CFTC Proposes Dodd-Frank Whistleblower Rules: CFTC’s Proposed Rules for Implementing the Whistleblower Protection and Award Provisions of the Dodd-Frank Act Leave Open Issues of Concern for EmployersSullivan & Cromwell LLP - November 30, 2010
On November 10, 2010, the Commodity Futures Trading Commission (“CFTC” or “Commission”) proposed rules under a new program enacted by Congress earlier in the year that encourages whistleblowing by providing for mandatory cash rewards to persons who report information about violations of the Commodity Exchange Act (“CEA”). As we reported in our publication of August 5, 2010, the whistleblower reward program is required under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and the CFTC was directed to issue implementing rules.
The CFTC’s Proposed Rules 165.1 through 165.19 tend to track, in both structure and content, the Proposed Rules 21F-1 through 21F-16 issued by the SEC on November 3, 2010 to implement the Dodd-Frank Act’s whistleblower reward program under the securities laws. In light of the similarities between the two sets of Proposed Rules, this memorandum is devoted to highlighting particular distinctions between the CFTC’s rules and their associated commentary and those of the SEC. For a more in-depth discussion of how, in the context of the securities laws, the whistleblower program operates, please see our publication of November 12, 2010.
The CFTC’s Proposed Rules, like those of the SEC, include some structural safeguards to allow employees to report information initially as part of a company’s internal compliance without losing eligibility for a reward. The CFTC rules, however, not only permit employees to remain eligible for the mandatory rewards even if they bypass their employer’s internal compliance procedures, but also, unlike the SEC rules, there is no discussion of any encouragement to whistleblowers to use internal processes.