The Commodity Exchange Act ("CEA") generally requires the Commodity Futures Trading Commission ("CFTC") to pay awards under the CFTC Whistleblower Rules to eligible whistleblowers that voluntarily report "original information" about CEA violations leading to successful enforcement in a covered or related action. Original information is defined in relevant part as derived from a whistleblower's independent knowledge. The CFTC ordinarily will not consider information from compliance officers or internal audit employees to be derived from their independent knowledge. However, there is an exception to that limitation in situations where a compliance or internal audit employee reports internally and then waits at least 120 days before reporting to the CFTC.
In a first-of-its-kind action, the CFTC awarded approximately $1.25 million to an insider whistleblower in an unspecified compliance or audit role who put his or her employer on notice of misconduct by reporting concerns internally. The employee then reported the issue to the CFTC at least 120 days after "the employer took no meaningful remedial action." By taking the foregoing actions, the whistleblower fell within the exception from the general rule that compliance officer and internal audit employee whistleblower tips will not qualify for an award. Eligible whistleblowers can receive between 10% and 30% of the penalty value, creating a substantial financial incentive for employees to report concerns to the CFTC.
In light of the CFTC's award announcement, companies should consider evaluating their internal reporting policies and procedures to ensure that complaints are appropriately escalated and timely remedial action is taken where appropriate. Failure to take timely remedial action could prove costly, as compliance and audit employees are well-placed to learn of misconduct and have substantial financial incentives to report their concerns to the CFTC.
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