Whistleblower Provisions Regulation Proposed Rules - CFTC and SEC

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Gavel.png FINAL RULE: This page refers to the proposed rulemaking on whistleblower provisions. The CFTC final rule was issued at its August 4, 2011 open meeting. The SEC final rule was issued at its May 25, 2011 open meeting.
Dodd-Frank Timeline, Whistleblower Provisions, CFTC
Proposal Date Final Rule Issue Effective Date
December 6, 2010 August 4, 2011 October 24, 2011
Dodd-Frank Timeline, Whistleblower Provisions of Secton 21F of the Securities Exchange Act of 1934
Comment Deadline Final Rule Issue Effective Date
December 17, 2010 June 13, 2011 August 12, 2011

On November 10, 2010, the Commodity Futures Trading Commission (CFTC) held its fourth in the series of open meetings to consider the issuance of proposed rulemakings under the Dodd-Frank Act. One of the agenda items was a proposed rule regarding the establishment of whistleblower incentives and protection .[1]

Also, the Securities and Exchange Commission (SEC) finalized rules for its whistleblower program on May 25, 2011.[2] These rules were proposed at an open meeting on November 3, 2010 to reward individuals that provide the agency with tips that lead to successful enforcement actions.

Background

The Dodd-Frank Act directs the commission to issue final rules regarding the issuance of monetary rewards to individuals who provide information that leads to fines or sanctions in excess of $1,000,000. The act gives discretion as to the amount, only stating that it could be "between 10 and 30 percent of the sanctions collected."

CFTC Proposed Rule

The Whistleblower rule proposal maintains the "discretionary power" of the commission with regard to the amount awarded to informants. Criteria used in the determination include:

  • Significance of the information;
  • Degree of assistance provided;
  • Programmatic interest; and
  • Other criteria.

Awards may be denied to certain government employees and other persons deemed "statutorily ineligible." Also included in the proposal are provisions for protection of whistleblowers from employer retaliation.

Proposed rules appeared in the Federal Register on December 6, 2010.

SEC Proposed Rule

In the rules, the following factors are required in order for a whistleblower to be considered for a reward:

  • In general, a whistleblower is deemed to have provided information voluntarily if the whistleblower has provided information before the government, a self-regulatory organization or the Public Company Accounting Oversight Board asks for it.
  • Original information must be based upon the whistleblower’s independent knowledge or independent analysis, not already known to the Commission and not derived exclusively from certain public sources.
  • A whistleblower’s information can be deemed to have led to successful enforcement in two circumstances: (1) if the information results in a new examination or investigation being opened and significantly contributes to the success of a resulting enforcement action, or (2) if the conduct was already under investigation when the information was submitted, but the information is essential to the success of the action and would not have otherwise been obtained.

Proposed rules were added to the Federal Register on November 17, 2010.

Related Documents: Fact Sheet (CFTC), Q&A (CFTC), Federal Registry Entries (CFTC and SEC)

References

  1. Open Meeting on Fourth Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on March 7, 2011.
  2. Open Meeting Agenda - Wednesday, May 25, 2011. SEC. Retrieved on March 25, 2011.

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