CFTC Amends Rules to Protect Whistleblowers

The CFTC adopted several rule amendments in order to better protect whistleblowers from retaliation or intimidation by their employers and to establish a new review process for whistleblower claims. The amendments are based on a reinterpretation of the CFTC’s anti-retaliation authority under the Commodity Exchange Act (“CEA”).

The amendments create a new rule – Rule 165.20 – that (i) prohibits retaliation against a whistleblower or anyone else assisting in an investigation, (ii) authorizes the CFTC to bring civil enforcement actions against employers who retaliate against whistleblowers, and (iii) makes explicit that the anti-retaliation protections apply whether or not an award is made. One effect of the amendments will be to allow both the CFTC and a whistleblower to bring legal actions against employers for retaliation.

The newly adopted amendments make the following changes:

  • Rule 165.19 prohibits employers from taking action to prevent potential whistleblowers from communicating directly with the CFTC;
  • Rule 165.5(b) rescinds the requirement that, in order for a whistleblower to receive an award, they must be the original source of the information provided;
  • Rules 165.2(i)(2) and 165.2(l)(2) expand the list of entities to which a whistleblower can report misconduct before reporting to the CFTC and still maintain award eligibility;
  • Rules 165.2(i)(3) and 165.2(l)(2) expand the timeframe in which a whistleblower must file a Form TCR (i.e., a Tip, Complaint or Referral Form) from 120 to 180 days;
  • Rules 165.5(a)(3) and 165.11(a) allow a whistleblower to receive an award in both a Related Action and a covered judicial or administrative action;
  • Rule 165.11(b) prevents a whistleblower from receiving an award for a Related Action if they have received an SEC award for the same action;
  • Rules 165.15(a)(2) and 165.7(f)-(l) replace the Whistleblower Award Determination Panel with a Claims Review Staff, and implement an enhanced review process mirroring that of the SEC.

In addition, the CFTC rule amendments make other changes related to form filing, recordkeeping and confidentiality. The amendments also harmonize rules concerning the CFTC and the SEC whistleblower programs. The amendments will become effective 60 days after their publication in the Federal Register.

Lofchie Comment: The mythic image of the “whistleblower” is that of a brave individual facing down a giant corporation (and preferably of the future subject of a movie). Sometimes whistleblowing does work like that. At other times, a whistleblower is just someone out for money (or revenge). What does a company do when it becomes aware of a whistleblower who has gone straight to the government with an accusation, without first attempting to remedy the matter internally, and the allegations turn out to be (legally) mistaken or factually untrue? Can an employee who is concerned about being dismissed raise an allegation strategically as a defense against being fired? These are difficult real-world questions. Big companies doubtless will try to live with the whistleblower rather than risk allegations of mistreatment. For smaller companies, it’s a harder situation.