The Commodity Futures Trading Commission last month announced more than $150 million in rewards to four whistleblowers. But the headline obscures an alarming development: in what may be an unprecedented action, the CFTC reduced certain awards for being too large.
This basis for reducing awards doesn’t withstand scrutiny and contrasts with the Securities and Exchange Commission’s rejection of such a policy. The decision threatens the incentives on which effective whistleblower programs depend, potentially undercutting the CFTC’s enforcement as the agency expands its jurisdiction while losing experienced staff.
The CFTC and SEC have long welcomed whistleblower tips. While the agencies didn’t formally track the number of such tips before 2010, by all accounts the number of tips has increased dramatically following the establishment of the agencies’ whistleblower award programs in the Dodd-Frank Act.
Recognizing the risks whistleblowers take and that incentives matter, Congress mandated awards of 10% to 30% of the monetary sanctions an agency collects based on those tips. Because awards are based on amounts collected, the program always brings in more than it pays out.
The September 11 award determination acknowledged the claimants provided “significant information” that led to investigations and successful enforcement actions. Accordingly, the Claims Review Staff recommended awards within the 10-30% statutory range.
Despite the whistleblowers’ exemplary...
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