspects of the proposed rules, as well as comment on the
specific provisions and issues highlighted in the discussion below.
II. Description of the Proposed Rules
A. Proposed Rule 165.1–General
Proposed Rule 165.1 provides a general, plain English description
of
[[Page 75729]]
Section 23 of the CEA. It sets forth the purposes of the rules and
states that the Commission administers the whistleblower program. In
addition, the proposed rule states that, unless expressly provided for
in the rules, no person is authorized to make any offer or promise, or
otherwise to bind the Commission with respect to the payment of an
award or the amount thereof.
B. Proposed Rule 165.2–Definitions
1. Proposed Rule 165.2(a) Action
Proposed Rule 165.2(a) defines the term “action” to mean a single
captioned civil or administrative proceeding. This defined term is
relevant for purposes of calculating whether monetary sanctions in a
Commission action exceed the $1,000,000 threshold required for an award
payment pursuant to Section 23 of the CEA, as well as determining the
monetary sanctions on which awards are based.5 The Commission
proposes to interpret the “action” to include all defendants or
respondents, and all claims, that are brought within that proceeding
without regard to which specific defendants or respondents, or which
specific claims, were included in the action as a result of the
information that the whistleblower provided. This approach to
determining the scope of an “action” appears consistent with the most
common meaning of the term,6 will effectuate the purposes of Section
23 by enhancing the incentives for individuals to come forward and
report potential violations to the Commission,7 and will avoid the
challenges associated with attempting to allocate monetary sanctions
involving multiple individuals and claims based upon the select
individuals and claims reported by whistleblowers.
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5 See Proposed Rule 165.8.
6 See Black’s Law Dictionary 31 (8th ed. 2004) (defining an
“action” as “a civil or criminal judicial proceeding”). Section
23 of the CEA does not appear to contemplate the aggregation of
separate judicial or administrative actions for purposes of
determining whether the $1,000,000 threshold is satisfied, even if
the actions arise out of a single investigation.
7 This approach offers enhanced potential incentives for
whistleblowers when compared to other similar programs because those
programs have typically limited awards to successful claims that the
whistleblower actually identified. See Rockwell International Corp.
v. United States, 549 U.S. 457 (2007) (False Claims Act); John Doe
v. United States, 65 Fed. Cl. 184 (2005) (Customs moiety statute, 19
U.S.C. 1619); Internal Revenue Manual 25.2.2.2.8.A (under IRS
whistleblower program, collected proceeds only include proceeds from
the single issue identified by the whistleblower, or substantially
similar improper activity).
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The Commission requests comment on the proposed definition of the
word “action.” Is it appropriate to pay whistleblower awards based on
all monetary sanctions obtained in a single proceeding, even when the
whistleblower’s information did not concern all defendants or claims in
that proceeding?
2. Proposed Rule 165.2(b) Aggregate Amount
Proposed Rule 165.2(b) defines the phrase “aggregate amount” to
mean the total amount of an award granted to one or more whistleblowers
pursuant to Proposed Rule 165.7. The term is relevant for purposes of
determining the amount of an award pursuant to Proposed Rule 165.8.
3. Proposed Rule 165.2(c) Analysis
Under Section 23(a)(4) of the CEA, the original information
provided by a whistleblower can include information that is derived
from independent knowledge and also from independent “analysis” of a
whistleblower. Proposed Rule 165.2(c) defines the term “analysis” to
mean the whistleblower’s examination and evaluation of information that
may be generally available, but which reveals information that is not
generally known or available to the public. This definition recognizes
that there are circumstances where individuals can review publicly
available information, and, through their additional evaluation and
analysis, provide vital assistance to the Commission staff in
understanding complex schemes and identifying potential violations of
the CEA.
The Commission requests comment on the definition of “analysis.”
Is there a different or more specific definition of “analysis” that
would better effectuate the purposes of Section 23 of the CEA?
4. Proposed Rule 165.2(d) Collected by the Commission
Proposed Rule 165.2(d) defines the phrase “collected by the
Commission,” when used in the context of deposits and credits into the
Fund, to refer to a monetary sanction that is both collected by the
Commission and is recorded as a payment receivable on the Commission’s
books and records. While the amount of a whistleblower award is based
upon “what has been collected of the monetary sanctions imposed in an
action or related action,” see Section 23(b), Congress used different
language to describe the source of funding for whistleblower awards.
Specifically, Congress states that the Fund will be financed through
monetary sanctions “collected by the Commission,” meaning that
deposits into the Fund are based only upon what the Commission actually
collects. See Section 23(g)(3). The Commission generally collects civil
monetary sanctions and disgorgement amounts in civil actions, or fines
in administrative actions. A federal court or the Commission generally
awards restitution to victims in civil and administrative actions,
respectively, but the Commission does not “collect” restitution,
i.e., restitution is not recorded as a payment receivable on the
Commission’s books and records. Consequently, restitution amounts
collected in a covered action or related action will not be deposited
into the Fund.
5. Proposed Rule 165.2(e) Covered Judicial or Administrative Action
Proposed Rule 165.2(e) defines the phrase “covered judicial or
administrative action” to mean any judicial or administrative action
brought by the Commission under the CEA whose successful resolution
results in monetary sanctions exceeding $1,000,000.
6. Proposed Rule 165.2(f) Fund
Proposed Rule 165.2(f) defines the term “Fund” to mean the
“Commodity Futures Trading Commission Customer Protection Fund”
established by Section 23(g) of the CEA. The Commission will use the
Fund to pay whistleblower awards as provided in Proposed Rule 165.12
and to finance customer education initiatives designed to help
customers protect themselves against fraud and other violations of the
CEA or the Commission’s regulations.
7. Proposed Rule 165.2(g) Independent Knowledge
Proposed Rule 165.2(g) defines “independent knowledge” as factual
information in the whistleblower’s possession that is not obtained from
publicly available sources, which would include such sources as
corporate filings, media, and the Internet. Importantly, the proposed
definition of “independent knowledge” does not require that a
whistleblower have direct, first-hand knowledge of potential
violations. Instead, independent knowledge may be obtained from any of
the whistleblower’s experiences, observations, or communications
(subject to the exclusion for knowledge obtained from public sources).
Thus, for example, under Proposed Rule 165.2(g), a whistleblower would
have “independent knowledge” of information even if that knowledge
derives from facts or other information that has been conveyed to the
whistleblower by third parties.
The Commission preliminarily believes that defining “independent
[[Page 75730]]
knowledge” in this manner best effectuates the purposes of Section 23
of the CEA. An individual may learn about potential violations of the
CEA without being personally involved in the conduct. If an individual
voluntarily comes forward with such information, and the information
leads the Commission to a successful enforcement action (as defined in
Proposed Rule 165.2(i)), that individual should be eligible to receive
a whistleblower award.8
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8 In addition, the distinction between “independent
knowledge” (as knowledge not dependent upon publicly available
sources) and direct, first-hand knowledge, is consistent with the
approach courts have typically taken in interpreting similar
terminology in the False Claims Act. Until this year, the “public
disclosure bar” provisions of the False Claims Act defined an
“original source” of information, in part, as “an individual who
[had] direct and independent knowledge of the allegations of the
information on which the allegations [were] based * * *.” 31 U.S.C.
3130(e)(4) (prior to 2010 amendments). Courts interpreting these
terms generally defined “independent knowledge” to mean knowledge
that was not dependent on public disclosures, and “direct
knowledge” to mean first-hand knowledge from the relator’s own work
and experience, with no intervening agency. E.g., United States ex
rel. Fried v. West Independent School District, 527 F.3d 439 (5th
Cir. 2008); United States ex rel. Paranich v. Sorgnard, 396 F.3d 326
(3d Cir. 2005). See generally John T. Boese, Civil False Claims and
Qui Tam Actions Sec. 4.02[D][2] (Aspen Publishers) (2006) (citing
cases). Earlier this year, Congress amended the “public disclosure
bar” to, among other things, remove the requirement that a relator
have “direct knowledge” of information. Sec. 10104(h)(2), Public
Law 111-148, 124 Stat. 901 (Mar. 23, 2010).
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Proposed Rule 165.2(g) further provides that an individual will not
be considered to have “independent knowledge” in four other
circumstances. The effect of these provisions would be to exclude
individuals who obtain information under these circumstances from being
eligible for whistleblower awards.
The first exclusion contemplated is for information that was
obtained through a communication that is subject to the attorney-client
privilege. (Proposed Rule 165.2(g)(2) and (3).) Compliance with the CEA
is promoted when individuals, corporate officers, Commission
registrants and others consult with counsel about potential violations,
and the attorney-client privilege furthers such consultation. This
important benefit could be undermined if the whistleblower award
program vitiated the public’s perception of the scope of the attorney-
client privilege or created monetary incentives for counsel to disclose
information about potential CEA violations that they learned of through
privileged communications.
The exception for knowledge obtained through privileged attorney-
client communications would not apply in circumstances where the
disclosure of the information is otherwise permitted. This could
include, for example, circumstances where the privilege has been
waived, and where the privilege is not applicable because of a
recognized exception such as the crime-fraud exception to the attorney-
client privilege.
The second exclusion to “independent knowledge” in the proposed
rule applies when a person with legal, compliance, audit, supervisory,
or governance responsibilities for an entity receives information about
potential violations, and the information was communicated to the
person with the reasonable expectation that the person would take
appropriate steps to cause the entity to remedy the violation.9
(Proposed Rule 165.2(g)(4).)
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9 This exclusion has been adapted from case law holding that a
disclosure to a supervisor who is in a position to remedy the
wrongdoing is a protected disclosure for purposes of the federal
Whistleblower Protection Act, 5 U.S.C. 2302(b)(8). E.g., Reid v.
Merit Systems Protection Board, 508 F.3d 674 (Fed. Cir. 2007);
Hooven-Lewis v. Caldera, 249 F.3d 259 (4th Cir. 2001).
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The third exclusion is closely related to the second, and applies
any other time that information is obtained from or through an entity’s
legal, compliance, audit, or similar functions or processes for
identifying, reporting, and addressing potential non-compliance with
applicable law. (Proposed Rule 165.2(g)(5).) However, each of these two
exclusions ceases to be applicable, with the result that an individual
may be deemed to have “independent knowledge,” and therefore may
become a whistleblower, if the entity fails to disclose the information
to the Commission within sixty (60) days or otherwise proceeds in bad
faith.
Compliance with the CEA is promoted when companies implement
effective legal, audit, compliance, and similar functions. The
rationale for these proposed exclusions is the concern that Section 23
not be implemented in a way that would create incentives for persons
involved in such functions, as well as other responsible persons who
are informed of wrongdoing, to circumvent or undermine the proper
operation of the entity’s internal processes for investigating and
responding to violations of law. Accordingly, under the proposed rule,
officers, directors, employees, and others who learn of potential
violations as part of their official duties in the expectation that
they will take steps to address the violations, or otherwise from or
through the various processes that companies employ to identify
problems and advance compliance with legal standards, would not be
permitted to use that knowledge to obtain a personal benefit by
becoming whistleblowers.
Nevertheless, if the entity failed to disclose the information to
the Commission within sixty (60) days or otherwise proceeds in bad
faith, the exclusion would no longer apply, thereby making an
individual who knows this undisclosed information eligible to become a
whistleblower. The rationale for this provision is that if the entity
fails to report information concerning the violation to the Commission,
it would be inconsistent with the purposes of Section 23 to continue to
disable individuals with knowledge of the potential violations from
coming forward and providing the information to the Commission.
Furthermore, this provision provides a reasonable period of time for
entities to report potential violations, thereby minimizing the
potential of circumventing or undermining existing compliance programs.
The fourth and final exclusion to “independent knowledge” in the
proposed rule applies if the whistleblower obtains the information by
means or in a manner that violates applicable federal or state criminal
law. This exclusion is necessary to avoid the unintended effect of
incentivizing criminal misconduct.
The Commission requests comment on the definition of “independent
knowledge.” Is it appropriate to include within the scope of the
phrase “independent knowledge” knowledge that is not direct, first-
hand knowledge, but is instead learned from others, subject only to an
exclusion for knowledge learned from publicly-available sources? Is it
appropriate to exclude from the definition of “independent knowledge”
information that is obtained through a communication that is protected
by the attorney-client privilege? Are there other ways these rules
should address privileged communications?
The Commission also requests comment on the proposed exclusions for
information obtained by a person with legal, compliance, audit,
supervisory, or governance responsibilities for an entity under an
expectation that the person would cause the entity to take steps to
remedy the violation, and for information otherwise obtained from or
through an entity’s legal, compliance, audit, or similar functions.
Does this exclusion strike the proper balance? Will the carve-out for
situations where the entity fails to disclose the information within
sixty
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(60) days promote effective self-policing functions and compliance with
the law without undermining the operation of Section 23? Is sixty (60)
days a “reasonable time” for the entity to disclose the information
and, if not, what period should be specified (e.g., three months, six
months, one year)? Are there alternative provisions the Commission
should consider that would promote effective self-policing and self-
reporting while still being consistent with the goals and text of
Section 23?
Finally, the Commission seeks comment on whether there are other
sources of knowledge that should or should not be deemed
“independent” for purposes of Section 23 and that should be
specifically addressed by rule?
8. Proposed Rule 165.2(h) Independent Analysis
Proposed Rule 165.2(h) defines the phrase “independent analysis”
to mean the whistleblower’s own analysis, whether done alone or in
combination with others. The proposed rule thus recognizes that
analysis–in particular academic or professional studies–is often the
product of collaboration among two or more individuals. The phrase is
relevant to the definition of “original information” in Proposed Rule
165.2(k).
9. Proposed Rule 165.2(i) Information That Led to Successful
Enforcement
Under Section 23, a whistleblower’s eligibility for an award
depends in part on whether the whistleblower’s original information
“led to the successful enforcement” of the Commission’s covered
judicial or administrative action or a related action. Proposed Rule
165.2(i) defines when original information “led to successful
enforcement.”
The Commission’s enforcement practice generally proceeds in several
stages. First, the staff opens an investigation based upon some
indication of potential violations of the CEA and/or Commission
regulations. Second, the staff conducts its investigation to gather
additional facts in order to determine whether there is sufficient
basis to recommend enforcement action. If so, the staff may recommend,
and the Commission may authorize, the filing of an action. The
definition in Proposed Rule 165.2(i) addresses the significance of the
whistleblower’s information to both the decision to open an
investigation and the success of the resulting enforcement action. The
proposed rule would distinguish between situations where the
whistleblower’s information causes the staff to begin an investigation
or inquire about new or different conduct as part of a current
investigation, and situations where the whistleblower provides
information about conduct that is already under investigation. In the
latter case, awards would be limited to the rare circumstances where
the whistleblower provided essential information that the staff would
not have otherwise obtained in the normal course of the investigation.
Subparagraphs (1) and (2) of Proposed Rule 165.2(i) reflect these
considerations.
Subparagraph (1) of Proposed Rule 165.2(i) applies to situations
where the staff is not already reviewing the conduct in question, and
establishes a two-part test for determining whether “original
information” voluntarily provided by a whistleblower led to successful
enforcement of a Commission action. First, the information must have
caused the staff to open an investigation, reopen an investigation that
had been closed, or to inquire concerning new and different conduct as
part of an open investigation. This does not necessarily contemplate
that the whistleblower’s information will be the only information that
the staff obtains before deciding to proceed. However, the proposed
rule would apply when the whistleblower gave the staff information
about conduct that the staff is not already investigating or examining,
and that information was the principal motivating factor behind the
staff’s decision to begin looking into the whistleblower’s allegations.
Second, if the whistleblower’s information caused the Commission
staff to start looking at the conduct for the first time, the proposed
rule would require that the information “significantly contributed”
to the success of an enforcement action filed by the Commission. The
proposed rule includes this requirement because the Commission believes
that it is not the intent of Section 23 to authorize whistleblower
awards for any and all tips about conduct that led to the opening of an
investigation if the resulting investigation concludes in a successful
covered judicial or administrative action. Rather, implicit in the
requirement in Section 23(b) that a whistleblower’s information “led
to * * * successful enforcement” is the further expectation that the
information, because of its high quality, reliability, and specificity,
had a meaningful connection to the Commission’s ability to successfully
complete its investigation and to either obtain a settlement or prevail
in a litigated proceeding.
At bottom, successful enforcement of a judicial or administrative
action depends on the staff’s ability to establish unlawful conduct by
a preponderance of evidence. Thus, in order to have “led to successful
enforcement,” the “original information” provided by a whistleblower
should be connected to evidence that plays a significant role in
successfully establishing the Commission’s claim. For example, the
“led to” standard of Proposed Rule 165.2(i)(1) would be met if a
whistleblower were to provide the Commission staff with strong, direct
evidence of violations that supported one or more claims in a
successful enforcement action. To give another example, a whistleblower
whose information did not provide this degree of evidence in itself,
but who played a critical role in advancing the investigation by
leading the staff directly to evidence that provided important support
for one or more of the Commission’s claims could also receive an award,
in particular if the evidence the whistleblower pointed to might have
otherwise been difficult to obtain. A whistleblower who only provided
vague information, or an unsupported tip, or evidence that was
tangential and did not significantly help the Commission successfully
establish its claims, would ordinarily not meet the standard of this
proposed rule.
If information that a whistleblower provides to the Commission
consists of “independent analysis” (Proposed Rule 165.2(h)) rather
than “independent knowledge” (Proposed Rule 165.2(g)), the evaluation
of whether this analysis “led to successful enforcement” similarly
would turn on whether it significantly contributed to the success of
the action. This would involve, for example, considering the degree to
which the analysis, by itself and without further investigation,
indicated a high likelihood of unlawful conduct that was the basis, or
was substantially the basis, for one or more claims in the Commission’s
enforcement action. The purpose of this provision is to ensure that the
analysis provided to the Commission results in the efficiency and
effectiveness benefits to the enforcement program that were intended by
Congress. Thus, if a person provided analysis based upon readily
available public information and the staff opened an inquiry based upon
this analysis but was required to conduct significant additional
analysis and investigation to conclude a successful enforcement action,
the person would not be deemed to have provided “independent
analysis.”
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Subparagraph (2) of Proposed Rule 165.2(i) sets forth a separate,
and higher, standard for cases in which a whistleblower provides
original information to the Commission about conduct that is already
under investigation by the Commission, Congress, any other federal,
state, or local authority, any self-regulatory organization, or the
Public Company Accounting Oversight Board. In this situation, the
information will be considered to have led to the successful
enforcement of a judicial or administrative action if the information
would not have otherwise been obtained and was essential to the success
of the action.10 Although the Commission believes that awards under
Section 23 generally should be limited to cases where whistleblowers
provide original information about violations that are not already
under investigation,11 there may be rare circumstances where
information received from a whistleblower in relation to an ongoing
investigation is so significant for the success of a Commission action
that a whistleblower award should be considered. For example, a
whistleblower who is not within the scope of the staff’s investigation,
but who nonetheless has access to, and comes forward with a document
that had been concealed from the staff, and that establishes proof of
wrongdoing that is critical to the Commission’s ability to sustain its
burden of proof, provides the type of assistance that should be
considered for an award without regard to whether the staff was already
investigating the conduct at the time the document was provided. The
Commission anticipates applying Proposed Rule 165.2(i) in a strict
fashion, however, such that awards under the proposed rule would be
exceedingly rare.
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10 The proposed rule also makes clear that subparagraph (2) of
Proposed Rule 165.2(i) does not apply when a whistleblower provides
information to the Commission about a matter that is already under
investigation by another authority if the whistleblower is the
“original source” for that investigation under Proposed Rule
165.2(l)). In those circumstances, subparagraph (1) of Proposed Rule
165.2(i) would govern the Commission’s analysis.
11 See Lacy v. United States, 221 Ct. Cl. 526 (1979); cf.
United States ex rel. Merena v. Smith-Kline Beecham Corp., 205 F.3d
97 (3d Cir. 2000).
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In considering the relationship between information obtained from a
whistleblower and the success of a covered judicial or administrative
action, the Commission will take into account the difference between
settled and litigated actions. Specifically, in a litigated action the
whistleblower’s information must significantly contribute, or, in the
case of conduct that is already under investigation, be essential, to
the success of a claim on which the Commission prevails in litigation.
For example, if a court finds in favor of the Commission on a number of
claims in an enforcement action, but rejects the claims that are based
upon the information the whistleblower provided, the whistleblower
would not be considered eligible to receive an award.12 By contrast,
in a settled action the Commission would consider whether the
whistleblower’s information significantly contributed, or was
essential, to allegations included in the Commission’s federal court
complaint, or to factual findings in the Commission’s administrative
order.
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12 As discussed below, however, if the Commission prevails on
a claim that is based upon the information the whistleblower
provided, and if all the conditions for an award are otherwise
satisfied, the award to the whistleblower would be based upon all of
the monetary sanctions obtained as a result of the action. See
Proposed Rule 165.8.
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The Commission requests comment on the proposed standard for when
original information voluntarily provided by a whistleblower “led to”
successful enforcement action. Is the proposed standard appropriate?
The Commission also requests comment on cases where the original
information provided by the whistleblower caused the staff to begin
looking at conduct for the first time. Should the standard also require
that the whistleblower’s information “significantly contributed” to a
successful enforcement action? If not, what standards should be used in
the evaluation? If yes, should the proposed rule define with greater
specificity when information “significantly contributed” to
enforcement action? In what way should the phrase be defined?
Finally, the Commission requests comment on the proposal in
Subparagraph (i)(2), which would consider that a whistleblower’s
information “led to” successful enforcement even in cases where the
whistleblower gave the Commission original information about conduct
that was already under investigation. Is this proposal appropriate?
Should the Commission’s evaluation turn on whether the whistleblower’s
information would not otherwise have been obtained and was essential to
the success of the action? If not, what other standard(s) should apply?
10. Proposed Rule 165.2(j) Monetary Sanctions
Proposed Rule 165.2(j) defines the phrase “monetary sanctions,”
when used with respect to any judicial or administrative action, to
mean (1) any monies, including penalties, disgorgement, restitution,
and interest ordered to be paid; and (2) any monies deposited into a
disgorgement fund or other fund pursuant to Section 308(b) of the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)), as a result of such
action or any settlement of such action. This phrase is relevant to the
definition of “covered judicial or administrative action” in Proposed
Rule 165.2(d) and to the amount of a whistleblower award under Proposed
Rule 165.8.
11. Proposed Rule 165.2(k) Original Information and Proposed Rule
165.2(l) Original Source
Proposed Rule 165.2(k) tracks the definition of “original
information” set forth in Section 23(a)(4) of the CEA.13 “Original
information” means information that is derived from the
whistleblower’s independent knowledge or analysis; is not already known
to the Commission from any other source, unless the whistleblower is
the original source of the information; and is not exclusively derived
from an allegation made in a judicial or administrative hearing, in a
governmental report, hearing, audit, or investigation, or from the news
media, unless the whistleblower is a source of the information.
Consistent with Section 23(l) of the CEA, the Dodd-Frank Act authorizes
the Commission to pay whistleblower awards on the basis of original
information that is submitted prior to the effective date of final
rules implementing Section 23 (assuming that all of the other
requirements for an award are met); the Dodd-Frank Act does not
authorize the Commission to apply Section 23 retroactively to pay
awards based upon information submitted prior to the enactment date of
the statute.14 Consistent with Congress’s intent, Proposed Rule
165.2(k)(4) also requires that “original information” be provided to
the Commission for the first time after July 21, 2010 (the date of
enactment of the Dodd-Frank Act).
—————————————————————————
13 7 U.S.C. 26(a)(4).
14 Section 23(k) of the CEA directs that: “Information
submitted to the Commission by a whistleblower in accordance with
rules or regulations implementing this section shall not lose its
status as original information solely because the whistleblower
submitted such information prior to the effective date of such rules
or regulations, provided that such information was submitted after
the date of enactment of the Wall Street Transparency and
Accountability Act of 2010.”
—————————————————————————
Under the statutory definition of “original information,” a
whistleblower who provides information that the Commission already
knows from another source has not provided original information, unless
the whistleblower is
[[Page 75733]]
the “original source” of that information. Proposed Rule 165.2(l)
defines the term “original source,” which will be used in the
definition of “original information.” Under the proposed rule, a
whistleblower is an “original source” of the same information that
the Commission obtains from another source if the other source obtained
the information from the whistleblower or his representative. The
whistleblower bears the burden of establishing that he is the original
source of information.
In Commission investigations, this situation may arise if the staff
receives a referral from another authority such as the Department of
Justice, a self-regulatory organization, or another organization that
is identified in the proposed rule. On occasion, the situation may also
arise that the “original source” of information shares his
information with another person, and such other person files a
whistleblower claim with the Commission prior to the original source
filing a claim for whistleblower status. In these circumstances, the
proposed rule would credit a whistleblower as being the “original
source” of information on which the referral was based as long as the
whistleblower “voluntarily” provided the information to the other
authority within the meaning of these rules; i.e., the whistleblower or
his representative must have come forward and given the other authority
the information before receiving any request, inquiry, or demand to
which the information was relevant, or was the individual who
originally possessed either the independent knowledge or conducted the
independent analysis.
As is described elsewhere in these proposed rules, a whistleblower
will need to submit two forms, a Form TCR (“Tip, Complaint or
Referral”) and Form WB-DEC (“Declaration Concerning Original
Information Provided Pursuant to Section 23 of the Commodity Exchange
Act”) in order to start the process and establish the whistleblower’s
eligibility for award consideration.15 A whistleblower who either
provides information to another authority first, or who shared his
independent knowledge or analysis with another who is also claiming to
be a whistleblower, will need to follow these same procedures and
submit the necessary forms to the Commission in order to perfect his
status as a whistleblower under the Commission’s whistleblower program.
However, under Proposed Rule 165.2(l)(2), as long as the whistleblower
submits the necessary forms to the Commission within 90 days after he
provided the information to the other authority, or 90 days after the
other person claiming to be a whistleblower submits his claim to the
Commission, the Commission will consider the whistleblower’s submission
to be effective.
—————————————————————————
15 See Proposed Rule 165.3.
—————————————————————————
As noted above, the whistleblower must establish that he is the
original source of the information provided to the other authority as
well as the date of his submission, but the Commission may seek
confirmation from the other authority, or any other source, in making
this determination. The objective of this procedure is to provide
further incentive for persons with knowledge of CEA violations to come
forward (consistent with the purposes of Section 23) by assuring
potential whistleblowers that they can provide information to
appropriate Government or regulatory authorities, and their “place in
line” will be protected in the event that other whistleblowers later
provide the same information directly to the Commission.
For similar reasons, the proposed rule extends the same protection
to whistleblowers who provide information about potential violations to
the persons specified in Proposed Rule 165.2(g)(3) and (4) (i.e.,
personnel involved in compliance or similar functions, or who are
informed about potential violations with the expectation that they will
take steps to address them), and who, within 90 days, submit the
necessary whistleblower forms to the Commission. Compliance with the
CEA is promoted when companies have effective programs for identifying,
correcting, and self-reporting unlawful conduct by company officers or
employees. The objective of this provision is to support, not
undermine, the effective functioning of company compliance and related
systems by allowing employees to take their concerns about potential
violations to appropriate company officials while still preserving
their rights under the Commission’s whistleblower program.
Proposed Rule 165.2(l)(3) addresses circumstances where the
Commission already possesses some information about a matter at the
time that a whistleblower provides additional information about the
same matter. The whistleblower will be considered the “original
source” of any information that is derived from his independent
knowledge or independent analysis and that materially adds to the
information that the Commission already possesses. The standard is
modeled after the definition of “original source” that Congress
included in the False Claims Act through amendments earlier this
year.16
—————————————————————————
16 31 U.S.C. 3730(e)(4)(B), Public Law 111-148 Sec.
10104(h)(2), 124 Stat. 901 (Mar. 23. 2010).
—————————————————————————
The Commission requests comment on all aspects of the definitions
of “original information” and “original source” set forth in
Proposed Rules 165.2(k) and (l). Is the provision that would credit
individuals with providing original information to the Commission, as
of the date of their submission to another Governmental or regulatory
authority, or to company legal, compliance, or audit personnel,
appropriate? In particular, does the provision regarding the providing
of information to a company’s legal, compliance, or audit personnel
appropriately accommodate the internal compliance process?
The Commission also requests comment on whether the ninety (90) day
deadline for submitting Forms TCR and WB-DEC to the Commission (after
initially providing information about violations or potential
violations to another authority or the employer’s legal, compliance, or
audit personnel) is the appropriate time frame? Should there be
different time frames for disclosures to other authorities and
disclosures to an employer’s legal, compliance or audit personnel?
12. Proposed Rule 165.2(m) Related Action
The phrase “related action,” when used with respect to any
judicial or administrative action brought by the Commission under the
CEA, means any judicial or administrative action brought by an entity
listed in Proposed Rule 165.11(a) that is based upon the original
information voluntarily submitted by a whistleblower to the Commission
pursuant to Proposed Rule 165.3 that led to the successful resolution
of the Commission action. This phrase is relevant to the Commission’s
determination of the amount of a whistleblower award under Proposed
Rules 165.8 and 165.11.
13. Proposed Rule 165.2(n) Successful Resolution or Successful
Enforcement
Proposed Rule 165.2(n) defines the phrase “successful
resolution,” when used with respect to any judicial or administrative
action brought by the Commission under the Commodity Exchange Act, to
include any settlement of such action or final judgment in favor of the
Commission. It shall also have the same meaning as “successful
enforcement.” This phrase is relevant to the definition of the phrase
“covered
[[Page 75734]]
judicial or administrative action” as set forth in Proposed Rule
165.2(e).
14. Proposed Rule 165.2(o) Voluntary Submission or Voluntarily
Submitted
Under Section 23(b)(1) of the CEA,17 whistleblowers are eligible
for awards only when they provide original information to the
Commission “voluntarily.” Proposed Rule 165.2(o) would define
“voluntary submission” or “voluntarily submitted” in the context of
submission to the Commission of original information as a
whistleblower’s provision of information to the Commission before
receipt by the whistleblower (or anyone representing the whistleblower,
including counsel) of any request, inquiry, or demand from the
Commission, Congress, any other federal, state or local authority, or
any self-regulatory organization about a matter to which the
information in the whistleblower’s submission is relevant. The fact
that such request, inquiry or demand is not compelled by subpoena or
other applicable law, does not render a subsequent submission
voluntary.
—————————————————————————
17 7 U.S.C. 26(b)(1).
—————————————————————————
Proposed Rule 165.2(o) would make clear that, in order to have
acted “voluntarily” under the statute, a whistleblower must do more
than merely provide the Commission with information that is not
compelled by subpoena (or by a court order following a Commission
action to enforce a subpoena) or by other applicable law.18 Rather,
the whistleblower or his representative (such as an attorney) must come
forward with the information before receiving any request, inquiry, or
demand from the Commission staff or from any other investigating
authority described in the proposed rule about a matter to which the
whistleblower’s information is relevant. A request, inquiry, or demand
that is directed to an employer is also considered to be directed to
employees who possess the documents or other information that is
necessary for the employer to respond. Accordingly, a subsequent
whistleblower submission from any such employee will not be considered
“voluntary” for purposes of the rule, and the employee will not be
eligible for award consideration, unless the employer fails to provide
the employee’s documents or information to the requesting authority
within sixty (60) days.
—————————————————————————
18 Various books and records provisions of the CEA and
Commission regulations generally require registrants to furnish
records to the Commission upon request. See e.g., Section 4(g) of
the CEA, 7 U.S.C. 6(g).
—————————————————————————
This approach is consistent with the statutory purpose of creating
a strong incentive for whistleblowers to come forward early with
information about possible violations of the CEA rather than wait until
Government or other official investigators “come knocking on the
door.” 19 This approach is also consistent with the approach federal
courts have taken in determining whether a private plaintiff, suing on
behalf of the Government under the qui tam provisions of the False
Claims Act, “voluntarily” provided information about the false or
fraudulent claims to the Government before filing suit.20
—————————————————————————
19 See S. Rep. No. 111-176 at 110 (2010) (discussing Section
922 of the Dodd-Frank Act, which establishes “Securities
Whistleblower Incentives and Protection” similar to the “Commodity
Whistleblower Incentives and Protection” in Section 748; “The
Whistleblower Program aims to motivate those with inside knowledge
to come forward and assist the Government to identify and prosecute
persons who have violated securities laws * * *.”).
20 See United States ex rel. Barth v. Ridgedale Electric,
Inc., 44 F.3d 699 (8th Cir. 1994); United States ex rel. Paranich v.
Sorgnard, 396 F.3d 326 (3d Cir. 2005); United States ex rel. Fine v.
Chevron, USA, Inc., 72 F.3d 740 (9th Cir. 1995), cert. denied, 517
U.S.1233 (1996) (rejecting argument that provision of information to
the Government is always voluntary unless compelled by subpoena).
The qui tam provisions of the False Claims Act include a “public
disclosure bar,” which, as recently amended, requires a court to
dismiss a private action or claim if substantially the same
allegations or transactions as alleged in the action or claim were
publicly disclosed in certain fora, unless the Government opposes
dismissal or the plaintiff is an “original source” of the
information. 31 U.S.C. 3730(e)(4). An “original source” is further
defined, in part, with reference to whether the plaintiff
“voluntarily” disclosed the information to the Government before
filing suit. Id. Because the qui tam provisions of the False Claims
Act have played a significant role in the development of
whistleblower law generally, and because some of the terminology
used by Congress in Section 23 has antecedents in the False Claims
Act, the Commission believes that precedent under the False Claims
Act can provide helpful guidance in the interpretation of Section 23
of the CEA. At the same time, because the False Claims Act and
Section 23 serve different purposes, are structured differently, and
the two statutes may use the same words in different contexts, the
Commission does not view False Claims Act precedent as necessarily
controlling or authoritative in all circumstances for purposes of
Section 23 of the CEA.
—————————————————————————
Disclosure to the Government should also not be considered
voluntary if the individual has a pre-existing legal or contractual
duty to report violations of the type at issue to the Commission,
Congress, any other federal or state authority, or any self-regulatory
organization.21 Thus, for example, Section 23(c)(2) of the CEA 22
prohibits awards to members, officers, or employees of an appropriate
regulatory agency, the Department of Justice, a registered entity, a
registered futures association, or a self-regulatory organization. The
Commission anticipates that other similarly-situated persons should not
be eligible for award consideration if they are under a pre-existing
legal duty to report the information to the Commission or to any of the
other authorities described above. Proposed Rule 165.2(o) accomplishes
this goal by providing that submissions from such individuals will not
be considered voluntary for purposes of Section 23 of the CEA. Proposed
Rule 165.2(o) also includes a similar exclusion for information that
the whistleblower is contractually obligated to provide. This exclusion
is intended to preclude awards to persons who provide information
pursuant to preexisting agreements that obligate them to assist
Commission staff or other investigative authorities.
—————————————————————————
21 See United States ex rel. Biddle v. Board of Trustees of
The Leland Stanford, Jr. University, 161 F.3d 533 (9th Cir. 1998),
cert. denied, 526 U.S. 1066 (1999); United States ex rel. Schwedt v.
Planning Research Corp., 39 F. Supp. 2d 28 (D.D.C. 1999).
22 15 U.S.C. 78u-6(c)(2).
—————————————————————————
The Commission requests comment on the definition of
“voluntarily.” Does Proposed Rule 165.2(o) appropriately define the
circumstances when a whistleblower should be considered to have acted
“voluntarily” in providing information about CEA or Commission
regulation violations to the Commission? Are there other circumstances
not clearly included that should be in the rule? Is it appropriate for
the proposed rule to consider a request or inquiry directed to an
employer to be directed at individual employees who possess the
documents or other information needed for the employer’s response?
Should the persons who are considered to be within the scope of an
inquiry be narrowed or expanded? Will the carve-out that permits such
an employee to become a whistleblower if the employer fails to disclose
the information the employee provided within sixty (60) days promote
compliance with the law and the effective operation of Section 23? Is
sixty (60) days a “reasonable time” for employers to disclose the
information the employee provided, or should a different period be
specified (e.g., three months, six months, one year)?
The Commission also requests comment on the standard described in
Proposed Rule 165.2(o) that would credit an individual with acting
“voluntarily” in circumstances where the individual was aware of
fraudulent conduct for an extended period of time, but chose not to
come forward as a whistleblower until after he became aware of a
governmental investigation (such as by observing document requests
being served on his employer or colleagues, but before he received an
[[Page 75735]]
inquiry, request, or demand himself, assuming that he was not within
the scope of an inquiry directed to his employer). Is this an
appropriate result, and, if not, how should the proposed rule be
modified to account for it?
Finally, the Commission seeks Comment on the exclusion set forth in
Proposed Rule 165.2(o) for information provided pursuant to a pre-
existing legal or contractual duty to report violations. Is the
exclusion appropriate? Should the exclusion be expanded to other forms
of duties such as ethical duties or duties imposed by codes of conduct?
15. Proposed Rule 165.2(p) Whistleblower(s)
The term “whistleblower” is defined in Section 23(a)(7) of the
CEA.23 Consistent with this language, Proposed Rule 165.2(p) would
define a whistleblower as an individual who, alone or jointly with
others, provides information to the Commission relating to a potential
violation of the CEA. A company or another entity is not eligible to
receive a whistleblower award. This definition tracks the statutory
definition of a “whistleblower,” except that the proposed rule uses
the term “potential violation” in order to make clear that the
whistleblower anti-retaliation protections set forth in Section 23(h)
of the CEA do not depend on an ultimate adjudication, finding or
conclusion that conduct identified by the whistleblower constituted a
violation of the CEA.
—————————————————————————
23 7 U.S.C. 26(a)(7).
—————————————————————————
Proposed Rule 165.2(p) (and Proposed Rule 165.6(b)) would further
make clear that the anti-retaliation protections set forth in Section
23(h) of the CEA apply irrespective of whether a whistleblower
satisfies all the procedures and conditions to qualify for an award
under the Commission’s whistleblower program. Section 23(h)(1)(A) of
the CEA prohibits employment retaliation against a whistleblower who
provides information to the Commission (i) “in accordance with this
section,” or (ii) “in assisting in any investigation or judicial or
administrative action of the Commission based upon or related to such
information.” The Commission interprets the statute as designed to
extend the protections against employment retaliation that are provided
for in Section 23(h)(1) to any individual who provides information to
the Commission about potential violations of the CEA regardless of
whether the person satisfies procedures and conditions necessary to
qualify for an award under the Commission’s whistleblower program.
The Commission requests comment on whether the anti-retaliation
protections set forth in Section 23(h)(1) of the CEA should be applied
broadly to any person who provides information to the Commission
concerning a potential violation of the CEA, or should they be limited
by the various procedural or substantive prerequisites to consideration
for a whistleblower award? Should the application of the anti-
retaliation provisions be limited or broadened in any other ways?
C. Proposed Rule 165.3–Procedures for Submitting Original Information
The Commission proposes a two-step process for the submission of
original information under the whistleblower award program. In general,
the first step would require the submission of the standard form on
which the information concerning potential violations of the CEA are
reported. The second step would require the whistleblower to complete a
unique form, signed under penalties of perjury (consistent with Section
23(m) of the CEA), in which the whistleblower would be required to make
certain representations concerning the veracity of the information
provided and the whistleblower’s eligibility for a potential award. The
use of standardized forms will greatly assist the Commission in
managing and tracking the thousands of tips that it receives annually.
This will also better enable the Commission to connect tips to each
other so as to make better use of the information provided, and to
connect tips to requests for payment under the whistleblower
provisions. The purpose of requiring a sworn declaration is to help
deter the submission of false and misleading tips and the resulting
inefficient use of the Commission’s resources. The requirement should
also mitigate the potential harm to companies and individuals that may
be caused by false or spurious allegations of wrongdoing.
As set forth in Proposed Rule 165.5, Commission staff may also
request testimony and additional information from a whistleblower
relating to the whistleblower’s eligibility for an award.
1. Form TCR and Instructions
Subparagraph (a) of Proposed Rule 165.3 requires the submission of
information to the Commission on proposed Form TCR. The Form TCR,
“Tip, Complaint or Referral,” and the instructions thereto, are
designed to capture basic identifying information about a complainant
and to elicit sufficient information to determine whether the conduct
alleged suggests a violation of the CEA.
2. Form WB-DEC and Instructions
In addition to Form TCR, the Commission proposes in subparagraph
(b) of Proposed Rule 165.3 to require that whistleblowers who wish to
be considered for an award in connection with the information they
provide to the Commission also complete and provide the Commission with
proposed Form WB-DEC, “Declaration Concerning Original Information
Provided Pursuant to Section 23 of the Commodity Exchange Act.”
Proposed Form WB-DEC would require a whistleblower to answer certain
threshold questions concerning the whistleblower’s eligibility to
receive an award. The form also would contain a statement from the
whistleblower acknowledging that the information contained in the Form
WB-DEC, as well as all information contained in the whistleblower’s
Form TCR, is true, correct and complete to the best of the
whistleblower’s knowledge, information and belief. Moreover, the
statement would acknowledge the whistleblower’s understanding that the
whistleblower may be subject to prosecution and ineligible for an award
if, in the whistleblower’s submission of information, other dealings
with the Commission, or dealings with another authority in connection
with a related action, the whistleblower knowingly and willfully makes
any false, fictitious, or fraudulent statements or representations, or
uses any false writing or document knowing that the writing or document
contains any false, fictitious, or fraudulent statement or entry.
In instances where information is provided by an anonymous
whistleblower, proposed subparagraph (c) of Proposed Rule 165.3 would
require that the whistleblower’s identity must be disclosed to the
Commission and verified in a form and manner acceptable to the
Commission consistent with the procedure set forth in Proposed Rule
165.7(c) prior to Commission’s payment of any award.
The Commission proposes to allow two alternative methods of
submission of Form TCRs and WB-DEC. A whistleblower would have the
option of submitting a Form TCR electronically through the Commission’s
website, or by mailing or faxing the form to the Commission. Similarly,
a Form WB-DEC could be submitted electronically, in accordance with
instructions set forth on the Commission’s website or, alternatively,
by mailing or faxing the form to the Commission.
[[Page 75736]]
3. Perfecting Whistleblower Status for Submissions Made Before
Effectiveness of the Rules
As previously discussed, Section 748(k) of Dodd-Frank Act states
that information submitted to the Commission by a whistleblower after
the date of enactment, but before the effective date of these proposed
rules, retains the status of original information. The Commission has
already received tips from potential whistleblowers after the date of
enactment of the Dodd-Frank Act. Proposed Rule 165.3(d) would provide a
mechanism by which potential whistleblowers who provide tips between
enactment of the Dodd-Frank Act and the effective date of the final
rules could perfect their status as whistleblowers under the
Commission’s award program once final rules are adopted. Subparagraph
(d)(1) requires a whistleblower who provided original information to
the Commission in a format or manner other than a Form TCR to submit a
completed Form TCR within one hundred twenty (120) days of the
effective date of the proposed rules and to otherwise follow the
procedures set forth in subparagraphs (a) and (b) of Proposed Rule
165.3. If the whistleblower provided the original information to the
Commission in a Form TCR, subparagraph (d)(2) would require the
whistleblower to submit Form WB-DEC within one hundred twenty (120)
days of the effective date of the proposed rules in the manner set
forth in subparagraph (b) of Proposed Rule 165.3.
Although the Commission is proposing alternative methods of
submission of the Form TCR and WB-DEC, it expects that electronic
submissions would dramatically reduce the administrative costs, enhance
ability to evaluate tips (generally and using automated tools), and
improve efficiency in processing whistleblower submissions.
Accordingly, the Commission solicits comment on whether it would be
appropriate to eliminate the fax and mail option and require that all
submissions of proposed Form TCRs and WB-DEC be made electronically.
Would the elimination of submissions by fax and mail create an undue
burden for some potential whistleblowers who may not have easy access
to a computer or who may prefer to submit their information in that
manner? Is there other information that the Commission should elicit
from whistleblowers on Form TCRs and WB-DEC? Are there categories of
information included on these forms that are unnecessary, or should be
modified?
The Commission also requests comment on whether the requirement
that an attorney for an anonymous whistleblower certify that the
attorney has verified the whistleblower’s identity and eligibility for
an award is appropriate? Is there an alternative process the Commission
should consider that would accomplish its goal of ensuring that it is
communicating with a legitimate whistleblower?
Finally, the Commission seeks comment on whether the Commission’s
proposed process for allowing whistleblowers 120 days to perfect their
status in cases where the whistleblower provided original information
to the Commission in writing after the date of enactment of the Dodd-
Frank Act but before adoption of the proposed rules is reasonable?
Should the period be made shorter (e.g., 30 or 60 days) or longer
(e.g., 180 days)?
D. Proposed Rule 165.4–Confidentiality
Proposed Rule 165.4 summarizes the confidentiality requirements set
forth in Section 23(h)(2) of the CEA 24 with respect to information
that could reasonably be expected to reveal the identity of a
whistleblower. As a general matter, it is the Commission’s policy and
practice to treat all information obtained during its investigations as
confidential and nonpublic. Disclosures of enforcement-related
information to any person outside the Commission may only be made as
authorized by the Commission and in accordance with applicable laws and
regulations. Consistent with Section 23(h)(2), the proposed rule
explains that the Commission will not reveal the identity of a
whistleblower or disclose other information that could reasonably be
expected to reveal the identity of a whistleblower, except under
circumstances described in the statute and the rule.25 As is further
explained below, there may be circumstances in which disclosure of
information that identifies a whistleblower will be legally required or
will be necessary for the protection of investors.
—————————————————————————
24 7 U.S.C. 26(h)(2).
25 Section 23(h)(2)(A) provides that the Commission shall not
disclose any information, including that provided to the
whistleblower to the Commission, which could reasonably be expected
to reveal the identity of the whistleblower, except in accordance
with the provisions of Section 552a of title 5, United States Code,
unless and until required to be disclosed to a defendant or
respondent in connection with a public proceeding instituted by the
Commission or governmental organizations described subparagraph (C).
—————————————————————————
Subparagraph (a)(1) of the proposed rule would authorize disclosure
of information that could reasonably be expected to reveal the identity
of a whistleblower when disclosure is required to a defendant or
respondent in a public proceeding that the Commission files or in
another public action or a public proceeding filed by an authority to
which the Commission is authorized to provide the information. For
example, in a related action brought as a criminal prosecution by the
Department of Justice, disclosure of a whistleblower’s identity may be
required, in light of the requirement of the Sixth Amendment of the
Constitution that a criminal defendant have the right to be confronted
with witnesses against him.26 Subparagraph (a)(2) would authorize
disclosure to: The Department of Justice; an appropriate department or
agency of the Federal Government, acting within the scope of its
jurisdiction; a registered entity, registered futures association, a
self-regulatory organization; a state attorney general in connection
with a criminal investigation; any appropriate state department or
agency, acting within the scope of its jurisdiction; or a foreign
futures authority.
—————————————————————————
26 See U.S. Const. Amend. VI.
—————————————————————————
Because many whistleblowers may wish to provide information
anonymously, subparagraph (b) of the proposed rule, consistent with
Section 23(d) of the CEA, states that anonymous submissions are
permitted with certain specified conditions. Subparagraph (b) would
require that anonymous whistleblowers who submit information to the
Commission must follow the procedure in Proposed Rule 165.3(c) for
submitting original information anonymously. Further, anonymous
whistleblowers would be required to follow the procedures set forth in
Proposed Rule 165.7(c) requiring that the whistleblower’s identity be
disclosed to the Commission and verified in a form and manner
acceptable to the Commission prior to Commission’s payment of any
award.
The purpose of this requirement is to prevent fraudulent
submissions and to facilitate communication and assistance between the
whistleblower and the Commission’s staff. Any whistleblower may be
represented by counsel–whether submitting information anonymously or
not.27 The Commission emphasizes that anonymous whistleblowers have
the same rights and responsibilities as other whistleblowers under
Section 23 of the CEA and these
[[Page 75737]]
proposed rules, unless expressly exempted.
—————————————————————————
27 See Section 23(d)(1), 7 U.S.C. 26(d)(1). Under the statute,
however, an anonymous whistleblower seeking an award is required to
be represented by counsel. Section 23(d)(2), 7 U.S.C. 26(d)(2).
—————————————————————————
E. Proposed Rule 165.5–Prerequisites to the Consideration of an Award
Proposed Rule 165.5 summarizes the general prerequisites for
whistleblowers to be considered for the payment of awards set forth in
Section 23(b)(1) of the CEA. As set forth in the statute, subparagraph
(a) states that, subject to the eligibility requirements in the
Regulations, the Commission will pay an award or awards to one or more
whistleblowers who voluntarily provide the Commission with original
information that led to the successful resolution of a covered
Commission judicial or administrative action or the successful
enforcement of a related action by: the Department of Justice; an
appropriate department or agency of the Federal Government, acting
within the scope of its jurisdiction; a registered entity, registered
futures association, a self regulatory organization; a state attorney
general in connection with a criminal investigation; any appropriate
state department or agency, acting within the scope of its
jurisdiction; or a foreign futures authority.
Subparagraph (b) of Proposed Rule 165.5 emphasizes that, in order
to be eligible, the whistleblower must have submitted to the Commission
original information in the form and manner required by Proposed Rule
165.3. The whistleblower must also provide the Commission, upon its
staff’s request, certain additional information, including:
explanations and other assistance, in the manner and form that staff
may request, in order that the staff may evaluate the use of the
information submitted; all additional information in the
whistleblower’s possession that is related to the subject matter of the
whistleblower’s submission; and testimony or other evidence acceptable
to the staff relating to the whistleblower’s eligibility for an award.
Subparagraph (b) of Proposed Rule 165.5 further requires that, to be
eligible for an award, a whistleblower must, if requested by Commission
staff, enter into a confidentiality agreement in a form acceptable to
the Commission, including a provision that a violation of the
confidentiality agreement may lead to the whistleblower’s ineligibility
to receive an award.
The terms “whistleblower,” “voluntarily,” “original
information,” “led to successful enforcement,” “action,” and
“monetary sanctions” are defined in Proposed Rule 165.2.
F. Proposed Rule 165.6–Whistleblowers Ineligible for an Award
Subparagraph (a) of Proposed Rule 165.6 recites the categories of
individuals who are statutorily ineligible for an award under Section
23 of the CEA. These include persons who are, or were at the time they
acquired the original information a member, officer, or employee of:
the Commission; the Board of Governors of the Federal Reserve System;
the Office of the Comptroller of the Currency; the Board of Directors
of the Federal Deposit Insurance Corporation; the Director of the
Office of Thrift Supervision; the National Credit Union Administration
Board; the Securities and Exchange Commission; the Department of
Justice; a registered entity; a registered futures association; a self-
regulatory organization; or a law enforcement organization. Further
Proposed Rule 165.6(a)(2) makes clear that no award will be made to any
whistleblower who is convicted of a criminal violation related to the
judicial or administrative action for which the whistleblower otherwise
could receive an award under Proposed Rule 165.7.
In order to prevent evasion of these exclusions, subparagraph
(a)(3) of the proposed rule also provides that persons who acquire
information from ineligible individuals are ineligible for an award.
Consistent with Section 23(m) of the CEA, also ineligible for an award
is any whistleblower that, in his submission of information or an
application for an award, other dealings with the Commission, or his
dealings with another authority in connection with a related action:
knowingly and willfully makes any false, fictitious, or fraudulent
statement or representation, or uses any false writing or document,
knowing that it contains any false, fictitious, or fraudulent statement
or entry; or omits any material fact whose absence would make any other
statement or representation made to the Commission or any other
authority misleading.
Subparagraph (b) of Proposed Rule 165.6 reiterates that a
determination that a whistleblower is ineligible to receive an award
for any reason does not deprive the individual of the anti-retaliation
protections set forth in Section 23(h)(1) of the CEA.
The Commission requests comment on the ineligibility criteria set
forth in Proposed Rule 165.6(a). Are there other statuses or activities
that should render an individual ineligible for a whistleblower award?
G. Proposed Rule 165.7–Procedures for Award Applications and
Commission Award Determinations
Proposed Rule 165.7 describes the steps a whistleblower would be
required to follow in order to make an application for an award in
relation to a Commission covered judicial or administrative action or
related action. In addition, the rule describes the Commission’s
proposed claims review process.
In regard to covered actions, the proposed process would begin with
the publication of a “Notice of a Covered Action” (“Notice”) on the
Commission’s Web site. Whenever a covered judicial or administrative
action brought by the Commission results in the imposition of monetary
sanctions exceeding $1,000,000, the Commission will cause this Notice
of a covered judicial or administrative action to be published on the
Commission’s Web site subsequent to the entry of a final judgment or
order in the action that by itself, or collectively with other
judgments or orders previously entered in the action, exceeds the
$1,000,000 threshold. If the monetary sanctions are obtained without a
judgment or order, the Notice would be published within thirty (30)
days of the issuance of the settlement order that causes total monetary
sanctions in the action to exceed $1,000,000. The Commission’s proposed
rule requires claimants to file their claim for an award within sixty
(60) days of the date of the Notice.
In regard to related actions, a claimant will be responsible for
tracking the resolution of the related action. The Commission’s
proposed rule requires claimants to file their claim for an award in
regard to a related action within sixty (60) days of the date of the
monetary sanctions being imposed in the related action.
A claimant’s failure to file timely a request for a whistleblower
award would bar that individual later seeking a recovery.28
—————————————————————————
28 See, e.g., Yuen v. U.S., 825 F.2d 244 (9th Cir. 1987)
(taxpayer barred from recovery due to failure to timely file a
written request for refund).
—————————————————————————
Subparagraph (b) of Proposed Rule 165.7 describes the procedure for
making a claim for an award. Specifically, a claimant would be required
to submit a claim for an award on proposed Form WB-APP (“Application
for Award for Original Information Provided Pursuant to Section 23 of
the Commodity Exchange Act”). Proposed Form WB-APP, and the
instructions thereto, will elicit information concerning a
whistleblower’s eligibility to receive an
[[Page 75738]]
award at the time the whistleblower files his claim. The form will also
provide an opportunity for the whistleblower to “make his case” for
why he is entitled to an award by describing the information and
assistance he has provided and its significance to the Commission’s
successful action.29
—————————————————————————
29 See discussion of Proposed 165.9 for a non-exhaustive list
of factors the Commission preliminarily believes it will consider in
determining award amounts.
—————————————————————————
Subparagraph (b) of Proposed Rule 165.7 provides that a claim on
Form WB-APP, including any attachments, must be received by the
Commission within sixty (60) calendar days of the date of the Notice or
sixty (60) calendar days of the date of the imposition of the monetary
sanctions in the related action, depending upon which action the
claimant is seeking an award, in order to be considered for an award.
Subparagraph (c) includes award application procedures for a
whistleblower who submitted original information to the Commission
anonymously. Whistleblowers who submitted original information
anonymously, but who are making a claim for a whistleblower award on a
disclosed basis, are required to disclose their identity on the Form
WB-APP and include with the Form WB-APP a signed and completed Form WB-
DEC. Whistleblowers who submitted information anonymously, and are
making a claim for a whistleblower award on an anonymous basis, must be
represented by counsel and must provide their counsel with a completed
and signed Form WB-DEC by no later than the date upon which the counsel
submits to the Commission the whistleblower’s Form WB-APP. In addition,
whistleblower’s counsel must submit with the Form WB-APP a separate
Form WB-DEC certifying that the counsel has verified your identity, has
reviewed the whistleblower’s Form WB-DEC form for completeness and
accuracy, will retain the signed original of your Form WB-DEC in
counsel’s records, and will produce the whistleblower’s Form WB-DEC
upon request of the Commission’s staff. Proposed Rule 165.7(c) makes
explicit that regardless of whether they make an award application on a
disclosed or anonymous basis, the whistleblower’s identity must be
verified in a form and manner that is acceptable to the Commission
prior to the payment of any award.
Subparagraph (d) of Proposed Rule 165.7 describes the Commission’s
claims review process. The claims review process would begin upon the
later of once the time for filing any appeals of the Commission’s
judicial or administrative action and the related action(s) has
expired, or where an appeal has been filed, after all appeals in the
action or related action(s) have been concluded.
Under the proposed process, the Commission would evaluate all
timely whistleblower award claims submitted on Form WB-APP. In
connection with this process, the Commission could require that
claimants provide additional information relating to their eligibility
for an award or satisfaction of any of the conditions for an award, as
set forth in Proposed Rule 165.5(b). Following that evaluation, the
Commission would send any claimant a Determination setting forth
whether the claim is allowed or denied and, if allowed, setting forth
the proposed award percentage amount.
H. Proposed Rule 165.8–Amount of Award
If all conditions are met, Proposed Rule 165.8 provides that the
whistleblower awards shall be in an aggregate amount equal to between
10 and 30 percent, in total, of what has been collected of the monetary
sanctions imposed in the Commission’s action or related actions. This
range is specified in Section 23(b)(1) of the CEA. Where multiple
whistleblowers are entitled to an award, subparagraph (b) states that
the Commission will independently determine the appropriate award
percentage for each whistleblower, but total award payments, in the
aggregate, will equal between 10 and 30 percent of the monetary
sanctions collected either in the Commission’s action or the related
action (but not both the Commission’s action and the related action).
The Commission requests comment on whether the provision stating
that the percentage amount of an award in a Commission covered judicial
or administrative action may differ from the percentage awarded in a
related action is appropriate?
I. Proposed Rule 165.9–Criteria for Determining Amount of Award
Assuming that all of the conditions for making an award to a
whistleblower have been satisfied, Proposed Rule 165.9 sets forth the
criteria that the Commission would take into consideration in
determining the amount of the award. Subparagraphs (a)(1) through (3)
of the proposed rule recite three criteria that Section 23(c)(1)(B) of
the CEA requires the Commission to consider, and subparagraph (a)(4)
adds a fourth criterion based upon the discretion given to the
Commission to consider “additional relevant factors” in determining
the amount of an award.
Subparagraph (a)(1) requires the Commission to consider the
significance of the information provided by a whistleblower to the
success of the Commission action or related action. Subparagraph (a)(2)
requires the Commission to consider the degree of assistance provided
by the whistleblower and any legal representative of the whistleblower
in the Commission action or related action. Subparagraph (a)(3)
requires the Commission to consider the programmatic interest of the
Commission in deterring violations of the CEA by making awards to
whistleblowers that provide information that led to successful
enforcement of covered judicial or administrative actions or related
actions. Subparagraph (a)(4) would permit the Commission to consider
whether an award otherwise enhances the Commission’s ability to enforce
the CEA, protect customers, and encourage the submission of high
quality information from whistleblowers.
The Commission anticipates that the determination of award amounts
pursuant to subparagraphs (a)(1)-(4) will involve highly individualized
review of the circumstances surrounding each award. To allow for this,
the Commission preliminarily believes that the four criteria afford the
Commission broad discretion to weigh a multitude of considerations in
determining the amount of any particular award. Depending upon the
facts and circumstances of each case, some of the considerations may
not be applicable or may deserve greater weight than others.
The permissible considerations include, but are not limited to:
The character of the enforcement action including whether
its subject matter is a Commission priority, whether the reported
misconduct involves regulated entities or fiduciaries, the type of CEA
violations, the age and duration of misconduct, the number of
violations, and the isolated, repetitive, or ongoing nature of the
violations;
The dangers to customers or others presented by the
underlying violations involved in the enforcement action including the
amount of harm or potential harm caused by the underlying violations,
the type of harm resulting from or threatened by the underlying
violations, and the number of individuals or entities harmed;
[[Page 75739]]
The timeliness, degree, reliability, and effectiveness of
the whistleblower’s assistance;
The time and resources conserved as a result of the
whistleblower’s assistance;
Whether the whistleblower encouraged or authorized others
to assist the staff who might not have otherwise participated in the
investigation or related action;
Any unique hardships experienced by the whistleblower as a
result of his or her reporting and assisting in the enforcement action;
The degree to which the whistleblower took steps to
prevent the violations from occurring or continuing;
The efforts undertaken by the whistleblower to remediate
the harm caused by the violations including assisting the authorities
in the recovery of the fruits and instrumentalities of the violations;
Whether the information provided by the whistleblower
related to only a portion of the successful claims brought in the
covered judicial or administrative action or related action; 30 and
—————————————————————————
30 As described elsewhere in these rules, if the information
provided by a whistleblower relates to only a portion of a
successful covered judicial or administrative action or related
action, the Commission proposes to look to the entirety of the
action (including all defendants or respondents, all claims, and all
monetary sanctions obtained) in determining whether the
whistleblower is eligible for an award and the total dollar amount
of sanctions on which the whistleblower’s award will be based.
However, under subparagraph (a) of Proposed Rule 165.9, the fact
that the whistleblower’s information related to only a portion of
the overall action would be a factor in determining the amount of
the whistleblower’s award. Thus, if the whistleblower’s information
supported only a small part of a larger case, that would be a reason
for making an award based upon a smaller percentage amount than
otherwise would have been awarded.
—————————————————————————
The culpability of the whistleblower including whether the
whistleblower acted with scienter, both generally and in relation to
others who participated in the misconduct.
These considerations are not listed in order of importance nor are they
intended to be all-inclusive or to require a specific determination in
any particular case.
Finally, subparagraph (b) to Proposed Rule 165.9 reiterates the
statutory prohibition in Section 23(c)(2) of the CEA from taking into
consideration the balance of the Fund when making an award
determination.
J. Proposed Rule 165.10–Contents of Record for Award Determinations
In order to promote transparency and consistency, and also to
preserve a clear record for appellate review (under Proposed Rule
165.13) of Commission award determinations (under Proposed Rule 165.7),
Proposed Rule 165.10 sets forth the contents of record for award
determinations relating to covered judicial or administrative actions
or related actions. The record shall consist of: Required forms the
whistleblower submits to the Commission, including related attachments;
other documentation provided by the whistleblower to the Commission;
the complaint, notice of hearing, answers and any amendments thereto;
the final judgment, consent order, or administrative speaking order;
the transcript of the related administrative hearing or civil
injunctive proceeding, including any exhibits entered at the hearing or
proceeding; any other documents that appear on the docket of the
proceeding. The record shall also include any statements by litigation
staff to the Commission regarding: The significance of the information
provided by the whistleblower to the success of the covered judicial or
administrative action or related action; the degree of assistance
provided by the whistleblower and any legal representative of the
whistleblower in a covered judicial or administrative action or related
action; and any facts relating to a determination of whether the
whistleblower provided original information, conducted an independent
analysis, or possessed independent knowledge.
However, Proposed Rule 165.10(b) explicitly states that the record
upon which the award determination under Proposed Rule 165.7 shall be
made shall not include any Commission pre-decisional or internal
deliberative process materials related to the Commission or its staff’s
determination: To file or settle the covered judicial or administrative
action; and/or whether, to whom and in what amount to make a
whistleblower award. Further, the record upon which the award
determination under Proposed Rule 165.7 shall be made shall not include
any other entity’s pre-decisional or internal deliberative process
materials related to its or its staff’s determination to file or settle
a related action.
The Commission requests comment on what other relevant items the
Commission should consider as part of the record for its award
determinations?
K. Proposed Rule 165.11–Awards Based Upon Related Actions
Proposed Rule 165.11 explains that the Commission, or its delegate,
may grant an award based on amounts collected in certain related
actions rather than the amount collected in a covered judicial or
administrative action. Proposed Rule 165.11 sets forth the requirements
for a related action or related actions to serve as the basis of a
whistleblower award. Regardless of whether the Commission’s award
determination will be based upon the Commission’s covered judicial or
administrative action or a related action or actions, Proposed Rule
165.7 sets forth the procedures for whistleblower award applications
and Commission award determinations.
L. Proposed Rule 165.12–Payment of Awards From the Fund, Financing
Customer Education Initiatives, and Deposits and Credits to the Fund;
and Proposed Rule 165.15–Delegations of Authority
Proposed Rules 165.12 and 165.15 set forth certain internal
Commission procedures. Specifically, paragraph (a) of Proposed Rule
165.12, consistent with Section 23(g)(2) of the CEA, requires the
Commission to pay whistleblower awards from the Fund. Importantly,
Proposed Rule 165.12(b)(2) makes clear that if there is an insufficient
amount in the Fund to satisfy a whistleblower award made pursuant to
Proposed Rule 165.7, the Commission shall deposit into the Fund
monetary sanctions that are actually collected by the Commission in an
amount equal to the unsatisfied portion of the award from any judicial
or administrative action based on the information provided by any
whistleblower.
Proposed Rule 165.15 includes the Commission’s delegations to the
Executive Director to take certain actions to carry out this Part 165
of the Rules and the requirements of Section 23(h) of CEA. Among the
delegations to the Executive Director in Proposed Rule 165.15(a) is the
authority to make deposits into the Fund.
Proposed Rule 165.12 also includes the Commission’s financing of
customer education initiatives. Proposed Rule 165.12(c) provides that
the Commission shall undertake and maintain customer education
initiatives. The initiatives shall be designed to help customers
protect themselves against fraud or other violations of the CEA, or
rules or regulations thereunder. The Commission shall fund the customer
education initiatives, and may utilize funds deposited into the Fund
during any fiscal year in which the beginning (October 1) balance of
the Fund is greater than $10,000,000. The Commission shall budget on an
annual basis the amount used to finance customer education initiatives,
taking
[[Page 75740]]
into consideration the balance of the Fund.
The Commission limited its discretion to finance customer education
initiatives to fiscal years in which the beginning (October 1) balance
of the Fund is greater than $10,000,000 in order to limit the
possibility that spending on customer education initiatives may
inadvertently result in the Commission operating the Fund in a deficit
and thereby delay award payments to whistleblowers.
The Commission requests comment on whether this limitation is
appropriate, or would other limitations better effectuate this purpose?
Is the $10 million Fund balance trigger too high or too low, and, if
so, what would be a better trigger amount?
M. Proposed Rule 165.13–Appeals
Section 23(f) of the CEA provides for rights of appeal of Final
Orders of the Commission with respect to whistleblower award
determinations.31 Subparagraph (a) of Proposed Rule 165.13 tracks
this provision and describes claimants’ rights to appeal. Claimants may
appeal any Commission final award determination, including whether, to
whom, or in what amount to make whistleblower awards, to an appropriate
court of appeals within thirty (30) days after the Commission’s Final
Order of determination.
—————————————————————————
31 7 U.S.C. 26(f).
—————————————————————————
Subparagraph (b) of Proposed Rule 165.13 designates the materials
that shall be included in the record on any appeal. They include: The
Contents of Record for Award Determination, as set forth in Proposed
Rule 165.9; any Final Order of the Commission, as set forth in Rule
165.7(e).
N. Proposed Rule 165.14–Procedures Applicable to the Payment of Awards
Proposed Rule 165.14 addresses the timing for payment of an award
to a whistleblower. Any award made pursuant to the rules would be paid
from the Fund established by Section 23(g) of the CEA.32 Subparagraph
(a) provides that a recipient of a whistleblower award will be entitled
to payment on the award only to the extent that a monetary sanction is
collected in the covered judicial or administrative action or in a
related action upon which the award is based. This requirement is
derived from Section 23(b)(1) of the CEA,33 which provides that an
award is based upon the monetary sanctions collected in the covered
judicial or administrative action or related action.
—————————————————————————
32 7 U.S.C. 26(g).
33 7 U.S.C. 26(b)(1).
—————————————————————————
Subparagraph (b) states that any payment of an award for a monetary
sanction collected in a covered judicial or administrative action shall
be made within a reasonable period of time following the later of
either the completion of the appeals process for all whistleblower
award claims arising from the covered judicial or administrative
action, or the date on which the monetary sanction is collected.
Likewise, the payment of an award for a monetary sanction collected in
a related action shall be made within a reasonable period of time
following the later of either the completion of the appeals process for
all whistleblower award claims arising from the related action, or the
date on which the monetary sanction is collected. This provision is
intended to cover situations where a single action results in multiple
whistleblowers claims. Under this scenario, if one whistleblower
appeals a Final Order of the Commission relating to a whistleblower
award determination, the Commission would not pay any awards in the
action until that whistleblower’s appeal has been concluded, because
the disposition of that appeal could require the Commission to
reconsider its determination and thereby affect all payments for that
covered judicial or administrative action or related action.
Subparagraph (c) of Proposed Rule 165.14 describes how the
Commission will address situations where there are insufficient amounts
available in the Fund to pay an award to a whistleblower or
whistleblowers within a reasonable period of time of when payment
should otherwise be made. In this situation, the whistleblower or
whistleblowers will be paid when amounts become available in the Fund,
subject to the terms set forth in proposed subparagraph (c). Under
proposed subparagraph (c), where multiple whistleblowers are owed
payments from the Fund based on awards that do not arise from the same
Notice or resolution of a related action, priority in making payment on
these awards would be determined based upon the date that the Final
Order of the Commission is made. If two or more of these Final Orders
of the Commission are entered on the same date, those whistleblowers
owed payments will be paid on a pro rata basis until sufficient amounts
become available in the Fund to pay their entire payments. Under
proposed subparagraph (c)(2), where multiple whistleblowers are owed
payments from the Fund based on awards that arise from the same Notice
or resolution of a related action, they would share the same payment
priority and would be paid on a pro rata basis until sufficient amounts
become available in the Fund to pay their entire payments.
O. Proposed Rule 165.16–No Immunity and Proposed Rule 165.17–Awards
to Whistleblowers Who Engage in Culpable Conduct
Proposed Rule 165.16 provides notice that the provisions of Section
23 of the CEA do not provide immunity to individuals who provide
information to the Commission relating to a violation of the CEA.
Whistleblowers who have not participated in misconduct will of course
not need immunity. However, some whistleblowers who provide original
information that significantly aids in detecting and prosecuting
sophisticated manipulation or fraud schemes may themselves be
participants in the scheme who would be subject to Commission
enforcement actions. While these individuals, if they provide valuable
assistance to a successful action, will remain eligible for a
whistleblower award, they will not be immune from prosecution. Rather,
the Commission will analyze the unique facts and circumstances of each
case in accordance with its Enforcement Advisory, “Cooperation Factors
in Enforcement Division Sanction Recommendations” to determine
whether, how much, and in what manner to credit cooperation by
whistleblowers who have participated in misconduct.
The options available to the Commission and its staff for
facilitating and rewarding cooperation ranges from taking no
enforcement action to pursuing charges and sanctions in connection with
enforcement actions.
Whistleblowers with potential civil liability or criminal liability
for CEA violations that they report to the Commission remain eligible
for an award. However, pursuant to Section 23(c)(2)(B) of the CEA,34
if a whistleblower is convicted of a criminal violation related to the
judicial or administrative action, they are not eligible for an award.
Furthermore, if a defendant or respondent in a Commission or related
action is ordered to pay monetary sanctions in a civil enforcement
action, this proposed rule states that the Commission will not count
the amount of such monetary sanctions toward the $1,000,000 threshold
in considering an award payment to such a defendant or respondent in
relation to a covered
[[Page 75741]]
judicial or administrative action, and will not add that amount to the
total monetary sanctions collected in the action for purposes of
calculating any payment to the culpable individual. The rationale for
this limitation is to prevent wrongdoers from financially benefiting
from their own misconduct, and ensures equitable treatment of culpable
and non-culpable whistleblowers. For example, without such a
prohibition, a whistleblower that was the leader or organizer of a
fraudulent scheme involving multiple defendants that resulted in total
monetary sanctions of $1,250,000 would exceed the $1,000,000 minimum
threshold required for making an award, even though he personally was
ordered to pay $750,000 of those monetary sanctions and, under similar
circumstances, a non-culpable whistleblower would be deemed ineligible
for an award if they reported a CEA or Commission regulation violation
that resulted in monetary sanctions of less than $1,000,000. The
proposed rule would prevent such inequitable treatment.
—————————————————————————
34 7 U.S.C. 26(c)(2)(B).
—————————————————————————
P. Proposed Rule 165.18–Staff Communications With Whistleblowers From
Represented Entities
Proposed Rule 165.18 clarifies the staff’s authority to communicate
directly with whistleblowers who are directors, officers, members,
agents, or employees of an entity that has counsel, and who have
initiated communication with the Commission relating to a potential CEA
violation. The proposed rule makes clear that the staff is authorized
to communicate directly with these individuals without first seeking
the consent of the entity’s counsel.
Section 23 of the CEA evinces a strong Congressional policy to
facilitate the disclosure of information to the Commission relating to
potential CEA violations and to preserve the confidentiality of those
who do so.35 This Congressional policy would be significantly
impaired were the Commission required to seek the consent of an
entity’s counsel before speaking with a whistleblower who contacts us
and who is a director, officer, member, agent, or employee of the
entity. For this reason, Section 23 of the CEA authorizes the
Commission to communicate directly with these individuals without first
obtaining the consent of the entity’s counsel.
—————————————————————————
35 See Section 23 (b)-(d) & (h) of the CEA, 7 U.S.C 26(b)-(d)
& (h).
—————————————————————————
The Commission believes that expressly clarifying this authority in
the proposed rule would promote whistleblowers’ willingness to disclose
potential CEA violations to the Commission by reducing or eliminating
any concerns that whistleblowers might have that the Commission is
required to request consent of the entity’s counsel and, in doing so,
might disclose their identity. The Commission also believes that this
proposed rule is appropriate to clarify that, in accordance with
American Bar Association Model Rule 4.2, the staff is authorized by law
to make these communications.36 Under this provision, for example,
the Commission could meet or otherwise communicate with the
whistleblower privately, without the knowledge or presence of counsel
or other representative of the entity.
—————————————————————————
36 American Bar Association Model Rule 4.2 provides as
follows: “In representing a client, a lawyer shall not communicate
about the subject of the representation with a person the lawyer
knows to be represented by another lawyer in the matter, unless the
lawyer has the consent of the other lawyer or is authorized to do so
by law or a court order.” Model Rules of Prof’l Conduct R. 4.2
(emphasis added).
—————————————————————————
Q. Proposed Rule 165.19–Nonenforceability of Certain Provisions
Waiving Rights and Remedies or Requiring Arbitration of Disputes
Consistent with Congressional intent to protect whistleblowers from
retaliation as reflected in Section 23(h) of the CEA, Proposed Rule
165.19 provides that the rights and remedies provided for in this Part
165 of the Commission’s regulations may not be waived by any agreement,
policy, form, or condition of employment including by a predispute
arbitration agreement. No predispute arbitration agreement shall be
valid or enforceable, if the agreement requires arbitration of a
dispute arising under this Part.
R. Proposed Appendix A–Guidance With Respect to the Protection of
Whistleblowers Against Retaliation
The Commission has included a Proposed Appendix A (“Guidance With
Respect To The Protection of Whistleblowers Against Retaliation”) to
better inform the public regarding the protections against retaliation
from employers provided for whistleblowers in Section 23 of the CEA.
Specifically, the Proposed Appendix A informs the public that Section
23(h)(1) of CEA provides whistleblowers with certain protections
against retaliation, including: A Federal cause of action against the
employer, which must be filed in the appropriate United States district
court within two (2) years of the employer’s retaliatory act; and
potential relief for prevailing whistleblowers, including
reinstatement, back pay, and compensation for other expenses, including
reasonable attorney’s fees. For ease of reference, the Proposed
Appendix also includes a verbatim copy of the full Section 23(h)(1) of
the CEA.
III. Request for Comment
The Commission requests comment on all aspects of the proposed
rules.
IV. Administrative Compliance
A. Cost-Benefit Analysis
Section 15(a) of the CEA 37 requires the Commission to consider
the costs and benefits of its actions before promulgating a regulation
under the CEA. By its terms, section 15(a) does not require the
Commission to quantify the costs and benefits of a rule or to determine
whether the benefits of the regulation outweigh its costs; rather, it
requires that the Commission “consider” the costs and benefits of its
actions. Section 15(a) further specifies that the costs and benefits
shall be evaluated in light of five broad areas of market and public
concern: (1) Protection of market participants and the public; (2)
efficiency, competitiveness and financial integrity of futures markets;
(3) price discovery; (4) sound risk management practices; and (5) other
public interest considerations. The Commission may in its discretion
give greater weight to any one of the five enumerated areas and could
in its discretion determine that, notwithstanding its costs, a
particular rule is necessary or appropriate to protect the public
interest or to effectuate any of the provisions or accomplish any of
the purposes of the CEA.
—————————————————————————
37 7 U.S.C. 19(a).
—————————————————————————
With respect to benefits, the proposed rules would enhance the
Commission’s capacity to ensure fair and equitable markets. The
Commission has determined that market participants and the public will
benefit substantially from prevention and deterrence of violations of
the CEA and Commission regulations, which will be buttressed by the
whistleblower incentives and protections under Section 23 of the CEA
and Proposed Part 165 of the regulations.
With respect to costs, the procedures set forth in the Proposed
Rules may impose certain costs on prospective whistleblowers. As an
initial matter, the procedures require potential whistleblowers to
complete certain forms to establish eligibility for an award under the
whistleblower program. As noted above, the Commission recognizes that
it will take time and effort on the part of
[[Page 75742]]
whistleblowers to complete and submit the required forms. In addition,
any whistleblower wishing to submit one of the required forms in hard
copy will need to arrange for delivery and pay the postage or other
delivery costs. In these Proposed Rules, the Commission has attempted
to mitigate the potential for burden or confusion in the procedures,
but such costs cannot be eliminated.
The Commission invites public comment on its cost-benefit
considerations. Commenters are also invited to submit any data or other
information that they may have quantifying or qualifying the costs and
benefits of the proposed rules with their comment letters.
B. Anti-Trust Considerations
Section 15(b) of the CEA, 7 U.S.C. 19(b), requires the Commission
to consider the public interests protected by the antitrust laws and to
take actions involving the least anti-competitive means of achieving
the objectives of the CEA. The Commission believes that the proposed
rules will have a positive effect on competition by improving the
fairness and efficiency of the markets through improving detection and
remediation of potential violations of the CEA and Commission
regulations.
C. Paperwork Reduction Act
This regulation requires that a whistleblower seeking an award
submit whistleblower information and file claims for an award
determination. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid control number. The Office of Management and
Budget (“OMB”) has not yet assigned a control number to the new
collection. Proposed Commission Regulation 165 would result in new
collection of information requirements within the meaning of the
Paperwork Reduction Act (“PRA”).38 The Commission therefore is
submitting this proposal to OMB for review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. The title for this collection of information
is “Regulation 165–Proposed Rules for Implementing Whistleblower
Provisions of Section 23 of the Commodity Exchange Act.” OMB control
number 3038-NEW. If adopted, responses to this new collection of
information would be mandatory.
—————————————————————————
38 44 U.S.C. 3501 et.seq.
—————————————————————————
The Commission will protect proprietary information according to
the Freedom of Information Act and 17 CFR part 145, “Commission
Records and Information.” In addition, section 8(a)(1) of the Act
strictly prohibits the Commission, unless specifically authorized by
the Act, from making public “data and information that would
separately disclose the business transactions or market positions of
any person and trade secrets or names of customers.” The Commission is
also required to protect certain information contained in a government
system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.
1. Information Provided by Reporting Persons
The Proposed Rules 165.3 (Procedures for Submitting Original
Information), 165.4 (Confidentiality), and 165.7 (Procedures for Award
Applications and Commission Award Determinations) require that all
individuals wishing to be eligible for an award under the Commission’s
whistleblower program must complete the following standard forms: Forms
TCR (“Tip, Complaint or Referral”), WB-DEC (“Declaration Concerning
Original Information Provided Pursuant to Section 23 of the Commodity
Exchange Act,” signed under penalty of perjury), and WB-APP
(“Application for Award for Original Information Provided Pursuant to
Section 23 of the Commodity Exchange Act”). The Commission estimates
that there will be numerous individuals, approximately 160 per fiscal
year, who may wish to file such forms. The Commission estimated the
number of individuals based upon the current number of tips, complaints
and referrals received by the Commission’s Division of Enforcement and
news articles regarding the whistleblower protections that indicate the
SEC and Commission should expect to receive a high volume of claims.
The proposed collection is estimated to involve approximately: 2 burden
hours per Form TCR; 0.5 burden hours per Form WB-DEC; and 10 burden
hours per Form WB-APP. The Commission expects that this will result in
a total cost of 12.5 burden hours per individual seeking to be
considered for an award under the Commission’s whistleblower program,
for an annual aggregate 2,000 burden hours per fiscal year. The
Commission invites public comment on the accuracy of its estimate
regarding the collection requirements that would result from the
proposed regulations.
2. Information Collection Comments
The Commission invites the public and other federal agencies to
comment on any aspect of the reporting and recordkeeping burdens
discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission
solicits comments in order to: (i) Evaluate whether the proposed
collection of information is necessary for the proper performance of
the functions of the Commission, including whether the information will
have practical utility; (ii) evaluate the accuracy of the Commission’s
estimate of the burden of the proposed collection of information; (iii)
determine whether there are ways to enhance the quality, utility, and
clarity of the information to be collected; and (iv) minimize the
burden of the collection of information on those who are to respond,
including through the use of automated collection techniques or other
forms of information technology.
Comments may be submitted directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at
[email protected]. Please provide the Commission with a copy
of submitted comments so that they can be summarized and addressed in
the final rule. Refer to the “Addresses” section of this notice of
proposed rulemaking for comment submission instructions to the
Commission. A copy of the supporting statements for the collections of
information discussed above may be obtained by visiting RegInfo.gov.
OMB is required to make a decision concerning the collection of
information between 30 and 60 days after publication of this release.
Consequently, a comment to OMB is most assured of being fully effective
if received by OMB (and the Commission) within 30 days after
publication of this notice of proposed rulemaking.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (“RFA”) 39 requires that
agencies consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and, if so, provide a regulatory flexibility analysis respecting the
impact.40 The rules proposed by the Commission will not have a
significant economic impact on a substantial number of small entities.
As explained above, because only individuals are eligible for
participation in the Commission’s whistleblower program under Section
23 of the CEA and Proposed Part 165 of the regulations, the proposed
rules will not have a significant impact on small entities.
Accordingly, the Chairman, on behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b), that the proposed rules will
not have a
[[Page 75743]]
significant impact on a substantial number of small entities.
—————————————————————————
39 5 U.S.C. 601.
40 Id.
—————————————————————————
Section 603(a) of the Regulatory Flexibility Act 41 requires the
Commission to undertake an initial regulatory flexibility analysis of
the proposed rule on small entities unless the Chairman certifies that
the rule, if adopted, would not have a significant economic impact on a
substantial number of small entities.42 The Proposed Rules apply only
to an individual, or individuals acting jointly, who provide
information to the Commission relating to the violation of the CEA or
Commission regulations. Companies and other entities are not eligible
to participate in the Program as whistleblowers. Consequently, the
persons that would be subject to the proposed rule are not “small
entities” for purposes of the Regulatory Flexibility Act. Accordingly,
the Chairman, on behalf of the Commission, hereby certifies pursuant to
5 U.S.C. 605(b) that the proposed rules will not have a significant
economic impact on a substantial number of small entities. A copy of
the certification is attached as an appendix to this document.
—————————————————————————
41 5 U.S.C. 603(a).
42 5 U.S.C. 605(b).
—————————————————————————
List of Subjects in 17 CFR Part 165
Whistleblower rules.
In consideration of the foregoing and pursuant to the authority
contained in the Commodity Exchange Act, in particular, Sections 2, 3,
8a(5) and 26 thereof, the Commodity Futures Trading Commission proposes
to add a new 17 CFR part 165 to read as follows:
PART 165–WHISTLEBLOWER RULES
Sec.
165.1 General.
165.2 Definitions.
165.3 Procedures for submitting original information.
165.4 Confidentiality.
165.5 Prerequisites to the consideration of an award.
165.6 Whistleblowers ineligible for an award.
165.7 Procedures for award applications and commission award
determinations.
165.8 Amount of award.
165.9 Criteria for determining amount of award.
165.10 Contents of record for award determination.
165.11 Awards based upon related actions.
165.12 Payment of awards from the fund, financing of customer
education initiatives, and deposits and credits to the fund.
165.13 Appeals.
165.14 Procedures applicable to the payment of awards.
165.15 Delegations of authority.
165.16 No immunity.
165.17 Awards to whistleblowers who engage in culpable conduct.
165.18 Staff communications with whistleblowers from represented
entities.
165.19 Nonenforceability of certain provisions waiving rights and
remedies or requiring arbitration of disputes.
Appendix A to Part 165–Guidance With Respect to the Protection of
Whistleblowers Against Retaliation
Authority: 7 U.S.C. 2, 3, 12a(5) and 26, as amended by Title VII
of the Dodd-Frank Wall Street Reform and Consumer Protection Act,
Pub. L. 111-203, 124 Stat. 1376 (June 16, 2010).
Sec. 165.1 General.
Section 23 of the Commodity Exchange Act, entitled “Commodity
Whistleblower Incentives and Protection,” requires the Commission to
pay awards, subject to certain limitations and conditions, to
whistleblowers who voluntarily provide the Commission with original
information about violations of the Commodity Exchange Act. This part
165 describes the whistleblower program that the Commission intends to
establish to implement the provisions of Section 23, and explain the
procedures you will need to follow in order to be eligible for an
award. Whistleblowers should read these procedures carefully, because
the failure to take certain required steps within the time frames
described in this part may serve as disqualification from receiving an
award. Unless expressly provided for in this part, no person is
authorized to make any offer or promise, or otherwise to bind the
Commission with respect to the payment of any award or the amount
thereof.
Sec. 165.2 Definitions.
(a) Action. The term “action” means a single captioned judicial
or administrative proceeding.
(b) Aggregate Amount. The phrase “aggregate amount” means the
total amount of an award granted to one or more whistleblowers pursuant
to Sec. 165.8.
(c) Analysis. The term “analysis” means your examination and
evaluation of information that may be generally available, but which
reveals information that is not generally known or available to the
public.
(d) Collected by the Commission. The phrase “collected by the
Commission” refers to any funds received, and confirmed by the
Treasury, in satisfaction of part or all of a civil monetary penalty,
disgorgement obligation, or fine owed to the Commission.
(e) Covered Judicial or Administrative action. The phrase “covered
judicial or administrative action” means any judicial or
administrative action brought by the Commission under the Commodity
Exchange Act whose successful resolution results in monetary sanctions
exceeding $1,000,000.
(f) Fund. The term “Fund” means the Commodity Futures Trading
Commission Customer Protection Fund.
(g) Independent Knowledge. The phrase “independent knowledge”
means factual information in your possession that is not generally
known or available to the public. You may gain independent knowledge
from your experiences, communications and observations in your personal
business or social interactions. The Commission will not consider your
information to be derived from your independent knowledge if you
obtained the information:
(1) From sources generally available to the public such as
corporate filings and the media, including the Internet;
(2) Through a communication that was subject to the attorney-client
privilege, unless the disclosure is otherwise permitted by the
applicable federal or state attorney conduct rules;
(3) As a result of the legal representation of a client on whose
behalf your services, or the services of your employer or firm, have
been retained, and you seek to use the information to make a
whistleblower submission for your own benefit, unless disclosure is
authorized by the applicable federal or state attorney conduct rules;
(4) Because you were a person with legal, compliance, audit,
supervisory, or governance responsibilities for an entity, and the
information was communicated to you with the reasonable expectation
that you would take appropriate steps to cause the entity to remedy the
violation, unless the entity subsequently failed to disclose the
information to the Commission within sixty (60) days or otherwise
proceeded in bad faith;
(5) Otherwise from or through an entity’s legal, compliance, audit
or other similar functions or processes for identifying, reporting and
addressing potential non-compliance with law, unless the entity failed
to disclose the information to the Commission within sixty (60) days or
otherwise proceeded in bad faith; or
(6) By a means or in a manner that violates applicable federal or
state criminal law.
(h) Independent Analysis. The phrase “independent analysis” means
your own
[[Page 75744]]
analysis, whether done alone or in combination with others.
(i) Information That Led to Successful Enforcement. The Commission
will consider that you provided original information that led to the
successful enforcement of a judicial or administrative action, or
related action, in the following circumstances:
(1) If you gave the Commission original information that caused the
staff to open an investigation, reopen an investigation that the
Commission had closed, or to inquire concerning new or different
conduct as part of a current investigation, and your information
significantly contributed to the success of the action; or
(2) If you gave the Commission original information about conduct
that was already under investigation by the Commission, Congress, any
other federal, state, or local authority, any self-regulatory
organization, or the Public Company Accounting Oversight Board (except
in cases where you were an original source of this information as
defined in paragraph (i)(1) of this section), and your information
would not otherwise have been obtained and was essential to the success
of the action.
(j) Monetary Sanctions. The phrase “monetary sanctions,” when
used with respect to any judicial or administrative, or related action,
action means–
(1) Any monies, including penalties, disgorgement, restitution, and
interest ordered to be paid; and
(2) Any monies deposited into a disgorgement fund or other fund
pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
7246(b)), as a result of such action or any settlement of such action.
(k) Original Information. (1) The phrase “original information”
means information that–
(i) Is derived from the independent knowledge or independent
analysis of a whistleblower;
(ii) Is not already known to the Commission from any other source,
unless the whistleblower is the original source of the information;
(iii) Is not exclusively derived from an allegation made in a
judicial or administrative hearing, in a governmental report, hearing,
audit, or investigation, or from the news media, unless the
whistleblower is a source of the information; and
(iv) Is submitted to the Commission for the first time after July
21, 2010 (the date of enactment of the Wall Street Transparency and
Accountability Act of 2010).
(2) Original information shall not lose its status as original
information solely because the whistleblower submitted such information
prior to the [EFFECTIVE DATE OF THE FINAL RULE], provided such
information was submitted after July 21, 2010, the date of enactment of
the Wall Street Transparency and Accountability Act of 2010. In order
to be eligible for an award, a whistleblower who submits original
information to the Commission after July 21, 2010, but prior to
[EFFECTIVE DATE OF THE FINAL RULE], must comply with the procedure set
forth in Sec. 165.3(d).
(l) Original Source. You must satisfy your status as the original
source of information to the Commission’s satisfaction.
(1) Information obtained from another source. The Commission will
consider you to be an “original source” of the same information that
the Commission obtains from another source if the information you
provide satisfies the definition of original information and the other
source obtained the information from you or your representative.
(i) In order to be considered an original source of information
that the Commission receives from Congress, any other federal state or
local authority, or any self-regulatory organization, you must have
voluntarily given such authorities the information within the meaning
of this part In determining whether you are the original source of
information, the Commission may seek assistance and confirmation from
one of the other entities or authorities described above.
(ii) In the event that you claim to be the original source of
information that an authority or another entity, other than as set
forth in paragraph (l)(1)(i) of this section, provided to the
Commission, the Commission may seek assistance and confirmation from
such authority or other entity.
(2) Information first provided to another authority or person. If
you provide information to Congress, any other federal, state, or local
authority, any self-regulatory organization, the Public Company
Accounting Oversight Board, or to any of any of the persons described
in paragraphs (g)(3) and (4) of this section, and you, within 90 days,
make a submission to the Commission pursuant to Sec. 165.3, as you
must do in order for you to be eligible to be considered for an award,
then, for purposes of evaluating your claim to an award under Sec.
165.7, the Commission will consider that you provided information as of
the date of your original disclosure, report, or submission to one of
these other authorities or persons. You must establish your status as
the original source of such information, as well as the effective date
of any prior disclosure, report, or submission, to the Commission’s
satisfaction. The Commission may seek assistance and confirmation from
the other authority or person in making this determination.
(3) Information already known by the Commission. If the Commission
already knows some information about a matter from other sources at the
time you make your submission, and you are not an original source of
that information, as described above, the Commission will consider you
an “original source” of any information you separately provide that
otherwise satisfies the definition of original information and
materially adds to the information that the Commission already
possesses.
(m) Related Action. The phrase “related action,” when used with
respect to any judicial or administrative action brought by the
Commission under the Commodity Exchange Act, means any judicial or
administrative action brought by an entity listed in Sec. 165.11(a)
that is based upon the original information voluntarily submitted by a
whistleblower to the Commission pursuant to Sec. 165.3 that led to the
successful resolution of the Commission action.
(n) Successful Resolution. The phrase “successful resolution,”
when used with respect to any judicial or administrative action brought
by the Commission under the Commodity Exchange Act, includes any
settlement of such action or final judgment in favor of the Commission.
It shall also have the same meaning as “successful enforcement.”
(o) Voluntary Submission or Voluntarily Submitted. The phrase
“voluntary submission” or “voluntarily submitted” within the
context of submission of original information to the Commission under
this part, shall mean the provision of information made prior to any
request from the Commission, Congress, any other federal or state
authority, the Department of Justice, a registered entity, a registered
futures association, or a self-regulatory organization to you or anyone
representing you (such as an attorney) about a matter to which the
information in the whistleblower’s submission is relevant. If the
Commission or any of these other authorities make a request, inquiry,
or demand to you or your representative first, your submission will not
be considered voluntary, and you will not be eligible for an award,
even if your response is not compelled by subpoena or other applicable
law. For purposes of this paragraph, you will be considered
[[Page 75745]]
to have received a request, inquiry or demand if documents or
information from you are within the scope of a request, inquiry, or
demand that your employer receives, unless, after receiving the
documents or information from you, your employer fails to provide your
documents or information to the requesting authority in a timely
manner.
In addition, your submission will not be considered voluntary if
you are under a pre-existing legal or contractual duty to report the
violations that are the subject of your original information to the
Commission, Congress, any other federal or state authority, the
Department of Justice, a registered entity, a registered futures
association, or a self-regulatory organization.
(p) Whistleblower(s). (1) The term “whistleblower” or
“whistleblowers” means any individual, or two (2) or more individuals
acting jointly, who provides information relating to a potential
violation of the Commodity Exchange Act to the Commission, in a manner
established by Sec. 165.3.
(2) The retaliation protections afforded to whistleblowers by the
provisions of Section 23(h) of the Commodity Exchange Act apply
irrespective of whether a whistleblower satisfies the procedures and
conditions to qualify for an award under this Part 165. Moreover, for
purposes of the anti-retaliation provision of paragraph (h)(1)(A)(i) of
Section 23, the requirement that a whistleblower provide “information
to the Commission in accordance” with Section 23 is satisfied if an
individual provides information to the Commission that relates to a
potential violation of the Commodity Exchange Act.
Sec. 165.3 Procedures for submitting original information.
A whistleblower’s submission of information to the Commission will
be a two-step process.
(a) First, you will need to submit your information to the
Commission. You may submit your information:
(1) By completing and submitting a Form TCR online and submitting
it electronically through the Commission’s Web site at [insert link]
or;
(2) By completing the Form TCR and mailing or faxing the form to
the Commission, Three Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581, Fax (202) XXX-XXXX.
(b) In addition to submitting a Form TCR, you will also need to
complete and provide to the Commission a Form WB-DEC, “Declaration
Concerning Original Information Provided Pursuant to Section 23 of the
Commodity Exchange Act,” signed under penalty of perjury. Your Form
WB-DEC must be submitted as follows:
(1) If you submit a Form TCR electronically, your Form WB-DEC must
be submitted either:
(i) Electronically (in accordance with the instructions set forth
on the Commission’s Web site); or
(ii) By mailing or faxing the signed form to the Commission. Your
Form WB-DEC must be received by the Commission within thirty (30) days
of the Commission’s receipt of your Form TCR.
(2) If you submit a Form TCR either by mail or fax, your Form WB-
DEC must be submitted by mail or fax at the same time as the Form TCR.
(c) Notwithstanding paragraph (b), if you submitted your original
information to the Commission anonymously, then your identity must be
disclosed to the Commission and verified in a form and manner
acceptable to the Commission consistent with the procedure set forth in
Sec. 165.7(c) prior to the Commission’s payment of any award.
(d) If you submitted original information in writing to the
Commission after July 21, 2010 (the date of enactment of the Wall
Street Transparency and Accountability Act of 2010) but before the
effective date of these rules, you will be eligible for an award only
if:
(1) In the event that you provided the original information to the
Commission in a format or manner other than that described in paragraph
(a) of this section, you submit a completed Form TCR and Form WB-DEC
within one hundred twenty (120) days of [EFFECTIVE DATE OF THE FINAL
RULE] and otherwise follow the procedures set forth above in paragraphs
(a) and (b) of this section; or
(2) In the event that you provided the original information to the
Commission in a Form TCR in the manner described in paragraph (a) of
this section, you submit a Form WB-DEC within one hundred twenty (120)
days of the effective date of this section in the manner set forth
above in paragraph (b) of this section.
Sec. 165.4 Confidentiality.
(a) In General. Section 23(h)(2) of the Commodity Exchange Act
requires that the Commission not disclose information that could
reasonably be expected to reveal the identity of a whistleblower,
except that the Commission may disclose such information in the
following circumstances:
(1) When disclosure is required to a defendant or respondent in
connection with a public proceeding that the Commission institutes or
in another public proceeding that is filed by an authority to which the
Commission provides the information, as described below;
(2) When the Commission determines that it is necessary to
accomplish the purposes of the Commodity Exchange Act and to protect
customers, it may provide whistleblower information to: The Department
of Justice; an appropriate department or agency of the Federal
Government, acting within the scope of its jurisdiction; a registered
entity, registered futures association, a self regulatory organization;
a state attorney general in connection with a criminal investigation;
any appropriate state department or agency, acting within the scope of
its jurisdiction; or a foreign futures authority.
(3) The Commission may make disclosures in accordance with the
Privacy Act of 1974 (5 U.S.C. 552a).
(b) Anonymous Whistleblowers. A whistleblower may anonymously
submit information to the Commission, however, the whistleblower must
follow the procedures in Sec. 165.3(c) for submitting original
information anonymously. Such whistleblower who anonymously submits
information to the Commission must also follow the procedures in Sec.
165.7(c) in submitting to the Commission an application for a
whistleblower award.
Sec. 165.5 Prerequisites to the consideration of an award.
(a) Subject to the eligibility requirements described in this part
165, the Commission will pay an award to one or more whistleblowers
who:
(1) Provide a voluntary submission to the Commission;
(2) That contains original information; and
(3) That leads to the successful resolution of a covered Commission
judicial or administrative action or successful enforcement of a
related action; and
(b) In order to be eligible, the whistleblower must:
(1) Have given the Commission original information in the form and
manner that the Commission requires in Sec. 165.3 and be the original
source of information;
(2) Provide the Commission, upon its staff’s request, certain
additional information, including: Explanations and other assistance,
in the manner and form that staff may request, in order that the staff
may evaluate the use of the information submitted; all additional
information in the whistleblower’s possession that is related to the
subject matter of the whistleblower’s
[[Page 75746]]
submission; and testimony or other evidence acceptable to the staff
relating to the whistleblower’s eligibility for an award; and
(3) If requested by Commission staff, enter into a confidentiality
agreement in a form acceptable to the Commission, including a provision
that a violation of the confidentiality agreement may lead to the
whistleblower’s ineligibility to receive an award.
Sec. 165.6 Whistleblowers ineligible for an award.
(a) No award under Sec. 165.7 shall be made:
(1) To any whistleblower who is, or was at the time, the
whistleblower who acquired the original information submitted to the
Commission, a member, officer, or employee of: The Commission; the
Board of Governors of the Federal Reserve System; the Office of the
Comptroller of the Currency; the Board of Directors of the Federal
Deposit Insurance Corporation; the Director of the Office of Thrift
Supervision; the National Credit Union Administration Board; the
Securities and Exchange Commission; the Department of Justice; a
registered entity; a registered futures association; a self-regulatory
organization; or a law enforcement organization;
(2) To any whistleblower who is convicted of a criminal violation
related to the judicial or administrative action for which the
whistleblower otherwise could receive an award under this section;
(3) To any whistleblower who submits information to the Commission
that is based on the facts underlying the covered judicial or
administrative action submitted previously by another whistleblower;
(4) To any whistleblower who acquired the information you gave the
Commission from any of the individuals described in paragraphs (a)(1),
(2), or (3) of this section; or
(5) To any whistleblower who, in the whistleblower’s submission,
the whistleblower’s other dealings with the Commission, or the
whistleblower’s dealings with another authority in connection with a
related action, knowingly and willfully makes any false, fictitious, or
fraudulent statement or representation, or use any false writing or
document, knowing that it contains any false, fictitious, or fraudulent
statement or entry, or omitted any material fact, where in the absence
of such fact, other statements or representations made by the
whistleblower would be misleading.
(b) Notwithstanding a whistleblowers ineligibility for an award for
any reason set forth in paragraph (a) of this section, the
whistleblower will remain eligible for the anti-retaliation protections
set forth in Section 23(h) of the Commodity Exchange Act.
Sec. 165.7 Procedures for award applications and commission award
determinations.
(a) Whenever a Commission judicial or administrative action results
in monetary sanctions totaling more than $1,000,000 (i.e., a covered
judicial or administrative action) the Commission will cause to be
published on the Commission’s Web site a “Notice of Covered Action.”
Such Notice of Covered Action will be published subsequent to the entry
of a final judgment or order that alone, or collectively with other
judgments or orders previously entered in the Commission covered
administrative or judicial action, exceeds $1,000,000 in monetary
sanctions. A whistleblower claimant will have sixty (60) calendar days
from the date of the Notice of Covered Action to file a claim for an
award based on that action, or the claim will be barred.
(b) To file a claim for a whistleblower award, you must file Form
WB-APP, “Application for Award for Original Information Provided
Pursuant to Section 23 of the Commodity Exchange Act.” You must sign
this form as the claimant and submit it to the Commission by mail or
fax to Commodity Futures Trading Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC 20581, Fax (202) XXX-XXXX.
The Form WB-APP, including any attachments, must be received by the
Commission within sixty (60) calendar days of the date of the Notice of
Covered Action or sixty (60) calendar days following the date of a
final judgment in a related action in order to be considered for an
award.
(c) If you provided your original information to the Commission
anonymously pursuant to Sec. Sec. 165.3 and 165.4 and:
(1) You are making your claim for a whistleblower award on a
disclosed basis, you must disclose your identity on the Form WB-APP and
include with your Form WB-APP a signed and completed Form WB-DEC. Your
identity must be verified in a form and manner that is acceptable to
the Commission prior to the payment of any award; or
(2) You are making your claim for a whistleblower award on an
anonymous basis, you must be represented by counsel. You must provide
your counsel with a completed and signed Form WB-DEC by no later than
the date upon which your counsel submits to the Commission the Form WB-
APP. In addition, your counsel must submit with the Form WB-APP a
separate Form WB-DEC completed and signed by counsel certifying that
counsel has verified your identity, has reviewed the whistleblower’s
Form WB-DEC for completeness and accuracy, and will retain the signed
original of whistleblower’s Form WB-DEC in counsel’s records. Upon
request of the Commission staff, whistleblower’s counsel must produce
to the Commission the whistleblower’s WB-DEC and the whistleblower’s
identity must be verified in a form and manner that is acceptable to
the Commission prior to the payment of any award.
(d) Once the time for filing any appeals of the Commission’s
judicial or administrative action and all related actions has expired,
or where an appeal has been filed, after all appeals in the judicial,
administrative and related actions have been concluded, the Commission
will evaluate all timely whistleblower award claims submitted on Form
WB-APP in accordance with the criteria set forth in this part 165. In
connection with this process, the Commission may require that you
provide additional information relating to your eligibility for an
award or satisfaction of any of the conditions for an award, as set
forth in Sec. 165.5(b). Following that evaluation, the Commission will
send you a Determination setting forth whether the claim is allowed or
denied and, if allowed, setting forth the award percentage amount.
(e) The Commission’s Office of the Secretariat will provide you
with the Final Order of the Commission.
Sec. 165.8 Amount of award.
If all of the conditions are met for a whistleblower award in
connection with a covered judicial or administrative action or a
related action, the Commission will then decide the amount of the award
pursuant to the procedure set forth in Sec. 165.7.
(a) Whistleblower awards shall be in an aggregate amount equal to–
(1) Not less than 10 percent, in total, of what has been collected
of the monetary sanctions imposed in the covered judicial or
administrative action or related actions; and
(2) Not more than 30 percent, in total, of what has been collected
of the monetary sanctions imposed in the covered judicial or
administrative action or related actions.
(b) If the Commission makes awards to more than one whistleblower
in connection with the same action or
[[Page 75747]]
related action, the Commission will determine an individual percentage
award for each whistleblower, but in no event will the total amount
awarded to all whistleblowers as a group be less than 10 percent or
greater than 30 percent of the amount the Commission or the other
authorities collect.
Sec. 165.9 Criteria for determining amount of award.
The determination of the amount of an award shall be in the
discretion of the Commission. The Commission may exercise this
discretion directly or through delegated authority pursuant to Sec.
165.15.
(a) In determining the amount, the Commission shall take into
consideration–
(1) The significance of the information provided by the
whistleblower to the success of the covered judicial or administrative
action or related action;
(2) The degree of assistance provided by the whistleblower and any
legal representative of the whistleblower in a covered judicial or
administrative action or related action;
(3) The programmatic interest of the Commission in deterring
violations of the Commodity Exchange Act by making awards to
whistleblowers who provide information that leads to the successful
enforcement of such laws; and
(4) Whether the award otherwise enhances the Commission’s ability
to enforce the CEA, protect customers, and encourage the submission of
high quality information from whistleblowers.
(b) The Commission shall not take into consideration the balance of
the Fund in determining the amount of an award.
Sec. 165.10 Contents of record for award determination.
(a) The following items constitute the record upon which the award
determination under Sec. 165.7 shall be made:
(1) The whistleblower’s Form TCR, “Tip, Complaint or Referral,”
and Form WB-DEC, “Declaration Concerning Original Information Provided
Pursuant to Section 23 of the Commodity Exchange Act,” including
related attachments, and other documentation provided by the
whistleblower to the Commission;
(2) The whistleblower’s Form WB-APP, “Application for Award for
Original Information Provided Pursuant to Section 23 of the Commodity
Exchange Act,” and related attachments
(3) The complaint, notice of hearing, answers and any amendments
thereto;
(4) The final judgment, consent order, or administrative speaking
order;
(5) The transcript of the related administrative hearing or civil
injunctive proceeding, including any exhibits entered at the hearing or
proceeding;
(6) Any other documents that appear on the docket of the
proceeding; and
(7) Any statements by the Commission litigation staff, or the
litigation staff involved in prosecuting the related action, to the
Commission regarding: The significance of the information provided by
the whistleblower to the success of the covered judicial or
administrative action or related action; and/or the degree of
assistance provided by the whistleblower and any legal representative
of the whistleblower in a covered judicial or administrative action or
related action.
(b) The record upon which the award determination under Sec. 165.7
shall be made shall not include any Commission pre-decisional or
internal deliberative process materials related to the Commission or
its staff’s determination: To file or settle the related covered
judicial or administrative action; and/or whether, to whom and in what
amount to make a whistleblower award. Further, the record upon which
the award determination under Sec. 165.7 shall be made shall not
include any other entity’s pre-decisional or internal deliberative
process materials related to its or its staff’s determination to file
or settle a related action.
Sec. 165.11 Awards based upon related actions.
Provided that a whistleblower or whistleblowers comply with the
requirements in Sec. Sec. 165.3, 165.5 and 165.7, pursuant to Sec.
165.8, the Commission or its delegate may grant an award based on the
amount of monetary sanctions collected in a “related action” or
“related actions,” rather than the amount collected in a covered
judicial or administrative action, where–
(a) A “related action” is a judicial or administrative action
that is brought by:
(1) The Department of Justice;
(2) An appropriate department or agency of the Federal Government,
acting within the scope of its jurisdiction;
(3) A registered entity, registered futures association, or self-
regulatory organization; or
(4) A State criminal or appropriate civil agency; and
(b) The “related action” is based on the same original
information that the whistleblower voluntarily submitted to the
Commission and led to a successful resolution of the Commission’s
judicial or administrative action.
Sec. 165.12 Payment of awards from the fund, financing of customer
education initiatives, and deposits and credits to the fund.
(a) The Commission shall pay awards to whistleblowers from the
Fund.
(b) The Commission shall deposit into or credit to the Fund:
(1) Any monetary sanctions collected by the Commission in any
covered judicial or administrative action that is not otherwise
distributed or ordered to be distributed, to victims of a violation of
the Commodity Exchange Act underlying such action, unless the balance
of the Fund at the time the monetary sanctions are collected exceeds
$100,000,000. In the event the Fund’s value exceeds $100,000,000, any
monetary sanctions collected by the Commission in a covered judicial or
administrative action that is not otherwise distributed or ordered to
be distributed to victims of violations of the Commodity Exchange Act
the Commissions rules and regulations thereunder underlying such
action, shall be deposited into the general fund of the U.S. Treasury.
(2) In the event that the amounts deposited into or credited to the
Fund under paragraph (b)(1) of this section are not sufficient to
satisfy an award made pursuant to 165.7, then, pursuant to Section
23(g)(3)(B) of the Commodity Exchange Act;
(i) An amount equal to the unsatisfied portion of the award;
(ii) Shall be deposited into or credited to the Fund;
(iii) From any monetary sanction collected by the Commission, in
any judicial or administrative action brought by the Commission under
the Commodity Exchange Act, regardless of whether it qualifies as an
“covered judicial or administrative action”; provided, such judicial
or administrative action is based on information provided by a
whistleblower.
(c) The Commission shall undertake and maintain customer education
initiatives. The initiatives shall be designed to help customers
protect themselves against fraud or other violations of the Act, or the
Commissions rules or regulations thereunder. The Commission shall fund
the customer education initiatives, and may utilize funds deposited
into the Fund during any fiscal year in which the beginning (October 1)
balance of the Fund is greater than $10,000,000. The Commission shall
budget on an annual basis the amount used to finance customer education
initiatives, taking
[[Page 75748]]
into consideration the balance of the Fund.
Sec. 165.13 Appeals.
(a) Any Final Order of the Commission relating to a whistleblower
award determination, including whether, to whom, or in what amount to
make whistleblower awards, may be appealed to the appropriate court of
appeals of the United States not more than thirty (30) days after the
Final Order of the Commission is issued.
(b) The record on appeal shall consist of:
(1) The Contents of Record for Award Determination, as set forth in
Sec. 165.9;
(2) The Final Order of the Commission, as set forth in Sec. 165.7.
Sec. 165.14 Procedures applicable to the payment of awards.
(a) A recipient of a whistleblower award is entitled to payment on
the award only to the extent that the monetary sanction upon which the
award is based is collected in the Commission judicial or
administrative action or in a related action;
(b) Payment of a whistleblower award for a monetary sanction
collected in a Commission action or related action shall be made within
a reasonable time following the later of:
(1) The date on which the monetary sanction is collected; or
(2) The completion of the appeals process for all whistleblower
award claims arising from:
(i) The Notice of Covered Action, in the case of any payment of an
award for a monetary sanction collected in a covered judicial or
administrative action; or
(ii) The related action, in the case of any payment of an award for
a monetary sanction collected in a related action.
(c) If there are insufficient amounts available in the Fund to pay
the entire amount of an award payment within a reasonable period of
time from the time for payment specified by paragraph (b) of this
section, then subject to the following terms, the balance of the
payment shall be paid when amounts become available in the Fund, as
follows:
(1) Where multiple whistleblowers are owed payments from the Fund
based on awards that do not arise from the same Notice of Covered
Action (or related action), priority in making these payments will be
determined based upon the date that the Final Order of the Commission
is made. If two or more of these Final Orders of the Commission are
entered on the same date, those whistleblowers owed payments will be
paid on a pro rata basis until sufficient amounts become available in
the Fund to pay their entire payments.
(2) Where multiple whistleblowers are owed payments from the Fund
based on awards that arise from the same Notice of Covered Action (or
related action), they will share the same payment priority and will be
paid on a pro rata basis until sufficient amounts become available in
the Fund to pay their entire payments.
Sec. 165.15 Delegations of authority.
(a) Delegation of Authority to the Executive Director. The
Commission hereby delegates, until such time as the Commission orders
otherwise, to the Executive Director or to any Commission employee
under the Executive Director’s supervision as he or she may designate,
the authority to take the following actions to carry out this Part 165
and the requirements of Section 23(h) of Commodity Exchange Act.
(1) Delegated authority to deposit collected monetary sanctions
into the Fund and the payment of awards therefrom shall be with the
concurrence of the General Counsel and the Director of the Division of
Enforcement or of their respective designees.
(2) [Reserved]
(b) [Reserved]
Sec. 165.16 No immunity.
The Commodity Whistleblower Incentives and Protections provisions
set forth in Section 23(h) of Commodity Exchange Act and this Part 165
do not provide individuals who provide information to the Commission
with immunity from prosecution. The fact that you may become a
whistleblower and assist in Commission investigations and enforcement
actions does not preclude the Commission from bringing an action
against you based upon your own conduct in connection with violations
of the Commodity Exchange Act and the Commission’s regulations. If such
an action is determined to be appropriate, however, the Commission’s
Division of Enforcement will take your cooperation into consideration
in accordance with its sanction recommendations to the Commission.
Sec. 165.17 Awards to whistleblowers who engage in culpable conduct.
In determining whether the required $1,000,000 threshold has been
satisfied (this threshold is further explained in Sec. 165.7) for
purposes of making any award, the Commission will not take into account
any monetary sanctions that the whistleblower is ordered to pay, or
that are ordered against any entity whose liability is based primarily
on conduct that the whistleblower principally directed, planned, or
initiated. Similarly, if the Commission determines that a whistleblower
is eligible for an award, any amounts that the whistleblower or such an
entity pay in sanctions as a result of the action or related actions
will not be included within the calculation of the amounts collected
for purposes of making payments pursuant to Sec. 165.14.
Sec. 165.18 Staff communications with whistleblowers from represented
entities.
If you are a whistleblower who is a director, officer, member,
agent, or employee of an entity that has counsel, and you have
initiated communication with the Commission relating to a potential
violation of the Commodity Exchange Act, the Commission’s staff is
authorized to communicate directly with you regarding the subject of
your communication without seeking the consent of the entity’s counsel.
Sec. 165.19 Nonenforceability of certain provisions waiving rights
and remedies or requiring arbitration of disputes.
The rights and remedies provided for in this Part 165 of the
Commission’s regulations may not be waived by any agreement, policy,
form, or condition of employment including by a predispute arbitration
agreement. No predispute arbitration agreement shall be valid or
enforceable if the agreement requires arbitration of a dispute arising
under this Part.
Appendix A to Part 165–Guidance With Respect to the Protection of
Whistleblowers Against Retaliation
Section 23(h)(1) of the Commodity Exchange Act prohibits
employers from engaging in retaliation against whistleblowers. This
provision provides whistleblowers with certain protections against
retaliation, including: A federal cause of action against the
employer, which must be filed in the appropriate United States
district court within two (2) years of the employer’s retaliatory
act; and potential relief for prevailing whistleblowers, including
reinstatement, back pay, and compensation for other expenses,
including reasonable attorney’s fees. Specifically, Section 23(h)(1)
of Commodity Exchange Act provides:
(A) In General.–No employer may discharge, demote, suspend,
threaten, harass, directly or indirectly, or in any other manner
discriminate against, a whistleblower in the terms and conditions of
employment because of any lawful act done by the whistleblower–
(i) In providing information to the Commission in accordance
with subsection (b); or
(ii) In assisting in any investigation or judicial or
administrative action of the Commission based upon or related to
such information.
[[Page 75749]]
(B) Enforcement. (i) Cause of Action.–An individual who alleges
discharge or other discrimination in violation of subparagraph (A)
may bring an action under this subsection in the appropriate
district court of the United States for the relief provided in
subparagraph (C), unless the individual who is alleging discharge or
other discrimination in violation of subparagraph (A) is an employee
of the Federal Government, in which case the individual shall only
bring an action under section 1221 of title 5, United States Code.
(ii) Subpoenas.–A subpoena requiring the attendance of a
witness at a trial or hearing conducted under this subsection may be
served at any place in the United States.
(iii) Statute of Limitations.–An action under this subsection
may not be brought more than 2 years after the date on which the
violation reported in subparagraph (A) is committed.
(C) Relief.–Relief for an individual prevailing in an action
brought under subparagraph (B) shall include–
(i) Reinstatement with the same seniority status that the
individual would have had, but for the discrimination;
(ii) The amount of back pay otherwise owed to the individual,
with interest; and
(iii) Compensation for any special damages sustained as a result
of the discharge or discrimination, including litigation costs,
expert witness fees, and reasonable attorney’s fees.
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BILLING CODE 6351-01-C
Privacy Act of Statement
The Privacy Act requires that the Commodity Futures Trading
Commission (CFTC) inform individuals of the following when asking
for information. This form may be used by anyone wishing to provide
the CFTC with information concerning a violation of the Commodity
Exchange Act or the Commission’s regulations. If you are submitting
this information for the Commission’s whistleblower award program
pursuant to Section 23 of the Commodity Exchange Act, the
information provided will enable the Commission to determine your
eligibility for payment of an award. This information may be
disclosed to Federal, state, local, or foreign agencies responsible
for investigating, prosecuting, enforcing, or implementing laws,
rules, or regulations implicated by the information consistent with
the confidentiality requirements set forth therein. Furnishing the
information is voluntary, but a decision not to do so may result in
you not being eligible for award consideration.
Questions concerning this form may be directed to the Commodity
Futures Trading Commission, Three Lafayette Centre, 1151 21st
Street, NW., Washington, DC 20581.
Submission Procedures
After completing this From TCR, please send it to the
Commission: electronically via the Commission’s Web site; by mail to
the Commodity Futures Trading Commission, Three Lafayette Centre,
1151 21st Street, NW., Washington, DC 20581; or by facsimile to
(202) XXX-XXXX.
You have the right to submit information anonymously.
If you are submitting information for the Commission’s
whistleblower award program, you must submit your information using
this Form TCR. In addition to submitting your information by this
method, you must also submit a declaration on From WB-DEC. The Form
WB-DEC can be printed out from the Commission’s Web site or obtained
from the Commission, and it must be manually signed by you under
penalty of perjury.
Instructions for Completing Form TCR
Section A: Information About You
Questions 1-3: Please provide the following information about
yourself:
[cir] Last name, first name, and middle initial;
[[Page 75752]]
[cir] Complete address, including city, state and zip code;
[cir] Telephone number and, if available, an alternative number
where you can be reached;
[cir] Your e-mail address (to facilitate communications, the
Commission strongly encourages you to provide your e-mail address);
and
[cir] Your preferred method of communication.
Question 4: Describes your occupation, for example which of the
following provides the best description:
[cir] Accountant, attorney, auditor, broker-dealer, compliance
officer, financial representative, foreign officer, fund manager,
investment advisor, commodity trading adviser, investor, customer,
company officer or senior manager, trader, floor broker, government
official (federal, state, or local), law enforcement personnel
(federal, state, or local), or other (specific).
Section B: Information About Your Attorney. Complete This Section
Only If Your Are Represented By An Attorney In This Matter.
Questions 1-4: Provide the following information about the
attorney representing you in this matter:
[cir] Attorney’s name;
[cir] Firm name;
[cir] Complete address, including city, state and zip code;
[cir] Telephone number and fax number; and
[cir] E-mail address.
Section C: Tell Us About The Individual And/Or Entity You Have A
Complaint Against. If your complaint relates to more than two
individuals and/or entities, you may attach additional sheets.
Question 1: Choose the following that best describes the
individual or entity to which your complaint relates:
[cir] For Individuals: accountant, analyst, associated person,
attorney, auditor, broker, commodity trading advisor, commodity pool
operator, compliance officer, employee, executing broker, executive
officer or director, financial planner, floor broker, floor trader,
trader, unknown, or other (specify).
[cir] For Entities: bank, commodity trading advisor, commodity
pool operator, commodity pool, futures commission merchant, hedge
fund, introducing broker, major swap participant, retail foreign
exchange dealer, swap dealer, unknown, or other (specify).
Questions 2-4: For each subject, provide the following
information, if known:
[cir] Full name;
[cir] Complete address, including city, state and zip code;
[cir] Telephone number;
[cir] E-mail address; and
[cir] Internet address, if applicable.
Section C: Tell Us About Your Complaint.
Question 1: State the date (mm/dd/yyyy) that the alleged conduct
began.
Question 2: Choose the option that you believe best describes
the nature of your complaint. If you are alleging more than one
violation, please list all that you believe may apply. Use
additional sheets, if necessary.
[cir] Theft/misappropriation;
[cir] Misrepresentation/omission (false/misleading marketing/
sales literature; inaccurate, misleading or non-disclosure by
commodity pool operator, commodity trading advisor, futures
commission merchant, introducing broker, retail foreign currency
dealer, swap dealer, or their associated person(s); false/material
misstatements in any report or statement;
[cir] Ponzi/pyramid scheme;
[cir] Off-exchange foreign currency, commodity, or precious
metal fraud;
[cir] Registration violations (including unregistered commodity
pool operator, commodity trading advisor, futures commission
merchant, introducing broker, retail foreign currency dealer, swap
dealer, or their associated person(s));
[cir] Trading (after hours trading; algorithmic trading;
disruptive trading; front running; insider trading; manipulation/
attempted manipulation of commodity prices; market timing;
inaccurate quotes/pricing information; program trading; trading
suspensions; volatility);
[cir] Fees/mark-ups/commissions (excessive, unnecessary or
unearned administrative, commission or sales fees; failure to
disclose fees; insufficient notice of change in fees; excessive or
otherwise improper spreads or fills);
[cir] Sales and advisory practices (background information on
past violations/integrity; breach of fiduciary duty/responsibility;
churning/excessive trading; cold calling; conflict of interest; a
bout of authority in discretionary trading; failure to respond to
client, customer or participant; guarantee against loss; promise to
profit; high pressure sales techniques; instructions by client,
customer or participant not followed; investment objectives not
followed; solicitation methods (non-cold calling, seminars);
[cir] Customer accounts (unauthorized trading); identity theft
affecting account; inaccurate valuation of Net Asset Value; or
[cir] Other (analyst complaints; market maker activities;
employer/employee disputes; specify other).
Question 3: Indicate whether you were in the past, or are
currently, an officer, director, employee, consultant, or contractor
of the entity to which your complaint relates.
Question 4a: Indicate whether you have taken any prior action
regarding your complaint, including whether you reported the
violation to the entity, including the compliance office,
whistleblower hotline or ombudsman; complained to the Commission,
another regulator, a law enforcement agency, or any other agency or
organization; initiated legal action, mediation or arbitration, or
initiated any other action.
Question 4b: If you answered “yes” to question 4a, provide
details, including the date on which you took the action(s)
described, the name of the person or entity to whom you directed any
report or complaint and the contact information for the person or
entity, if known, and the complete case name, case number, and forum
of any legal action you have taken. Use additional sheets, if
necessary.
Question 5: State in detail all the facts pertinent to your
complaint. Attach additional sheets, if necessary.
Question 6: Describe all supporting materials in your
possession, custody or control, and the availability and location of
additional supporting materials not in your possession, custody or
control. Attach additional sheets, if necessary.
Question 7: Describe how you obtained the information that
supports your allegation. If any information was obtained from a
public source, identify the source with as much particularity as
possible. Attach additional sheets, if necessary.
Question 8: Please provide any additional information you think
may be relevant.
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BILLING CODE 6351-01-C
Privacy Act Statement
This notice is given under the Privacy Act of 1974. The Privacy
Act requires that the Commodity Futures Trading Commission (CFTC)
inform individuals of the following when asking for information. The
information provided will enable the Commission to determine your
eligibility for payment of an award pursuant to Section 23 of the
Commodity Exchange Act. This information may be disclosed to
Federal, state, local, or foreign agencies responsible for
investigating, prosecuting, enforcing, or implementing rules, or
regulations implicated buy the information consistent with the
confidentiality requirements set forth in Section 23 of the
Commodity Exchange Act and part 165 of the Commissions regulations
hereunder. Furnishing the information is voluntary, but a decision
not to do so may result in you not being eligible for award
consideration.
Questions concerning this form may be directed to the Commodity
Futures Trading, Three Lafayette Centre, 1151 21st Street, NW.,
Washington, DC 20581.
General Information
Submitting information for the CFTC’s whistleblower award
program is a two-step process. First, you must provide us with your
information by competing a Form TCR (“Tip, Complaint, or
Referral”), instructions set forth on the form, and sending it to
the Commission: electronically via the Commission’s website; by mail
to the Commodity Futures Trading Commission, Three Lafayette Centre,
1151 21st Street, NW., Washington, DC 20581; or by facsimile to
(202) XXX-XXXX.
Submitting your information to the Commission is the
first step. If you want to be considered for a whistleblower award,
you must also submit this Form WB-DEC and it must be manually signed
under penalty of perjury.
If you submitted your information electronically
through the Commission’s website, the Commission must receive your
completed Form WB-DEC within 30 days of your submission. If you did
not submit your information electronically but instead are
submitting your information on Form TCR, you must submit your
declaration on Form WB-DEC at the same time that you submit your
Form TCR.
Follow the instructions set forth below for submitting this Form
WB-DEC.
If you follow these steps, and the information you
submit leads to the successful enforcement of a CFTC judicial or
administrative action, or a related action, you will have an
opportunity at a later date to submit a claim for an award. That is
a separate process and is described in our whistleblower rules,
which are available on the Commission’s Web site [insert link].
You have the right to submit information anonymously.
If you are doing so, please skip Part I of these instructions and
proceed directly to Part II. Otherwise, please begin by following
the instructions in Part I.
Part I: Instructions for Filers who are Disclosing Their Identity
You are required to complete Sections A, C, D, and E of this
form. If you are represented by an attorney in this matter, you must
also complete Section B. Specific instructions for answering these
questions can be found in Part IV below.
If you previously submitted your complaint electronically
through the Commission’s website, you may submit this Form WB-DEC to
us in any of the following ways:
[cir] By mailing or delivering the signed form to the Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581-XXXX; or
[cir] By faxing the signed form to (202) XXX-XXXX; or
[cir] By scanning and emailing the form in PDF format to [insert
e-mail address].
Please note that the Commission must receive your Form WB-DEC
within thirty (30) days of when you submitted your information to us
through the Commission’s website.
If you did not previously submit your complaint electronically
through the CFTC’s website, but instead intend to send us a Form
TCR, then you must submit your completed Form TCR and your
declaration on this Form WB-DEC together. You may do so in one of
two ways:
By mailing or delivering the Form TCR and the signed
Form WB-DEC to the Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581-XXXX;
or
By faxing the Form TCR and the signed Form WB-DEC form
to (202) XXX-XXXX.
Part II: Instructions for Anonymous Filers
If you are submitting information anonymously, you may be
represented by an attorney in this matter. If you are applying for a
whistleblower award, you must be represented by an attorney in
connection with such application.
In order for you to be eligible for a whistleblower award, your
attorney must retain your signed original of Form WB-DEC in his or
her records, and submit both your Form WB-APP (if you filled one out
instead of submitting your complaint to us electronically) and a
Form WB-DEC completed by the attorney declaration to the Commission.
You are encouraged to confirm that your attorney followed these
steps.
Part III: Instructions for Attorneys Representing Anonymous
Whistleblowers
Obtain a completed and signed original of Form WB-DEC from your
client. You must retain this signed original in your records because
it may be required at a later date upon request of CFTC staff and
prior to the payment a whistleblower award.
You must prepare your own Form WB-DEC, completing only Sections
B, C and F. Specific instructions for answering these questions can
be found in Part IV below.
You must submit your client’s application on Form WB-APP and
your attorney declaration on this Form WB-DEC together. You may do
so in one of two ways:
[cir] By mailing or delivering the Form WB-APP and the signed
Form WB-DEC to the Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581-XXXX;
or
[cir] By faxing the Form WB-APP and the signed Form WB-DEC to
(202) XXX-XXXX.
Part IV: Instructions for Completing Form WB-DEC
Section A: Submitter’s Information
Questions 1-3: Provide the following information about yourself:
First and last name, and middle initial;
Complete address, including city, state and zip code;
Telephone number and, if available, an alternate number
where you can be reached; and
E-mail address.
Section B: Information about Your Attorney. Complete this section
only if you are represented by an attorney in this matter. You must
be represented by an attorney, and this section must be completed,
if you intend to apply for a whistleblower award anonymously.
Questions 1-4: Provide the following information about the attorney
representing you in this matter:
Attorney’s name;
Firm name;
Complete address, including city, state and zip code;
Telephone number and fax number; and
E-mail address.
Section C: Tip/Complaint Details
Question 1: Indicate the manner in which the information was
submitted to the Commission.
Question 2a: Provide the date on which the TCR was submitted to the
Commission.
Question 2b: Provide the name of the individual or entity to which
your complaint relates.
Question 3a: Indicate whether the submitter or counsel have had any
communication(s) with the Commission concerning this manner.
Question 3b: If you answered “yes” to question 3a, provide the
name of the SEC staff member with whom the submitter or counsel
communicated.
Question 4a: Indicate whether the submitted or counsel have provided
the information being submitted to the CFTC to any other agency or
organization.
Question 4b: If you answered “yes” to question 4a, provide
details, including the name of the agency or organization, the date
on which you provided your information to the agency or organization
and any other relevant details.
Question 4c: Provide a name and contact information for your point
of contact at the other agency or organization, if known.
Section D: Eligibility Requirements
Question 1: State whether you are currently, or were at the time you
acquired the original information that you submitted to the CFTC a
member, officer, or employee of the Department of Justice the
Securities and Exchange Commission; the Comptroller of the
[[Page 75756]]
Currency, the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Office of Thrift
Supervision; National Credit Union Administration Board, registered
entity, a registered futures association, a self-regulatory
organization or; any law enforcement organization.
Question 2: State whether you provided the information submitted to
the CFTC pursuant to a cooperation agreement with the Commission or
with any other agency or organization.
Question 3: State whether you are a spouse, parent, child or sibling
of a member or employee of the Commission, or whether you reside in
the same household as a member or employee of the Commission.
Question 4: State whether you acquired the information you are
providing to the CFTC from any individual described in Question 1
through 3 of this Section.
Question 5: If you answered “yes” to questions 1 though 4, please
provide details.
Question 5a: State whether you provided the information identified
submitted to the CFTC before you (or anyone representing you)
received any request, inquiry or demand from the CFTC, Congress, or
any other federal, state or local authority, or any self regulatory
organization about a matter to which the information your submission
was relevant.
Question 5b: If you answered “no” to questions 5a, please provide
details. Use additional sheets if necessary.
Question 6a: State whether you are the subject or target of a
criminal investigation or have been convicted of a criminal
violation in connection with the information upon which your
application for award is based.
Question 6b: If you answered “yes” to question 9a, please provide
details, including the name of the agency or organization that
conducted the investigation or initiated the action against you, the
name and telephone number of your point of contact at the agency or
organization, if available and the investigation/case name and
number, if applicable. Use additional sheets, if necessary. If you
previously provided this information on Form WB-DEC, you may leave
this question blank, unless your response has changed since the time
you submitted your Form WB-DEC.
Section E: Declaration
To be completed and signed by person submitting the information
Section F: Counsel Certification
To be completed and signed by attorney for an anonymous person
submitting information
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BILLING CODE 6351-01-P
Privacy Act Statement
This notice is given under the Privacy Act of 1974. The Privacy
Act requires that the Commodity Futures Trading Commission (CFTC or
Commission) inform individuals of the following when asking for
information. The information provided will enable the Commission to
determine your eligibility for payment of an award pursuant to
Section 23 of the Commodity Exchange Act. This information may be
disclosed to Federal, state, local, or foreign agencies responsible
for investigating, prosecuting, enforcing, or implementing the laws,
rules, or regulations implicated by the information consistent with
the confidentiality requirements set forth in Section 23 of the
Commodity Exchange Act and part 165 of the Commissions regulations
thereunder. Furnishing the information is voluntary, but a decision
not to do so may result in you not being eligible for award
consideration.
Questions concerning this form may be directed to the Commodity
Futures Trading Commission, Three Lafayette Centre, 1151 21st
Street, NW., Washington, DC 20581.
General
This form should be used by persons making a claim for a
whistleblower award in connection with information provided to the
CFTC or to another agency in a related action. In order to be deemed
eligible for an award, you must meet all the requirements set forth
in Section 23 of the Commodities Exchange Act and the rules
hereunder.
You must sign the Form WB-APP as the claimant. If you provided
your information to the CFTC anonymously, you must now disclose your
identity on this form and your identity must be verified in a form
and manner that is acceptable to the CFTC prior to the payment of
any award.
If you are filing your claim in connection with
information that you provided to the CFTC, then Form WB-APP and any
attachments thereto, must be received by the CFTC within sixty (60)
days of the date of the Notice of Covered Action or the date of a
final judgment in a related action to which the claim relates.
If you are filing your claim in connection with
information you provided to another agency in a related action, then
your Form WB-APP, and any attachments there to, must be received by
the CFTC within sixty (60) days of the date of a final judgment in
the related action to which the claim relates.
You must submit your Form WB-APP to us in one of the following
two ways:
By mailing or delivering the signed form to the
Commodity Futures Trading Commission, Three Lafayette Centre, 1155
21st Street, NW., Washington, DC 20581; or
By faxing the signed form to (202) XXX-XXXX.
Instructions for Completing Form WB-APP
Section A: Applicant’s Information
Questions 1-3: Provide the following information about yourself:
First and last name, and middle initial;
Complete address, including city, state and zip code;
Telephone number and, if available, an alternate number
where you can be reached; and
E-mail address
Section B: Attorney’s Information. If you are represented by an
attorney in this matter, provide the information requested. If you
are not representing an attorney in this matter, leave this Section
blank.
Questions 1-4: Provide the following information about the attorney
representing you in this matter:
Attorney’s name;
Firm name;
Complete address, including city, state and zip code;
Telephone number and fax number; and
E-mail address.
Section C: Tip/Complaint Details
Question 1: Indicate the manner in which your original information
was submitted to the CFTC.
Question 2a: Provide the date on which you submitted your TCR (Tip,
Complaint or Referral) information to the CFTC.
Question 2b: Provide the name of the individual(s) or entity(s) to
which your complaint related.
Section D: Notice of Covered Action
The process for making a claim for a whistleblower award begins
with the publication of a “Notice of a Covered Action” on the
Commission’s Web site. This notice is published whenever a judicial
or administrative action brought by the Commission results in the
imposition of monetary sanctions exceeding $1,000,000. The Notice is
published on the Commission’s Web site subsequent to the entry of a
final
[[Page 75760]]
judgment or order in the action that by itself, or collectively with
other judgments or orders previously entered in the action, exceeds
the $1,000,000 threshold.
Question 1: Provide the date of the Notice of Covered Action to
which this claim relates.
Question 2: Provide the notice number of the Notice of Covered
Action.
Question 3a: Provide the case name referenced in Notice of Covered
Action.
Question 3b: Provide the case number referenced in Notice of Covered
Action.
Section E: Claims Pertaining to Related Actions
Question 1: Provide the name of the agency or organization to which
you provided your information.
Question 2: Provide the name and contact information for your point
of contact at the agency or organization, if known.
Question 3a: Provide the date on which that you provided your
information to the agency or organization referenced in question E1.
Question 3b: Provide the date on which the agency or organization
referenced in question E1 filed the related action that was based
upon the information you provided.
Question 4a: Provide the case name of the related action.
Question 4b: Provide the case number of the related action.
Section F: Eligibility Requirements
Question 1: State whether you are currently, or were at the time you
acquired the original information that you submitted to the CFTC a
member, officer, or employee of the Department of Justice, the
Securities and Exchange Commission, the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of Thrift Supervision,
National Credit Union Administration Board, registered entity, a
registered futures association, a self-regulatory organization or;
any law enforcement organization.
Question 2: State whether you provided the information submitted to
the CFTC pursuant to a cooperation agreement with the Commission or
with any other agency or organization.
Question 3: State whether you are a spouse, parent, child or sibling
of a member or employee of the Commission, or whether you reside in
the same household as a member or employee of the Commission.
Question 4: State whether you acquired the information you are
providing to the CFTC from any individual described in Question 1
through 3 of this Section.
Question 5: If you answered “yes” to questions 1 though 4, please
provide details.
Question 5a: State whether you provided the information identified
submitted to the CFTC before you (or anyone representing you)
received any request, inquiry or demand from the CFTC, Congress, or
any other federal, state or local authority, or any self regulatory
organization about a matter to which the information your submission
was relevant.
Question 5b: If you answered “no” to questions 5a, please provide
details. Use additional sheets if necessary.
Question 6a: State whether you are the subject or target of a
criminal investigation or have been convicted of a criminal
violation in connection with the information upon which your
application for award is based.
Question 6b: If you answered “yes” to question 9a, please provide
details, including the name of the agency or organization that
conducted the investigation or initiated the action against you, the
name and telephone number of your point of contact at the agency or
organization, if available and the investigation/case name and
number, if applicable. Use additional sheets, if necessary. If you
previously provided this information on Form WB-DEC, you may leave
this question blank, unless your response has changed since the time
you submitted your Form WB-DEC.
Section G: Entitlement to Award
Use this section to explain the basis for your belief that you
are entitled to an award in connection with your submission of
information to us or to another agency in connection with a related
action. Specifically address how you believe you voluntarily
provided the Commission with original information that led to the
successful enforcement of a judicial or administrative action filed
by the Commission, or a related action. Refer to Sec. 165.11 of
this part for further information concerning the relevant award
criteria. You may attach additional sheets, if necessary.
Section 23(c)(1)(B) of the CEA requires the Commission to
consider, and subparagraph (a)(1) through (4) provides that in
determining the amount of an award, the Commission will evaluate the
following factors: (a) The significance of the information provided
by a whistleblower to the success of the Commission action or
related action; (b) the degree of assistance provided by the
whistleblower and any legal representative of the whistleblower in
the Commission action or related action; (c) the programmatic
interest of the Commission in deterring violations of the securities
laws by making awards to whistleblowers who provide information that
leads to the successful enforcement of such laws; and (d) whether
the award otherwise enhances the Commission’s ability to enforce the
Commodity Exchange Act, protect customers, and encourage the
submission of high quality information from whistleblowers. Address
these factors in your response as well.
Section G: Declaration
This section must be signed by the claimant.
By the Commission.
Dated: November 10, 2010.
David Stawick,
Secretary.
Statement of Chairman Gary Gensler
Proposed Rules for Implementing the Whistleblower Provisions of Section
23 of the Commodity Exchange Act
I support the proposed rulemaking to establish a program for
whistleblowers as mandated by the Dodd-Frank Act. Congress enacted
these provisions to incentivize whistleblowers to come forward with new
information about potential fraud in the financial markets. The
proposed rulemaking authorizes the Commission to provide a monetary
award to whistleblowers when their original information results in a
successful enforcement action. The rule also provides that moneys
recovered will fund new customer education initiatives to protect the
public. The proposed rules encourage persons with knowledge to come
forward and assist the Commission in identifying, investigating and
prosecuting potential violations of the Commodity Exchange Act.
[FR Doc. 2010-29022 Filed 12-3-10; 8:45 am]
BILLING CODE 6351-01-P
Last Updated: December 6, 2010
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