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2011-20423

  • Federal Register, Volume 76 Issue 165 (Thursday, August 25, 2011)[Federal Register Volume 76, Number 165 (Thursday, August 25, 2011)]

    [Rules and Regulations]

    [Pages 53172-53222]

    From the Federal Register Online via the Government Printing Office [www.gpo.gov]

    [FR Doc No: 2011-20423]

    [[Page 53171]]

    Vol. 76

    Thursday,

    No. 165

    August 25, 2011

    Part II

    Commodity Futures Trading Commission

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    17 CFR Parts 165

    Whistleblower Incentives and Protection; Final Rule

    Federal Register / Vol. 76 , No. 165 / Thursday, August 25, 2011 /

    Rules and Regulations

    [[Page 53172]]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 165

    RIN 3038-AD04

    Whistleblower Incentives and Protection

    AGENCY: Commodity Futures Trading Commission (``Commission'').

    ACTION: Final rules.

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    SUMMARY: The Commission is adopting Final Rules and new forms to

    implement Section 23 of the Commodity Exchange Act (``CEA'' or ``Act'')

    entitled ``Commodity Whistleblower Incentives and Protection.'' The

    Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on

    July 21, 2010 (``Dodd-Frank Act''), established a whistleblower program

    that requires the Commission to pay an award, under regulations

    prescribed by the Commission and subject to certain limitations, to

    eligible whistleblowers who voluntarily provide the Commission with

    original information about a violation of the CEA that leads to the

    successful enforcement of a covered judicial or administrative action,

    or a related action. The Dodd-Frank Act also prohibits retaliation by

    employers against individuals who provide the Commission with

    information about possible CEA violations.

    DATES: Effective Date: These Final Rules will become effective upon

    October 24, 2011.

    FOR FURTHER INFORMATION CONTACT: Edward Riccobene, Chief, Policy and

    Review, Division of Enforcement, 202-418-5327, ericcobene@cftc.gov,

    Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st

    Street, NW., Washington, DC 20581.

    SUPPLEMENTARY INFORMATION: The Commission is adopting Final Rules 165.1

    through 165.19 and Appendix A, thereto, and new Forms TCR (``Tip,

    Complaint or Referral'') and WB-APP (``Application for Award for

    Original Information Provided Pursuant to Section 23 of the Commodity

    Exchange Act''), under the CEA.

    I. Background and Summary

    Section 748 of the Dodd-Frank Act added new Section 23 to the

    CEA,\1\ entitled ``Commodity Whistleblower Incentives and Protection.''

    \2\ Section 23 directs that the Commission pay awards, subject to

    certain limitations and conditions, to whistleblowers who voluntarily

    provide the Commission with original information about a violation of

    the CEA that leads to the successful enforcement of an action brought

    by the Commission that results in monetary sanctions exceeding

    $1,000,000, or the successful enforcement of a related action. Section

    23 also provides for the protection of whistleblowers against

    retaliation for reporting information to the Commission and assisting

    the Commission in its related investigations and enforcement actions.

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    \1\ 7 U.S.C. 1, et seq. (2006).

    \2\ Public Law 111-203, Sec. 748, 124 Stat. 1739 (2010).

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    On December 6, 2010, the Commission proposed Part 165 of the

    Commission's Regulations to implement new Section 23 (``the Proposed

    Rules'' or ``Proposing Release'').\3\ The rules contained in proposed

    Part 165 defined certain terms critical to the operation of the

    whistleblower program, outlined the procedures for applying for awards

    and the Commission's procedures for making decisions on claims, and

    generally explained the scope of the whistleblower program to the

    public and to potential whistleblowers.

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    \3\ Proposed Rules for Implementing the Whistleblower Provisions

    of Section 23 of the Commodity Exchange Act, Release No. 3038-AD04,

    75 FR 75728 (Dec. 6, 2010).

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    The Final Rules include the specific procedures and forms that a

    potential whistleblower must follow and file to make a claim. The Final

    Rules also detail the standards that the Commission will use in

    determining whether an award is appropriate and, if one is appropriate,

    what the amount of an award should be. The Commission may exercise

    discretion in granting an award based on the significance of the

    information, degree of assistance provided in support of a covered

    judicial or administrative action, programmatic interest,

    considerations of public policy, and other criteria (other than the

    balance of the Commodity Futures Trading Commission Customer Protection

    Fund (``Fund'')). An award shall be denied to certain government

    employees and others who, for certain stated reasons, are ineligible to

    be whistleblowers.

    The Final Rules also provide that a whistleblower may appeal to the

    appropriate U.S. Circuit Court of Appeals the Commission's award

    determination, including the determinations as to whom an award is

    made, the amount of an award, and the denial of an award. Finally, the

    Final Rules also provide guidance concerning anti-retaliation

    provisions of the Dodd-Frank Act.

    The Commission received more than 635 comment letters.\4\ Over 600

    of these comments, sent by or on behalf of different individuals and

    entities, were variations of the same form letter.\5\ The remaining 35

    comments were submitted by individuals, whistleblower advocacy groups,

    public companies, corporate compliance personnel, law firms and

    individual lawyers, professional associations, and nonprofit

    organizations. The comments addressed a wide range of issues, including

    the interplay of the proposed Commission whistleblower program and

    company internal compliance processes, the proposed exclusion from

    award eligibility of certain categories of individuals or types of

    information, the availability of awards to culpable whistleblowers, the

    procedures for submitting information and making a claim for an award,

    and the application of the statutory anti-retaliation provision.

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    \4\ The public comments the Commission received are available at

    http://comments.cftc.gov/PublicComments/CommentList.aspx?id=916.

    \5\ The form letters provide no specific comments or requested

    revisions regarding the Proposed Rules. These letters: express

    concern that the ``corporate lobby will have undue influence on the

    final rules to protect whistleblowers;'' allege that ``[t]he SEC

    proposed rules completely undermine efforts to protect employees who

    risk their careers to expose fraud;'' and opine that ``the CTFC

    should not blindly follow any of the SEC's recommendations and

    should instead write rules will encourage whistleblowers to report

    commodities fraud.''

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    As discussed in more detail below, the Commission has carefully

    considered the comments received on the Proposed Rules in formulating

    the Final Rules the Commission adopts today. The Commission has also

    considered the Securities and Exchange Commission's (``SEC['s]'')

    rulemaking to implement Section 922 of the Dodd-Frank Act, which

    establishes whistleblower protections and incentives with respect to

    violations of the securities laws.\6\ Where appropriate and consistent

    with the underlying statutory mandate in Section 23 of the CEA, the

    Commission has endeavored to harmonize its whistleblower rules with

    those of the SEC. The Commission has made a number of revisions and

    refinements to the Proposed Rules in

    [[Page 53173]]

    order to achieve the goals of the statutory whistleblower program and

    advance effective enforcement of laws under the CEA. While the

    revisions of each Proposed Rule are described in more detail throughout

    this release, the four subjects highlighted below are among the most

    significant.

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    \6\ See Securities Whistleblower Incentives and Protections, 76

    FR 34300 (June 13, 2011) (to be codified at 17 CFR 240.21F-1 to

    240.21F-17). Commission staff has consulted with SEC staff regarding

    drafting of rules to implement the Commission's and SEC's respective

    Dodd-Frank Act whistleblower provisions, Section 748 (Commodity

    Whistleblower Incentives and Protection) and Section 922

    (Whistleblower Protection). To the extent that the Commission and

    SEC reached the same conclusions on common issues, the Commission

    endeavored harmonize its rule text with the SEC's final rule text.

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    Internal Compliance: A significant issue discussed in the Proposed

    Rules was the impact of the whistleblower program on company systems

    for internal reporting of potential misconduct.\7\ The Commission did

    not propose a requirement that a whistleblower must report his

    information internally to an entity to be eligible for an award, and

    commenters were sharply divided on the issues raised by this topic.

    Upon consideration of the comments, the Commission has determined that

    it is inappropriate to require whistleblowers to report violations

    internally to be eligible for an award. The Commission does, however,

    recognize that internal compliance and reporting systems ought to

    contribute to the goal of detecting, deterring and preventing

    misconduct, including CEA violations, and does not want to discourage

    employees from using such systems when they are in place. Accordingly,

    the Commission has tailored the Final Rules as follows:

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    \7\ See 75 FR at 75730.

    [cir] With respect to the criteria for determining the amount of

    an award, the Final Rules provide that while the amount of an award

    is within the Commission's discretion, the Commission will consider

    (i) a whistleblower's report of information internally to an

    entity's whistleblower, compliance or legal system as a factor that

    potentially can increase the amount of an award; and (ii) a

    whistleblower's interference with such internal systems is a factor

    that can potentially decrease the amount of an award. Rule

    165.9(b)(4), (c)(3).

    [cir] A whistleblower may be eligible for an award for reporting

    original information to an entity's internal compliance and

    reporting systems if the entity later reports information to the

    Commission that leads to a successful Commission action or related

    action. Under this provision, all of the information provided by the

    entity to the Commission will be attributed to the whistleblower,

    which means the whistleblower will get credit--and potentially a

    greater award--for any information provided by the entity to the

    Commission in addition to the original information reported by the

    whistleblower. Rule 165.2(i)(3).

    Procedures for Submitting Information and Claims: The Proposed

    Rules set forth a two-step process for submitting information,

    requiring the submission of two different forms. In response to

    comments that urged the Commission to streamline the procedures for

    submitting information, the Commission has adopted a simpler process by

    combining the two proposed forms into a single ``Form TCR'' to be

    submitted by a whistleblower, under penalty of perjury. With respect to

    the claims application process, the Commission has made one section of

    that form optional to make the process less burdensome.

    Aggregation of Smaller Actions to meet the $1,000,000 Threshold:

    The Proposed Rules stated that awards would be available only when the

    Commission has successfully brought a single judicial or administrative

    action in which it obtained monetary sanctions of more than $1,000,000.

    In response to comments, the Commission has provided in the Final Rules

    that, for purposes of making an award, the Commission will aggregate

    two or more smaller actions that arise from the same nucleus of

    operative facts. This will make whistleblower awards available in more

    cases.

    Exclusions from Award Eligibility for Certain Persons and

    Information: The Proposed Rules set forth a number of exclusions from

    eligibility for certain categories of persons and information. In

    response to comments suggesting that some of these exclusions were

    overly broad or unclear, the Commission has revised a number of these

    provisions. Most notably, the Final Rules provide greater clarity and

    specificity about the scope of the exclusions applicable to senior

    officials within an entity who learn information about misconduct in

    connection with the entity's processes for identifying, reporting, and

    addressing possible violations of law.

    Internal Procedural and Organizational Issues: In the Proposing

    Release, the Commission noted that it would address ``internal

    procedural and organizational issues'' related to implementation of

    Section 23 in a future rulemaking.\8\ The Final Rules include revisions

    to reflect the Commission's intent to delegate to a Whistleblower

    Office the authority to administer the Commission's whistleblower

    program and to undertake and maintain customer education initiatives

    through an Office of Consumer Outreach. The Final Rules also provide

    that the Commission will exercise its authority to make whistleblower

    award determinations through a delegation of authority to a panel that

    shall be composed of representatives from three of the Commission's

    Offices or Divisions.

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    \8\ See 75 FR at 75728.

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    II. Description of the Rules

    A. Rule 165.1--General

    Proposed Rule 165.1 provided a general, straightforward description

    of Section 23 of the CEA, setting forth the purposes of the rules and

    stating that the Commission administers the whistleblower program. In

    addition, the Final Rule states that, unless expressly provided for in

    the rules, no person is authorized to make any offer or promise, or

    otherwise to bind the Commission, with respect to the payment of an

    award or the amount thereof.

    B. Rule 165.2--Definitions

    1. Action

    The term ``action'' is relevant for purposes of calculating whether

    monetary sanctions in a Commission action exceed the $1,000,000

    threshold required for an award payment pursuant to Section 23 of the

    CEA, as well as determining the monetary sanctions on which awards are

    based.\9\ Proposed Rule 165.2(a) defined the term ``action'' to mean a

    single captioned judicial or administrative proceeding. The Commission

    proposed to interpret the term ``action'' to include all claims against

    all defendants or respondents that are brought within that proceeding

    without regard to which specific defendants or respondents, or which

    specific claims, were included in the action as a result of the

    information that the whistleblower provided. With respect to the

    definition of the term ``action,'' one commenter stated that only those

    claims in multiple claim enforcement matters that result directly or

    indirectly from the whistleblower's report should be included in an

    ``action'' for which a whistleblower is eligible for an award.\10\ The

    commenter reasoned that the proposed definition would encourage the

    reporting of ``fairly minor violations'' which could cause the

    Commission to be ``inundated with far more complaints on insignificant

    matters, thereby clogging a process that is already expected to be

    cumbersome'' to the Commission.

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    \9\ See Rule 165.8.

    \10\ See letter from National Society of Compliance

    Professionals (``NSCP'').

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    The Commission has considered, but disagrees with the rationale in

    support of these comments. In general, any violation, even those that

    may appear relatively minor (e.g., failure to provide pool participants

    with timely account statements in violation of Commission Regulation

    4.22), may upon investigation be symptomatic of more significant

    violations (e.g., CPO fraud in violation of Sections 4b and 4o of the

    [[Page 53174]]

    CEA). It would therefore not be in the public interest to discourage

    the reporting of any violations. Further, to the extent that reporting

    of relatively minor violations is a potential concern, the Final Rules

    require that the whistleblower's information must have led to the

    successful enforcement of a covered judicial or administrative action

    (see Rules 165.2(e), (i), and 165.5(a)(3)). A minor violation by itself

    is unlikely to result in an enforcement action resulting in monetary

    sanctions exceeding $1,000,000.

    The Commission is making a slight amendment to Rule 165.2(a) as

    proposed. The Commission has discretion to bifurcate enforcement

    actions (e.g., one action against the entity and another against

    culpable individuals). Under the Proposed Rule, the bifurcation of a

    single enforcement action with aggregate sanctions in an amount greater

    than $1,000,000 could result in separate but related enforcement

    actions in which one or more of such actions had sanctions of less than

    $1,000,000. Under the Proposed Rule, therefore, the bifurcation of an

    enforcement action into two or more related actions could result in a

    reduced award for a whistleblower that provided the original

    information leading to the enforcement actions, or no reward at all.

    Consequently, the Commission is amending the definition of ``action''

    in Rule 165.2(a) to include two or more proceedings that ``arise out of

    the same nucleus of operative facts.'' \11\

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    \11\ See SEC Rule 240.21F-4(d) (providing a similar definition

    of ``action'').

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    2. Aggregate Amount

    Proposed Rule 165.2(b) defined the phrase ``aggregate amount'' to

    mean the total amount of an award granted to one or more whistleblowers

    pursuant to Proposed Rule 165.7 (Procedures for award applications and

    Commission award determinations). The term is relevant for purposes of

    determining the amount of an award pursuant to Proposed Rule 165.8

    (``Amount of award;'' providing the Commission's parameters for

    whistleblower awards). The Commission did not receive any comments on

    the definition of aggregate amount. The Commission is adopting Rule

    165.2(b) as proposed.

    3. Analysis

    Under Section 23(a)(4) of the CEA, the ``original information''

    provided by a whistleblower may include information that is derived

    from the ``independent knowledge'' or ``independent analysis'' of a

    whistleblower. Proposed Rule 165.2(c) defined the term ``analysis'' to

    mean the whistleblower's examination and evaluation of information that

    may be generally available, but which reveals information that is not

    generally known or available to the public. The Commission received no

    comment on the definition of ``analysis.'' However, the Commission did

    receive several comments on the definition of ``independent analysis,''

    which are more fully discussed in section II.B.7.a below.

    Because it received no comments to the contrary, the Commission is

    adopting Rule 165.2(c) as proposed. This definition recognizes that

    there are circumstances where individuals might review publicly

    available information, and, through their additional evaluation and

    analysis, provide vital assistance to the Commission staff in

    understanding complex schemes and identifying potential violations of

    the CEA.

    4. Collected by the Commission

    Proposed Rule 165.2(d) defined the phrase ``collected by the

    Commission,'' when used in the context of deposits and credits into the

    Fund, to refer to a monetary sanction that is both collected by the

    Commission and confirmed by the U.S. Department of the Treasury.\12\

    Section 23(g)(3) of the CEA provides that the Fund will be financed

    through monetary sanctions ``collected by the Commission * * * that is

    not otherwise distributed to victims of a violation of this Act or the

    rules or regulations thereunder underlying such action,'' meaning that

    deposits into the Fund are based only upon what the Commission actually

    collects.\13\ The Commission generally collects civil monetary

    sanctions and disgorgement amounts in civil actions, or fines in

    administrative actions. A federal court or the Commission may award

    restitution to victims in civil and administrative actions,

    respectively, but the Commission does not ``collect'' restitution,

    i.e., restitution is not recorded as a receivable on the Commission's

    books and records. Consequently, restitution amounts collected in a

    covered action or related action, in normal course, will not be

    deposited into the Fund. The Commission did not receive comments

    regarding the definition of ``collected by the Commission.'' The

    Commission is therefore adopting Rule 165.2(d) as proposed.

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    \12\ See discussion regarding the Fund below in section II.B.6.

    \13\ See Section 23(g)(3) of the CEA, 7 U.S.C. 26(g)(3).

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    5. Covered Judicial or Administrative Action

    Proposed Rule 165.2(e) defined the phrase ``covered judicial or

    administrative action'' to mean any judicial or administrative action

    brought by the Commission under the CEA, the successful resolution of

    which results in monetary sanctions exceeding $1,000,000. The

    Commission did not receive any comments on ``covered judicial or

    administrative action,'' and is adopting Rule 165.2(e) as proposed.

    6. Fund

    Proposed Rule 165.2(f) defined the term ``Fund'' to mean the

    ``Commodity Futures Trading Commission Customer Protection Fund''

    established by Section 23(g) of the CEA. The Commission will use the

    Fund to pay whistleblower awards as provided in Final Rule 165.12 and

    to finance customer education initiatives designed to help customers

    protect themselves against fraud and other violations of the CEA or the

    Commission's Regulations. The Commission received no comments regarding

    the definition of ``Fund.'' The Commission is adopting Rule 165.2(f) as

    proposed.

    7. Independent Knowledge and Independent Analysis

    The phrases ``independent knowledge'' and ``independent analysis''

    are relevant to the definition of ``original information'' in Proposed

    Rule 165.2(k), which provides that ``original information'' may be

    derived from the ``independent knowledge'' or ``independent analysis''

    of a whistleblower. Commenters generally agreed with the Commission's

    interpretation of independent knowledge and independent analysis.\14\

    However, there were varied views as to what the Commission should or

    should not exclude from independent knowledge and independent analysis.

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    \14\ See letters from Securities Industry and Financial Markets

    Association and Futures Industry Association (``SIFMA/FIA''),

    American Institute of CPAs (``AICPA''), NSCP, American Bar

    Association--Business Law Section/Committee on Derivatives and

    Futures Law and the Committee on Federal Regulation of Securities

    (``ABA'') and Edison Electric Institute and National Rural Electric

    Cooperative Association (``EEI'').

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    a. Independent Analysis

    The Commission received one comment that addressed the definition

    of ``independent analysis''--``the whistleblower's own analysis whether

    done alone or in combination with others.'' The commenter stated that

    the term ``independent analysis'' in Proposed Rule 165.2(h) should be

    [[Page 53175]]

    restricted to an analysis of the whistleblower's ``independent

    knowledge'' along with other objective facts such as commodity price or

    trading volume.\15\ The Commission has considered the comment in the

    context of ``independent analysis'' and has decided to adopt Rule

    165.2(h) as proposed. Section 23(a)(4) of the CEA specifically provides

    that original information can be derived from either ``the independent

    knowledge or analysis of a whistleblower.'' The Commission's Proposed

    Rule adheres to this statutory limitation.

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    \15\ See letter from ABA.

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    b. Independent Knowledge

    i. Proposed Rule

    Proposed Rule 165.2(g) defined ``independent knowledge'' as factual

    information in the whistleblower's possession that is not obtained from

    publicly available sources, which would include such sources as

    corporate filings, media, and the Internet. Importantly, the proposed

    definition of ``independent knowledge'' did not require that a

    whistleblower have direct, first-hand knowledge of potential

    violations.\16\ Instead, independent knowledge may be obtained from any

    of the whistleblower's experiences, observations, or communications

    (subject to the exclusion for knowledge obtained from public sources).

    Thus, for example, under Proposed Rule 165.2(g), a whistleblower would

    have ``independent knowledge'' of information even if that knowledge

    derives from facts or other information that has been conveyed to the

    whistleblower by third parties.

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    \16\ In addition, the distinction between ``independent

    knowledge'' (as knowledge not dependent upon publicly available

    sources) and direct, first-hand knowledge, is consistent with the

    approach courts have typically taken in interpreting similar

    terminology in the False Claims Act. Until this year, the ``public

    disclosure bar'' provisions of the False Claims Act defined an

    ``original source'' of information, in part, as ``an individual who

    [had] direct and independent knowledge of the allegations of the

    information on which the allegations [were] based * * *.'' 31 U.S.C.

    3730(e)(4) (prior to 2010 amendments). Courts interpreting these

    terms generally defined ``independent knowledge'' to mean knowledge

    that was not dependent on public disclosures, and ``direct

    knowledge'' to mean first-hand knowledge from the relator's own work

    and experience, with no intervening agency. E.g., United States ex

    rel. Fried v. West Independent School District, 527 F.3d 439 (5th

    Cir. 2008); United States ex rel. Paranich v. Sorgnard, 396 F.3d 326

    (3d Cir. 2005). See generally John T. Boese, Civil False Claims and

    Qui Tam Actions Sec. 4.02[D][2] (Aspen Publishers) (2006) (citing

    cases). Earlier this year, Congress amended the ``public disclosure

    bar'' to, among other things, remove the requirement that a relator

    have ``direct knowledge'' of information. Sec. 10104(j)(2), Public

    Law 111-148 124 Stat. 901 (Mar. 23, 2010).

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    Proposed Rule 165.2(g) provided six circumstances in which an

    individual would not be considered to have ``independent knowledge.''

    The effect of those provisions would be to exclude individuals who

    obtain information under those circumstances from being eligible for

    whistleblower awards.

    The first exclusion is for information generally available to the

    public, including corporate filings and internet based information.

    (Proposed Rule 165.2(g)(1).)

    The second and third exclusions address information that was

    obtained through a communication that is subject to the attorney-client

    privilege. (Proposed Rule 165.2(g)(2) and (3).) The second exclusion

    applies when a would-be whistleblower obtains the information in

    question through privileged attorney-client communications. The third

    exclusion applies when a would-be whistleblower obtains the information

    in question as a result of his or his firm's legal representation of a

    client. Neither the second nor the third exclusion would apply in

    circumstances in which the disclosure of the information is authorized

    by the applicable federal or state attorney conduct rules. These

    authorized disclosures could include, for example, situations where the

    privilege has been waived, or where the privilege is not applicable

    because of a recognized exception such as the crime-fraud exception to

    the attorney-client privilege.

    In regard to both the second and third exclusions, compliance with

    the CEA is promoted when individuals, corporate officers, Commission

    registrants and others consult with counsel about potential violations,

    and the attorney-client privilege furthers such consultation. This

    important benefit could be undermined if the whistleblower award

    program vitiated the public's perception of the scope of the attorney-

    client privilege or created monetary incentives for counsel to disclose

    information about potential CEA violations that they learned of through

    privileged communications.

    The fourth exclusion to ``independent knowledge'' in the Proposed

    Rule applies when a person with legal, compliance, audit, supervisory,

    or governance responsibilities for an entity receives information about

    potential violations, and the information was communicated to the

    person with the reasonable expectation that the person would take

    appropriate steps to cause the entity to remedy the violation.\17\

    (Proposed Rule 165.2(g)(4).) Accordingly, under the fourth exclusion,

    officers, directors, and employees who learn of wrongdoing and are

    expected as part of their official duties to address the violations

    would not be permitted to use that knowledge to obtain a personal

    benefit by becoming whistleblowers.

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    \17\ This exclusion has been adapted from case law holding that

    a disclosure to a supervisor who is in a position to remedy the

    wrongdoing is a protected disclosure for purposes of the federal

    Whistleblower Protection Act, 5 U.S.C. 2302(b)(8). E.g., Reid v.

    Merit Systems Protection Board, 508 F.3d 674 (Fed. Cir. 2007);

    Hooven-Lewis v. Caldera, 249 F.3d 259 (4th Cir. 2001).

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    The fifth exclusion is closely related to the fourth, and applies

    any other time that information is obtained from or through an entity's

    legal, compliance, internal audit, or similar functions or processes

    for identifying, reporting, and addressing potential non-compliance

    with applicable law. (Proposed Rule 165.2(g)(5).)

    Compliance with the CEA is promoted when companies implement

    effective legal, internal audit, compliance, and similar functions.

    Thus, Section 23 should not create incentives for persons involved in

    such roles, as well as other similarly positioned persons who learn of

    wrongdoing at a company, to circumvent or undermine the proper

    operation of an entity's internal processes for investigating and

    responding to violations of law. However, both of these exclusions

    cease to be applicable if the entity fails to disclose the information

    to the Commission within sixty (60) days of when it becomes aware of

    the violation or otherwise proceeds in bad faith, with the result that

    an individual may be deemed to have ``independent knowledge,'' and,

    therefore, depending on the other relevant factors, may qualify for a

    whistleblower award. The rationale for this provision is that if the

    entity fails to report information concerning the violation to the

    Commission within that time frame, it would be inconsistent with the

    purposes of Section 23 to deter individuals with knowledge of the

    potential violations from coming forward and providing the information

    to the Commission. Furthermore, this provision provides a reasonable

    period of time for entities to report potential violations, thereby

    minimizing the potential of circumventing or undermining existing

    compliance programs.

    The sixth and final exclusion to ``independent knowledge'' in the

    Proposed Rule applies if the would-be whistleblower obtains the

    information by means or in a manner that violates

    [[Page 53176]]

    applicable federal or state criminal law. (Section 165.2(g)(6).) This

    exclusion is necessary to avoid the unintended effect of incentivizing

    criminal misconduct.

    ii. Comments and Final Rule

    Rule 165.2(g)(1)--Exception Concerning Public Sources

    The Commission received comments from two commenters regarding the

    public source exception to ``independent knowledge.'' One commenter

    suggested that the public source exception (Section 165.2(g)(1)) is too

    broad and suggested that the Commission should restrict the definition

    of ``independent knowledge'' to first-hand knowledge. The commenter's

    rationale was that such a restriction would be premised on the notion

    that oral information obtained from third parties is unreliable because

    it may be insincere or subject to flaws in memory or perception. This

    commenter also suggested that the public source exception incentivizes

    whistleblower reports based on rumors or ill-informed sources.\18\

    Taking a contrary position, another commenter recommended that an

    ``independent analysis'' be allowed to draw on previously published

    sources.\19\ One commenter suggested that ``independent analysis''

    should be restricted to an analysis of the whistleblower's own

    ``independent knowledge'' along with other objective facts like

    commodity price or trading volume.\20\

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    \18\ See letter from ABA.

    \19\ See letter from Project on Government Oversight (``POGO'')

    at 5-6 (noting the Bernard Madoff whistleblower, Harry Markopolos,

    as an example of whistleblowers who ``perform original analysis

    based on publicly available sources.'').

    \20\ See letter from ABA.

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    After considering comments received, the Commission has decided to

    adopt Rule 165.2(g)(1) as proposed.

    Rule 165.2(g)(2)--Exception Concerning Attorney-Client Privilege and

    Rule 165.2(g)(3)--Outside Counsel

    One commenter asked the Commission to clarify that all of the

    exceptions contained in Proposed Rules 165.2(g)(2) and (3) continue to

    apply after an individual has resigned from his or her law firm, that

    the provisions apply equally to in-house and outside counsel; and that

    the rules treat the duties of lawyers differently from those of non-

    lawyer experts, such as paralegals and others who work under the

    direction of lawyers.\21\ This commenter noted that lawyers gain

    knowledge about an entity that is protected by the attorney-client

    privilege and the work product doctrine,\22\ which the lawyers are not

    permitted to waive, and that lawyers have state-law ethical obligations

    to maintain client confidentiality that extend beyond privileged

    information. The commenter reasoned that if the Commission does not

    specify that the exceptions in Rules 165.2(g)(2) and (3) continue after

    a lawyer has left his or her firm, the lawyer is incentivized to quit.

    Another commenter recommended that Rule 165.2(g)(2) be amended to

    explicitly apply to both attorneys and clients.\23\ Similarly, another

    commenter suggested that the definitions of ``independent knowledge''

    and ``independent analysis'' should exclude information obtained

    through a communication that is protected by the attorney-client

    privilege.\24\ The same commenter recommended that the exclusions for

    information obtained by a person with legal, compliance, audit,

    supervisory, or governance responsibilities should apply to any

    information obtained by such persons and not be limited to information

    being communicated ``with a reasonable expectation that the [recipient]

    would take appropriate steps to cause the entity to remedy the

    violation. * * *'' \25\

    ---------------------------------------------------------------------------

    \21\ See letter from SIFMA/FIA.

    \22\ See letter from ABA.

    \23\ See letter from The Financial Services Roundtable

    (``FSR'').

    \24\ See letter from NSCP.

    \25\ Id.

    ---------------------------------------------------------------------------

    After considering comments received, the Commission has decided to

    adopt Rule 165.2(g)(2) as proposed and Rule 165.2(g)(3) with some

    modifications. The Commission has changed ``[A]s a result of the legal

    representation of a client on whose behalf the whistleblower's

    services, or the services of the whistleblower's employer or firm, have

    been retained * * *'' to ``[I]n connection with the legal

    representation of a client on whose behalf the whistleblower, or the

    whistleblower's employer or firm, have been providing services. * * *''

    \26\ The Commission believes that these changes will prevent the use of

    confidential information not only by attorneys, but by secretaries,

    paralegals, consultants and others who work under the direction of

    attorneys and who may have access to confidential client information.

    ---------------------------------------------------------------------------

    \26\ See Rule 165.2(g)(3).

    ---------------------------------------------------------------------------

    Rule 165.2(g)(4), (5)--Exception Concerning Internal Legal, Compliance,

    Audit, and Supervisory Responsibilities

    Several commenters sought to expand the exclusions in Proposed Rule

    165.2(g)(4). One commenter suggested that the exclusions for

    information obtained by a person with legal, compliance, audit,

    supervisory, or governance responsibilities should apply to any

    information obtained by such persons, and not be limited to information

    that was communicated to the recipient ``with a reasonable expectation

    that the [recipient] would take appropriate steps to cause the entity

    to remedy the violation * * *.'' \27\ Two other commenters said that

    the 60-day deadline for an entity to report information to the

    Commission, which if missed allows a whistleblower in this category to

    avoid the exclusions under Proposed Rules 165.2(g)(4) and (5), did not

    give the entity enough time to report. One suggested the deadline

    should be a `reasonable time',\28\, and the other suggested that

    whistleblowers in this category should have to wait until an entity's

    internal investigation is completed before reporting to the

    Commission.\29\ Another commenter requested that the exclusion apply to

    external auditors (accounting firms) who obtain information about an

    entity while performing a CEA-required engagement and that the

    exclusion applies to any engagement performed for an entity subject to

    the jurisdiction of the Commission whether or not the engagement is an

    audit.\30\ A commenter also suggested that lawyers should not be

    subject to the ``good faith'' or ``prompt reporting'' exceptions in

    Proposed Rule 165.2(g)(4), and that the reference to lawyers in

    Proposed Rule165.2(g)(4) should therefore be deleted and treated

    separately in Proposed Rules 165.2(g)(2) and (3).\31\

    ---------------------------------------------------------------------------

    \27\ See letter from ABA.

    \28\ See letter from NSCP, ``as long as the firm is moving

    toward appropriate resolution in light of the totality of the

    circumstances, a subjective definition of `reasonable time' is

    appropriate.''

    \29\ See letter from EEI.

    \30\ See letter from AICPA.

    \31\ See letter from SIFMA/FIA.

    ---------------------------------------------------------------------------

    The Commission also received a comment that stated that the

    exception should be broadened to include internal control functions

    more generally, including risk management, product management and

    personnel functions. This commenter reasoned that all internal control

    functions should be treated equally because all internal control

    functions play an important role in maintaining an entity's control

    environment.\32\

    ---------------------------------------------------------------------------

    \32\ See letter from SIFMA/FIA. The Commission does not agree

    with this commenter. To exclude all persons somehow involved in an

    undefined ``internal control'' function would create too broad an

    exclusion, thereby making an unnecessarily large number of employees

    ineligible to be whistleblowers. It was not the intent of Section 23

    to unreasonably limit the potential pool of whistleblowers.

    ---------------------------------------------------------------------------

    The Commission has considered the comments received and revised the

    rule

    [[Page 53177]]

    such that those recommendations that have been accepted, in whole or in

    part, are now reflected in Rule 165.2(g)(4), (5). The recommended

    exclusions have been revised and focused to promote the goal of

    ensuring that the persons most responsible for an entity's conduct and

    compliance with law are not incentivized to promote their own self-

    interest at the possible expense of the entity's ability to detect,

    address, and self-report violations. Further, pursuant to the rules as

    adopted, such individuals would be permitted to become whistleblowers

    under certain circumstances, including when the whistleblower has a

    ``reasonable basis to believe'' that: (1) Reporting to the Commission

    is necessary to prevent conduct likely to cause substantial injury; (2)

    the entity is engaging in conduct that will impede an investigation of

    the misconduct; or (3) at least 120 days have elapsed since the

    whistleblower reported the information internally.\33\

    ---------------------------------------------------------------------------

    \33\ See Rule 165.2(g)(7).

    ---------------------------------------------------------------------------

    The Commission declined to revise the rule to extend the exclusion

    to an employee of a public accounting firm. While the SEC includes such

    an exclusion in its rules,\34\ the SEC's Dodd-Frank Act whistleblower

    provisions specifically requires this exclusion \35\ and external

    auditors are under an existing obligation to report violations to the

    SEC under the Securities Exchange Act of 1934.\36\ Neither the

    Commission's Dodd-Frank Act whistleblower provisions nor the CEA have

    similar exclusions or requirements.

    ---------------------------------------------------------------------------

    \34\ See SEC Rule 240.21F-4(b)(4)(iii)(D).

    \35\ See 15 U.S.C. 78u-6(c)(2)(C).

    \36\ See 15 U.S.C. 78j-1(b)(3); see also SEC Rule 240.10A-1.

    ---------------------------------------------------------------------------

    Rule 165.2(g)(6)--Exception Concerning Information Obtained in

    Violation of Law

    Commenters support the notion that a whistleblower who reports

    information he obtained in violation of the law should be ineligible

    for an award.\37\ One commenter, however, recommended that an award

    exclusion should be limited.\38\ This commenter reasoned that Rule

    165.2(g)(6), as proposed, would have the effect of making the

    Commission ``responsible for adjudicating--without any real due process

    afforded to the whistleblower--whether or not evidence-gathering

    techniques violated a law, and if so, whether or not the whistleblower

    was in fact guilty of violating said law (i.e. whether the state could

    prove, beyond [a] reasonable doubt, that the employee in fact violated

    each and every element of the criminal claim).'' In addition, this

    commenter suggested that the Commission should revise the rule to more

    closely reflect the underlying statutory language. Another commenter

    proposed that the exclusion for information obtained in violation of

    the law should be extended to civil violations of laws or rules, and

    violations of a self-regulatory organization (``SRO'') rules.\39\

    ---------------------------------------------------------------------------

    \37\ See letter from SIFMA/FIA (``The rules should also not

    allow for an award based on information provided in violations of

    judicial or administrative orders.'').

    \38\ See letter from Taxpayers Against Fraud (``TAF'').

    \39\ See letter from SIFMA/FIA.

    ---------------------------------------------------------------------------

    After considering the comments on Proposed Rule 165.2(g)(6), the

    Commission has decided to adopt the rule, as proposed, with one

    modification. Under the Final Rule, Rule 165.2(g)(5), whether a

    criminal violation occurred for purposes of the exclusion is now

    subject to the determination of a United States court. This revision is

    consistent with Section 23(c)(2) of the CEA, which renders ineligible

    ``any whistleblower who is convicted of a criminal violation related to

    the judicial or administrative action for which the whistleblower

    otherwise could receive'' a whistleblower award. Expanding this

    exclusion beyond criminal violations and without the requirement for a

    United States court determination would be inconsistent with the

    statute and discourage whistleblowers through the creation of legal

    uncertainty.

    8. Information That Led to Successful Enforcement Action

    a. Proposed Rule

    As proposed, Rule 165.2(i) explained when the Commission would

    consider original information to have led to a successful enforcement

    action. The Proposed Rule distinguished between information regarding

    conduct not previously under investigation or examination and

    information regarding conduct already under investigation or

    examination.

    For information regarding conduct not previously under

    investigation or examination, the Proposed Rule established a two-part

    test for determining whether the information led to successful

    enforcement. First, the information must have caused the Commission

    staff to commence an investigation or examination, reopen an

    investigation that had been closed, or to inquire into new and

    different conduct as part of an existing examination or investigation.

    Second, the information must have ``significantly contributed'' to the

    success of an enforcement action filed by the Commission.

    For information regarding conduct already under investigation or

    examination, the Proposed Rule established a higher hurdle. To

    establish that information led to a successful enforcement action, a

    whistleblower would need to demonstrate that the information: (1) Would

    not have otherwise been obtained; and (2) was essential to the success

    of the action.

    b. Comments

    The Commission received two comments regarding Proposed Rule

    165.2(i). Both commenters suggested revising Proposed Rule 165.2(i) to

    lower the hurdles to proving that a whistleblower's information led to

    a successful enforcement action.\40\ One commenter opined that the

    Commission imposes additional, non-statutory hurdles to the meaning of

    ``led to the successful enforcement.'' This commenter also asserted

    that the ``significantly contributed to the success of the action''

    element of the definition improperly broadens the Commission's

    discretion to deny awards beyond congressional intent and suggested

    that the ``significantly contributed'' element be stricken from the

    rule.\41\

    ---------------------------------------------------------------------------

    \40\ See letters from The National Whistleblowers Center

    (``NWC'') and TAF.

    \41\ See letter from TAF.

    ---------------------------------------------------------------------------

    c. Final Rule

    The Commission has considered the comments received regarding the

    definition of ``information that led to successful enforcement'' and

    has decided to adopt Rule 165.2(i) with some changes. Although the

    Commission has retained the ``significantly contributed'' element of

    the rule, the Commission has added alternative standards to evaluate

    whether a whistleblower has provided original information that led to a

    successful enforcement action. The Commission continues to believe that

    it is not the intent of Section 23 to authorize whistleblower awards

    for any and all tips. Instead, implicit in the requirement contained in

    Section 23(b) that a whistleblower's information ``led to successful

    enforcement'' is the additional expectation that the information,

    because of its high quality, reliability, and specificity, has a

    meaningful nexus to the Commission's ability to successfully complete

    its investigation, and to either obtain a settlement or prevail in a

    litigated proceeding.

    [[Page 53178]]

    In addition, to further incentivize internal reporting of

    violations, the Commission has added a new paragraph (3) to this rule,

    which states that original information reported through an entity's

    internal processes that leads to a successful enforcement action will

    be treated as information provided by the whistleblower instead of

    provided by the entity.\42\

    ---------------------------------------------------------------------------

    \42\ The SEC final rules take a similar approach to their

    comparable definitional provision. See SEC Rule 240.21F-4(c)

    (``information that leads to successful enforcement'').

    ---------------------------------------------------------------------------

    9. Monetary Sanctions

    Proposed Rule 165.2(j) defined the phrase ``monetary sanctions''

    when used with respect to any judicial or administrative action, or

    related action, to mean: (1) Any monies, including penalties,

    disgorgement, restitution and interest ordered to be paid; and (2) any

    monies deposited into a disgorgement fund or other fund pursuant to

    section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)),

    as a result of such action or any settlement of such action. This

    phrase is relevant to the definition of a ``covered judicial or

    administrative action'' in Proposed Rule 165.2(e) and to the amount of

    a whistleblower award under Proposed Rule 165.8. The Commission

    received no comments on the definition of ``monetary sanctions.'' The

    Commission is adopting the rule as proposed.

    10. Original Information and Original Source

    a. Proposed Rules

    Proposed Rule 165.2(k) tracked the definition of ``original

    information'' set forth in Section 23(a)(4) of the CEA.\43\ ``Original

    information'' means information that is derived from the

    whistleblower's independent knowledge or analysis; is not already known

    to the Commission from any other source, unless the whistleblower is

    the original source of the information; and is not exclusively derived

    from an allegation made in a judicial or administrative hearing, in a

    governmental report, hearing, audit, or investigation, or from the news

    media, unless the whistleblower is a source of the information.

    Consistent with Section 23(l) of the CEA, the Dodd-Frank Act authorizes

    the Commission to pay whistleblower awards on the basis of original

    information that is submitted prior to the effective date of the Final

    Rules implementing Section 23 (assuming that all of the other

    requirements for an award are met). The Dodd-Frank Act does not

    authorize the Commission to apply Section 23 retroactively to pay

    awards based upon information submitted prior to the enactment date of

    the statute.\44\ Consistent with Congress's intent, Proposed Rule

    165.2(k)(4) also required that ``original information'' be provided to

    the Commission for the first time after July 21, 2010 (the date of

    enactment of the Dodd-Frank Act).

    ---------------------------------------------------------------------------

    \43\ 7 U.S.C. 26(a)(4).

    \44\ Section 23(k) of the CEA directs that: ``Information

    submitted to the Commission by a whistleblower in accordance with

    rules or regulations implementing this section shall not lose its

    status as original information solely because the whistleblower

    submitted such information prior to the effective date of such rules

    or regulations, provided that such information was submitted after

    the date of enactment of the [Dodd-Frank Act].''

    ---------------------------------------------------------------------------

    Proposed Rule 165.2(l) defined the term ``original source,'' a term

    found in the definition of ``original information.'' Under the Proposed

    Rule, a whistleblower is an ``original source'' of the same information

    that the Commission obtains from another source if the other source

    obtained the information from the whistleblower or his representative.

    The whistleblower bears the burden of establishing that he is the

    original source of information.

    In Commission investigations, a whistleblower would be an original

    source if he first provided information to another authority, such as

    the Department of Justice, an SRO, or another organization that is

    identified in the Proposed Rule, which then referred the information to

    the Commission. In these circumstances, the Proposed Rule would credit

    a whistleblower as being the ``original source'' of information on

    which the referral was based as long as the whistleblower

    ``voluntarily'' provided the information to the other authority within

    the meaning of these rules (i.e., the whistleblower or his

    representative must have come forward and given the other authority the

    information before receiving any request, inquiry, or demand to which

    the information was relevant, or was the individual who originally

    possessed either the independent knowledge or conducted the independent

    analysis). Similarly, a whistleblower would not lose original source

    status solely because he shared his information with another person who

    filed a whistleblower claim with the Commission prior to the original

    source filing a claim for whistleblower status, as long as the other

    applicable factors are satisfied.

    Proposed Rule 165.3 (``Procedures for submitting original

    information'') required a whistleblower to submit two forms, a Form TCR

    (``Tip, Complaint or Referral'') and a Form WB-APP (``Application for

    Award for Original Information Provided Pursuant to Section 23 of the

    Commodity Exchange Act''), which included the ``Declaration Concerning

    Original Information Provided Pursuant to Section 23 of the Commodity

    Exchange Act'' in order to start the process and establish the

    whistleblower's eligibility for award consideration.\45\ A

    whistleblower who either provides information to another authority

    first, or who shares his independent knowledge or analysis with another

    who is also claiming to be a whistleblower, would have followed these

    same procedures and submitted the necessary forms to the Commission in

    order to perfect his status as a whistleblower under the Commission's

    whistleblower program. However, under Proposed Rule 165.2(l)(2), the

    whistleblower must have submitted the necessary forms to the Commission

    within 90 days after he provided the information to the other

    authority, or 90 days after the other person claiming to be a

    whistleblower submitted his claim to the Commission.

    ---------------------------------------------------------------------------

    \45\ See Rule 165.3.

    ---------------------------------------------------------------------------

    As noted above, the whistleblower must establish that he is the

    original source of the information provided to the other authority as

    well as the date of his submission, but the Commission may seek

    confirmation from the other authority, or any other source, in making

    this determination. The objective of this procedure is to provide

    further incentive for persons with knowledge of CEA violations to come

    forward (consistent with the purposes of Section 23) by assuring

    potential whistleblowers that they can provide information to

    appropriate Government or regulatory authorities, and their ``place in

    line'' will be protected in the event that other whistleblowers later

    provide the same information directly to the Commission.

    For similar reasons, the Proposed Rule extended the same protection

    to whistleblowers who provide information about potential violations to

    the persons specified in Proposed Rule 165.2(g)(3) and (4) (i.e.,

    personnel involved in legal, compliance, audit, supervisory and similar

    functions, or who were informed about potential violations with the

    expectation that they would take steps to address them), and who,

    within 90 days, submit the necessary whistleblower forms to the

    Commission. Compliance with the CEA is promoted when entities have

    effective programs for identifying, correcting, and self-reporting

    unlawful conduct by their officers or employees. The objective of this

    provision is to support, not

    [[Page 53179]]

    undermine, the effective functioning of entity compliance and related

    systems by allowing employees to take their concerns about potential

    violations to appropriate entity officials while still preserving their

    rights under the Commission's whistleblower program.

    Proposed Rule 165.2(l)(3) addressed circumstances where the

    Commission already possesses some information about a matter at the

    time that a whistleblower provides additional information about the

    same matter. The whistleblower will be considered the ``original

    source'' of any information that is derived from his independent

    knowledge or independent analysis, and that materially adds to the

    information that the Commission already possesses. The standard is

    modeled on the definition of ``original source'' that Congress included

    in the False Claims Act through amendments.\46\

    ---------------------------------------------------------------------------

    \46\ 31 U.S.C. 3730(e)(4)(B), Public Law 111-148 Sec.

    10104(j)(2), 124 Stat. 901 (Mar. 23. 2010).

    ---------------------------------------------------------------------------

    b. Comments

    The Commission received three comments regarding the definition of

    ``original information'' in Proposed Rule 165.2(k). One commenter

    believes that the enumerated exclusions from the definition of

    ``original information'' are not sufficiently broad. As an example,

    this commenter posits that the definition would not clearly exclude

    information a whistleblower receives as a result of an investigation by

    an exchange, SRO, or a foreign regulator, or information received in

    connection with internal investigations or civil or criminal

    proceedings in which the information has already been made known to the

    entity. Therefore, this commenter suggests broadly excluding from the

    definition all information deriving from an allegation made in any

    investigative or enforcement activity or proceeding, and all

    information elicited during, or deriving from, any such proceeding or

    other matter.\47\

    ---------------------------------------------------------------------------

    \47\ See letter from ABA.

    ---------------------------------------------------------------------------

    Another commenter had two concerns about the definition. The first

    concern was that a whistleblower could be rewarded for reporting

    something that an entity has already corrected. Therefore, the

    commenter proposed that for information to be considered original

    information, it should be ``information relating to a violation that

    has not been addressed by the entity that is alleged to have violated

    the CEA.'' The other concern was that the Proposed Rules do not

    specifically address original information involving violations that are

    time-barred by the applicable statute of limitations, or situations in

    which there is uncertainty regarding the applicable statute of

    limitations.\48\

    ---------------------------------------------------------------------------

    \48\ See letter from Investment Company Institute (``ICI'').

    ---------------------------------------------------------------------------

    Another commenter focused on the definition of ``original source''

    and suggested that it often takes longer than 90 days for a

    whistleblower to realize that an entity intends to ignore the

    whistleblower's efforts to report under an internal compliance program.

    Therefore that commenter posited that the time for a whistleblower to

    report internally should be extended.\49\

    ---------------------------------------------------------------------------

    \49\ See letter from TAF.

    ---------------------------------------------------------------------------

    c. Final Rules

    The Commission has considered the comments received regarding the

    definition of ``original information'' and has decided to adopt Rule

    165.2(k) as proposed. The Commission does not agree with the commenter

    who suggested that it would be improper for a whistleblower to receive

    an award for a violation that an entity has corrected. A whistleblower

    is entitled to an award of not less than 10 percent and not more than

    30 percent of monetary sanctions collected, regardless of whether the

    violation was self-corrected. In addition, the Commission does not

    believe it is necessary or appropriate to limit the definition of

    original information based upon the age of the information.

    The Commission has considered the comments received regarding

    ``original source'' and has decided to adopt Rule 165.2(l) with a

    change. The change is that the Commission has extended the time that an

    otherwise excluded whistleblower has to report information to the

    Commission after he reported to an entity that did not self report.

    Paragraph (2) of Rule 165.2(l) now gives such whistleblower 120 days

    instead of 90 days to regain ``original source'' status, which will

    provide whistleblowers with additional time to recognize whether an

    entity has reported the violation to the Commission.

    The Commission believes that several provisions in the Final Rules

    will ordinarily operate to exclude whistleblowers whose only source of

    original information is an existing investigation or proceeding.

    Information that is exclusively derived from a governmental

    investigation is expressly excluded from the definition of ``original

    information'' under Rule 165.2(k)(3). A whistleblower who learns about

    possible violations only through a company's internal investigation

    will ordinarily be excluded from claiming ``independent knowledge'' by

    operation of either the exclusions from ``independent knowledge'' set

    forth in Rule 165.2(g)(2), (3), (4), (5) (relating to attorneys and

    other persons who may be involved in the conduct of internal

    investigations). To the extent that information about an investigation

    or proceeding is publicly available, it is excluded from consideration

    as ``independent knowledge'' under Rule 165.2(g)(1).

    11. Related Action

    The phrase ``related action'' in Proposed Rule 165.2(m), when used

    with respect to any judicial or administrative action brought by the

    Commission under the CEA, means any judicial or administrative action

    brought by an entity listed in Proposed Rule 165.11(a) (i.e., the

    Department of Justice, an appropriate department/agency of the Federal

    Government, a registered entity, registered futures association or SRO,

    or a State criminal or appropriate civil agency) that is based upon the

    original information voluntarily submitted by a whistleblower to the

    Commission pursuant to Proposed Rule 165.3 that led to the successful

    resolution of the Commission action. This phrase is relevant to the

    Commission's determination of the amount of a whistleblower award under

    Proposed Rules 165.8 and 165.11. The Commission received one comment

    regarding ``related action.'' The commenter expressed concern that a

    whistleblower could potentially receive an award from both the

    Commission and the SEC by providing the same information to each

    agency. This same commenter noted that the SEC will not make an award

    for a related action and these rules should contain similar

    provisions.\50\ After consideration of the comment, the Commission has

    decided to adopt the rule as proposed. There are statutory differences

    between Section 23(h)(2)(C) of the CEA and Section 21F(h)(2)(D)(i) of

    the Securities Exchange Act of 1934 that prevent complete harmonization

    between the two agencies with regard to the term ``related action.''

    For example, the list entities whose actions can qualify as ``related

    actions'' do not match under the Commission and SEC Dodd-Frank Act

    provisions. Compare 7 U.S.C. 26(a)(5) (designating the Department of

    Justice, an appropriate department/agency of the Federal Government, a

    registered entity, registered futures association or SRO, a State

    criminal or appropriate civil agency, and a foreign futures authority);

    with 15 U.S.C. 78u-6(a)(5) (designating) the Attorney General of the

    United States, an

    [[Page 53180]]

    appropriate regulatory agency, an SRO, or a state attorney general in a

    criminal case).

    ---------------------------------------------------------------------------

    \50\ See letter from FSR.

    ---------------------------------------------------------------------------

    12. Successful Resolution or Successful Enforcement

    Proposed Rule 165.2(n) defined the phrase ``successful

    resolution,'' when used with respect to any judicial or administrative

    action brought by the Commission under the CEA, to include any

    settlement of such action or final judgment in favor of the Commission.

    The phrase shall also have the same meaning as ``successful

    enforcement.'' This phrase is relevant to the definition of the term

    ``covered judicial or administrative action'' as set forth in Rule

    165.2(e). The Commission received no comments on the term ``successful

    resolution'' or ``successful enforcement'' and is adopting the rule as

    proposed.

    13. Voluntary Submission or Voluntarily Submitted

    a. Proposed Rule

    Under Section 23(b)(1) of the CEA,\51\ whistleblowers are eligible

    for awards only when they ``voluntarily'' provide original information

    about CEA violations to the Commission. Proposed Rule 165.2(o) defined

    a submission as made ``voluntarily'' if a whistleblower provided the

    Commission with information before receiving any request, inquiry, or

    demand from the Commission, Congress, any other federal, state or local

    authority, the Department of Justice, a registered entity, a registered

    futures association or any SRO about a matter to which the information

    in the whistleblower's submission was relevant. The Proposed Rule

    covered both formal and informal requests. Thus, under the Proposed

    Rule, a whistleblower's submission would not be considered

    ``voluntary'' if the whistleblower was contacted by the Commission or

    one of the other authorities first, whether or not the whistleblower's

    response was compelled by subpoena or other applicable law.

    ---------------------------------------------------------------------------

    \51\ 7 U.S.C. 26(b)(1).

    ---------------------------------------------------------------------------

    As the Commission's Proposing Release explained, this approach was

    intended to create a strong incentive for whistleblowers to come

    forward early with information about possible violations of the CEA,

    rather than wait to be approached by investigators. For the same

    reasons, Proposed Rule 165.2(o) provided that a whistleblower's

    submission of documents or information would not be deemed

    ``voluntary'' if the documents or information were within the scope of

    a prior request, inquiry, or demand to the whistleblower's employer,

    unless the employer failed to make production to the requesting

    authority in a timely manner.

    Proposed Rule 165.2(o) also provided that a submission would not be

    considered ``voluntary'' if the whistleblower was under a pre-existing

    legal or contractual duty to report the violations of the CEA to the

    Commission or to one of the other designated authorities.

    b. Comments

    Commenters had diverse perspectives on the Commission's proposal to

    require that whistleblowers come forward before they receive either a

    formal or informal request or demand from the Commission, or one of the

    other designated authorities, about any matter relevant to their

    submission. Some commenters asserted that the Commission's Proposed

    Rule was too restrictive. For example, one commenter urged that all

    information provided by a whistleblower should be treated as

    ``voluntary'' until the whistleblower is testifying under compulsion of

    a subpoena.\52\ Another commenter expressed concern that the

    Commission's Proposed Rule could have the effect of barring

    whistleblowers in cases in which a whistleblower's information is

    arguably ``relevant'' to a general informational request from an

    authority, even though the authority is not pursuing the issue that the

    whistleblower might report.\53\ This commenter also suggested that

    rather than create an exclusion based on whether the information is

    ``relevant'' to a request, Rule 165.2(o) should be revised to bar

    individuals whose allegations are the subject of investigation by the

    public entities identified in the rule.\54\

    ---------------------------------------------------------------------------

    \52\ See letter from NWC.

    \53\ See letter from TAF. As an example, this commenter posits

    that:

    [A] request by a public employee pension fund for basic

    information concerning Forex currency trades on its account could

    preclude a ``voluntary'' submission of whistleblower allegations

    that the Forex currency broker engaged in large-scale mischarging,

    even if those allegations were not publicly known. In this instance

    the information requested is ``relevant'' to the whistleblower's

    allegations, even if the requesting agency is completely unaware of

    those allegations.

    \54\ Id.

    ---------------------------------------------------------------------------

    Other commenters posited that the Commission's Proposed Rule did

    not go far enough in precluding whistleblower submissions from being

    treated as ``voluntary.'' A commenter urged that the Commission's rules

    should preclude an individual from making a ``voluntary'' submission

    after an individual has been contacted for information during the

    course of an entity's internal investigation or internal review.\55\ In

    response to one specific request for comment, other commenters

    advocated that the Commission not treat a submission as ``voluntary''

    if the whistleblower was aware of a governmental or internal

    investigation at the time of the submission, whether or not the

    whistleblower received a request from the Commission or one of the

    other authorities.\56\

    ---------------------------------------------------------------------------

    \55\ See letter from SIFMA/FIA.

    \56\ See letters from ABA and NSCP.

    ---------------------------------------------------------------------------

    The Commission also requested comment regarding whether a

    whistleblower's submission should be deemed to be ``voluntary'' if the

    information submitted was within the scope of a previous request to the

    whistleblower's employer. Some commenters responded that they supported

    the exclusion and suggested that it be expanded in various ways.\57\

    ---------------------------------------------------------------------------

    \57\ See letters from SIFMA/FIA (urging elimination of the

    exception that would permit an employee to make a voluntary

    submission if the employer did not produce the documents or

    information in a timely manner) and NSCP (employee should be

    regarded as having received a request to an employer if there is a

    reasonable likelihood that the employee would have been contacted by

    the employer in responding to the request).

    ---------------------------------------------------------------------------

    The Commission received varying comments regarding its Proposed

    Rule to exclude whistleblowers from the definition of ``voluntarily''

    if they are under a pre-existing legal or contractual duty to report

    the violations to the Commission or another authority. Some commenters

    opposed the exclusion on the ground that Section 23(c)(2) of the CEA

    sets forth a specific list of persons whom Congress deemed to be

    ineligible for awards, some as a result of their pre-existing

    duties.\58\ These commenters suggested that the Commission was

    expanding these exclusions in a manner that was inconsistent with

    Congressional intent and the purposes of Section 23.\59\

    ---------------------------------------------------------------------------

    \58\ Section 23(c)(2) of the CEA sets forth four categories of

    individuals who are ineligible for whistleblower awards. These

    include: employees of the Commission and of certain other

    authorities; persons who were convicted of a criminal violation in

    relation to the action for which they would otherwise be eligible

    for an award; persons who submit information to the Commission that

    is based on the facts underlying the covered action submitted

    previously by another whistleblower; and any whistleblower who fails

    to submit information to the Commission in such form as the

    Commission may require by rule or regulation.

    \59\ See letters from NWC; Stuart D. Meissner, LLC; National

    Coordinating Committee for Multiemployer Plans (``NCCMP''); DC Bar;

    and Daniel J. Hurson.

    ---------------------------------------------------------------------------

    Other commenters favored the ``legal duty'' exclusion and

    recommended that it be clarified and extended. In particular, these

    commenters suggested that the exclusion should be applied to

    [[Page 53181]]

    various categories of individuals in the corporate context. Several

    commenters urged that the Commission should not consider submissions to

    be ``voluntary'' in circumstances in which an employee or an outside

    service provider has a duty to report misconduct to an entity.\60\

    ---------------------------------------------------------------------------

    \60\ See letters from NSCP and FSR.

    ---------------------------------------------------------------------------

    c. Final Rule

    After considering the comments, the Commission has decided to adopt

    Rule 165.2(o) without modifications. The Commission believes that a

    requirement that a whistleblower come forward before being contacted by

    Government investigations is both good policy and consistent with

    existing case law.\61\

    ---------------------------------------------------------------------------

    \61\ Cf. Barth v. Ridgedale Electric, Inc., 44 F.3d 699 (8th

    Cir. 1994); United States ex rel. Paranich v. Sorgnard, 396 F.3d 326

    (3d Cir. 2005) (rejecting argument that information provided beyond

    that required by subpoena is voluntary for purposes of False Claims

    Act); United States ex rel. Fine v. Chevron, USA, Inc., 72 F.3d 740

    (9th Cir. 1995), cert. denied, 517 U.S. 1233 (1996) (rejecting

    argument that provision of information to the Government is always

    voluntary unless compelled by subpoena).

    ---------------------------------------------------------------------------

    As adopted, Final Rule 165.2(o) provides that a submission of

    original information is deemed to have been made ``voluntarily'' if the

    whistleblower makes his or her submission before a request, inquiry, or

    demand that relates to the subject matter of the submission is directed

    to the whistleblower or anyone representing the whistleblower (such as

    an attorney): (i) By the Commission; (ii) Congress; (iii) any other

    federal or state authority; (iv) the Department of Justice; (v) a

    registered entity; (vi) a registered futures association; or (vii) an

    SRO.

    The Commission believes that a whistleblower award should not be

    available to an individual who makes a submission after first being

    questioned about a matter (or otherwise requested to provide

    information) by Commission staff acting pursuant to any of its

    investigative or regulatory authorities. Only an investigative request

    made by one of the other designated authorities will trigger

    application of the rule, except that a request made in connection with

    an examination or inspection, as well as an investigative request, by

    an SRO will also render a whistleblower's subsequent submission

    relating to the same subject matter not ``voluntary.'' In the context

    of a request made to an employer, an employee-whistleblower will be

    considered to have received a request if the documents or information

    the whistleblower provides to the Commission are within the scope of

    the request to the employer. This provision recognizes the important

    relationship that frequently exists between examinations and

    enforcement investigations, as well as the Commission's regulatory

    oversight of SROs. For example, if an entity's employee were

    interviewed by examiners, the employee could not later make a

    ``voluntary'' submission related to the subject matter of the

    interview.\62\

    ---------------------------------------------------------------------------

    \62\ As is further discussed below, individuals who wait to make

    their submission until after a request is directed to their employer

    will not face an easy path to an award. The Commission expects to

    scrutinize all of the attendant circumstances carefully in

    determining whether such submissions ``significantly contributed''

    to a successful enforcement action under Rule 165.2(n) in view of

    the previous request to the employer on the same or related subject

    matter.

    ---------------------------------------------------------------------------

    As adopted, the Commission's rule retains the provision that a

    submission will not be considered ``voluntary'' if the whistleblower is

    under a pre-existing legal or contractual duty to report the

    information to the Commission or to any of the other authorities

    designated in the rule. As adopted, Rule 165.2(o) provides that a

    whistleblower cannot ``voluntarily'' submit information if the

    whistleblower is required to report his ``original information'' to the

    Commission pursuant to a pre-existing legal duty, a contractual duty

    that is owed to the Commission or to one of the other authorities set

    forth above, or a duty that arises out of a judicial or administrative

    order.

    For similar reasons, the Commission declines to accept the

    suggestion of some commenters that a whistleblower report should not be

    treated as ``voluntary'' if it was made after the whistleblower had

    been contacted for information in the course of an internal

    investigation. Elsewhere in the Commission's final Rules, the

    Commission has attempted to create strong incentives for employees to

    continue to utilize their employers' internal compliance and other

    processes for receiving and addressing reports of possible violations

    of law.\63\ If a whistleblower took any steps to undermine the

    integrity of such systems or processes, the Commission will consider

    that conduct as a factor that may decrease the amount of any award.\64\

    However, a principal purpose of Section 23 is to promote effective

    enforcement of the commodity laws by providing incentives for persons

    with knowledge of misconduct to come forward and share their

    information with the Commission. Although the Commission acknowledges

    that internal investigations can be an important component of corporate

    compliance, and although there are existing incentives for companies to

    self-report violations, providing information to persons conducting an

    internal investigation, or simply being contacted by them, may not,

    without more, achieve the statutory purpose of getting high-quality,

    original information about violations of the CEA directly to Commission

    staff.

    ---------------------------------------------------------------------------

    \63\ See discussion below in Part II.I.

    \64\ See Rule 165.9.

    ---------------------------------------------------------------------------

    14. Whistleblower(s)

    a. Proposed Rule

    The term ``whistleblower'' is defined in Section 23(a)(7) of the

    CEA.\65\ Consistent with this language, Proposed Rule 165.2(p) defined

    a whistleblower as an individual who, alone or jointly with others,

    provides information to the Commission relating to a potential

    violation of the CEA. An entity or other non-natural person is not

    eligible to receive a whistleblower award. This definition tracks the

    statutory definition of a ``whistleblower,'' except that the Proposed

    Rule uses the term ``potential violation'' in order to make clear that

    the whistleblower anti-retaliation protections set forth in Section

    23(h) of the CEA do not depend on an ultimate adjudication, finding or

    conclusion that conduct identified by the whistleblower constituted a

    violation of the CEA.

    ---------------------------------------------------------------------------

    \65\ 7 U.S.C. 26(a)(7).

    ---------------------------------------------------------------------------

    Further, Proposed Rule 165.2(p) (and Proposed Rule 165.6(b)) would

    make clear that the anti-retaliation protections set forth in Section

    23(h) of the CEA apply irrespective of whether a whistleblower

    satisfies all the procedures and conditions to qualify for an award

    under the Commission's whistleblower program. Section 23(h)(1)(A) of

    the CEA prohibits employment retaliation against a whistleblower who

    provides information to the Commission (i) ``in accordance with this

    section,'' or (ii) ``in assisting in any investigation or judicial or

    administrative action of the Commission based upon or related to such

    information.'' The Commission interprets the statute as designed to

    extend the protections against employment retaliation delineated in

    Section 23(h)(1) to any individual who provides information to the

    Commission about potential violations of the CEA regardless of whether

    the person satisfies procedures and conditions necessary to qualify for

    an award under the Commission's whistleblower program.

    b. Comments

    The Commission received several comments regarding the definition

    of whistleblower. Two commenters urged

    [[Page 53182]]

    that the term whistleblower should include only individuals who provide

    information about potential violations of the commodities laws ``by

    another person.'' \66\ The Commission also received several comments

    regarding the anti-retaliation provision of the definition. One

    commenter asserted that the anti-retaliation provisions of Proposed

    Rules 165.2(p) and 165.6(b) could be interpreted to protect individuals

    who have violated criminal laws, and urged that the Commission clarify

    that companies are permitted ``to take adverse personnel actions

    against whistleblowers for any appropriate reason other than their

    whistleblower status.'' This same commenter suggested that the rules

    also should be clarified to state that filing a whistleblower report

    does not protect an individual from discipline or termination if the

    individual was involved in, was responsible for, or lied about the

    misconduct described in the report.\67\

    ---------------------------------------------------------------------------

    \66\ See letters from SIFMA/FIA and ABA.

    \67\ See letter from SIFMA/FIA.

    ---------------------------------------------------------------------------

    Another commenter was concerned about the potential for abuse by

    employees who might make frivolous whistleblower claims solely to avail

    themselves of the anti-retaliation provisions of Part 165 or to seek a

    chance to receive a potentially large award. This commenter believed

    that the Commission should impose additional requirements on persons

    entitled to whistleblower status and suggested that Proposed Rule

    165.2(p) be revised to specify that the anti-retaliation provision

    apply to a person who provides information: That is material to the

    claimed violation of the CEA; that has a basis in fact or knowledge

    (which must be articulated) rather than speculation; that is not based

    on information that is either publicly disseminated or which the

    employee should reasonably know is already known to the entity's board

    of directors or chief compliance officer, or to a court or the

    Commission or another governmental entity; and the provision of which

    does not result in the violation of a professional obligation,

    including the obligation to maintain such information in confidence.

    This commenter also suggested that the Commission deliver to an

    employee who has met the requisite criteria of a ``whistleblower'' a

    letter or statement indicating such status by reason of the information

    the employee provided.\68\ This commenter also contended that the

    information regarding ``a potential violation'' language in Proposed

    Rule 165.2(p) could be read to refer to future acts or omissions. As a

    result, the commenter encouraged the Commission to use ``another phrase

    (such as `claimed violation') and to add a definition of the term to

    further minimize the ambiguity.'' The commenter posited that the

    definition of the term should be further clarified to indicate that it

    does not include matters that are clearly stale (e.g., an alleged

    violation that occurred ten years ago). Two other commenters

    recommended that the rule exclude any individuals who engaged in the

    underlying misconduct from eligibility as a whistleblower.\69\ One

    commenter supported anti-retaliation protection of whistleblowers even

    if they do not qualify for an award.\70\ Another commenter suggested

    that the Commission should find that any entity that retaliates against

    a whistleblower commits ``a separate and independent violation'' of the

    commodity futures laws subjecting the entity to the maximum penalties

    for such violation provided for under the law, up to and including a

    delisting of the entity.\71\

    ---------------------------------------------------------------------------

    \68\ See letter from ABA.

    \69\ See letters from Association of Corporate Counsel (``ACC'')

    and FSR.

    \70\ See letter from POGO.

    \71\ See letter from NCCMP.

    ---------------------------------------------------------------------------

    c. Final Rule

    Upon consideration of the comments received, the Commission has

    decided to adopt Rule 165.2(p) as proposed. The anti-retaliation

    provisions reflect Congress's intent to implement anti-retaliation

    protections for whistleblowers who provide original information to the

    Commission. These anti-retaliation protections do not provide blanket

    immunity to whistleblowers from adverse employment actions by their

    employers; whistleblowers are protected only to the extent that the

    employer took the adverse employment action because ``of any lawful act

    done by the whistleblower'' in providing information to the Commission

    or in assisting the Commission in any related investigation or

    enforcement action.\72\ With respect to the commenter concern regarding

    potential bad faith reporting, Congress placed a procedural safeguard

    in the statute that advises whistleblowers that they can be prosecuted

    for making false statements to the Commission under 18 U.S.C. 1001.\73\

    This procedural safeguard will reduce the risk of meritless referrals.

    Moreover, whistleblowers are incentivized to provide referrals only if

    they believe those referrals have merit since they can only get an

    award if their referral leads to a successful enforcement action (see

    Rules 165.2(i) and 165.9.). Also as indicated above, several commenters

    addressed issues relating to eligibility and culpability of a

    whistleblower. Those issues are addressed in Rules 165.6 and 165.17,

    respectively.

    ---------------------------------------------------------------------------

    \72\ 7 U.S.C. 26(h)(1)(A).

    \73\ See Section 23(m) of the CEA, 7 U.S.C. 26(m). Such false

    statements also could be a violation of Section 9(a)(3) of the CEA,

    7 U.S.C. 13(a)(3), and could potentially be a violation of Section

    6(c)(2) of the CEA, 7 U.S.C. 9, 15. Therefore, a whistleblower who

    provides information to the Commission in violation of these

    sections would not be entitled to retaliation protection because his

    provision of information to the Commission would be in violation of

    law. See 7 U.S.C. 26(h)(1)(A).

    ---------------------------------------------------------------------------

    The Commission does not have the statutory authority to conclude

    that any entity that retaliates against a whistleblower commits a

    separate and independent violation of the CEA. Section 23(h)(1)(B)(i)

    clearly states that only an individual who alleges retaliation in

    violation of being a whistleblower may bring such a cause of action.

    Regarding Rule 165.2(p)(2), the Commission has made a slight

    modification. Pursuant to the change, in order to be considered a

    whistleblower for purposes of the anti-retaliation protections afforded

    by Section 23(h)(1)(A)(i) of the CEA, the whistleblower must possess a

    reasonable belief that the information the whistleblower provides

    relates to a possible violation of the CEA.

    C. Rule 165.3--Procedures for Submitting Original Information

    1. Proposed Rule

    The Commission proposed a two-step process for the submission of

    original information under the whistleblower award program. In general,

    the first step would require the submission of the standard form on

    which the information concerning potential violations of the CEA are

    reported. The second step would require the whistleblower to complete a

    unique form, signed under penalties of perjury (consistent with Section

    23(m) of the CEA), in which the whistleblower would be required to make

    certain representations concerning the veracity of the information

    provided and the whistleblower's eligibility for a potential award. The

    use of standardized forms will greatly assist the Commission in

    managing and tracking numerous tips from potential whistleblowers.

    Forms will also better enable the Commission to find common threads

    among tips and otherwise make better use of the information provided,

    and assist with the review of requests for payment under the

    whistleblower provisions. The purpose of requiring a sworn declaration

    is to help deter the

    [[Page 53183]]

    submission of false and misleading tips and the resulting inefficient

    use of the Commission's resources. The requirement would also mitigate

    the potential harm to companies and individuals resulting from false or

    spurious allegations of wrongdoing.

    As set forth in Proposed Rule 165.5, Commission staff may also

    request testimony and additional information from a whistleblower

    relating to the whistleblower's eligibility for an award.

    a. Form TCR and Instructions

    Subparagraph (a) of Proposed Rule 165.3 required the submission of

    information to the Commission on proposed Form TCR. The Form TCR,

    ``Tip, Complaint or Referral,'' and the instructions thereto, were

    designed to capture basic identifying information about a complainant

    and to elicit sufficient information to determine whether the conduct

    alleged suggests a violation of the CEA.

    b. Form WB-DEC and Instructions

    In addition to Form TCR, the Commission proposed in subparagraph

    (b) of Proposed Rule 165.3 to require that whistleblowers who wish to

    be considered for an award in connection with the information they

    provide to the Commission also complete and provide the Commission with

    proposed Form WB-DEC, ``Declaration Concerning Original Information

    Provided Pursuant to Section 23 of the Commodity Exchange Act.''

    Proposed Form WB-DEC would require a whistleblower to answer certain

    threshold questions concerning the whistleblower's eligibility to

    receive an award. The form also would contain a statement from the

    whistleblower acknowledging that the information contained in the Form

    WB-DEC, as well as all information contained in the whistleblower's

    Form TCR, is true, correct and complete to the best of the

    whistleblower's knowledge, information and belief. Moreover, the

    statement would acknowledge the whistleblower's understanding that the

    whistleblower may be subject to prosecution and ineligible for an award

    if, in the whistleblower's submission of information, other dealings

    with the Commission, or dealings with another authority in connection

    with a related action, the whistleblower knowingly and willfully made

    any false, fictitious, or fraudulent statements or representations, or

    used any false writing or document knowing that the writing or document

    contained any false, fictitious, or fraudulent statement or entry.

    In instances where information is provided by an anonymous

    whistleblower, proposed subparagraph (c) of Proposed Rule 165.3

    required that the whistleblower's identity must be disclosed to the

    Commission and verified in a form and manner acceptable to the

    Commission consistent with the procedure set forth in Proposed Rule

    165.7(c) prior to the Commission's payment of any award.

    The Commission proposed to allow two alternative methods of

    submission of Form TCRs and WB-DEC. A whistleblower would have the

    option of submitting a Form TCR electronically through the Commission's

    Web site, or by mailing or faxing the form to the Commission.

    Similarly, a Form WB-DEC could be submitted electronically, in

    accordance with instructions set forth on the Commission's Web site or,

    alternatively, by mailing or faxing the form to the Commission.

    c. Perfecting Whistleblower Status for Submissions Made Before

    Effectiveness of the Rules

    As previously discussed, Section 748(k) of the Dodd-Frank Act

    stated that information submitted to the Commission by a whistleblower

    after the date of enactment, but before the effective date of the

    Proposed Rules, retained the status of original information. The

    Commission has already received tips from potential whistleblowers

    after the date of enactment of the Dodd-Frank Act. Proposed Rule

    165.3(d) provided a mechanism by which whistleblowers who fall into

    this category could perfect their status as whistleblowers once the

    Final Rules are adopted. Subparagraph (d)(1) required a whistleblower

    who provided original information to the Commission in a format or

    manner other than a Form TCR to submit a completed Form TCR within one

    hundred twenty (120) days of the effective date of the Final Rules and

    to otherwise follow the procedures set forth in subparagraphs (a) and

    (b) of Proposed Rule 165.3. If a whistleblower provided the original

    information to the Commission in a Form TCR, subparagraph (d)(2) would

    require the whistleblower to submit Form WB-DEC within one hundred

    twenty (120) days of the effective date of the Final Rules in the

    manner set forth in subparagraph (b) of Proposed Rule 165.3.

    2. Comments

    The Commission received several comments regarding Proposed Rule

    165.3. A commenter advised the Commission that the rules as currently

    proposed are not ``user friendly'' and modifications must be made to

    both procedures and forms to facilitate disclosures, and to do so would

    minimize the risks that otherwise qualified applicants will be denied

    based on a technicality.\74\ Several commenters referenced Proposed

    Rule 165.3 while advocating internal reporting.\75\ They suggested that

    a whistleblower who reports internally prior to reporting to the

    Commission should be given one year to file an application; and that 90

    days to file Forms TCR and WB-DEC may not be sufficient time for a firm

    to assess a complex situation, and, therefore, the deadline should be a

    minimum of 90 days or such longer time as is reasonable.

    ---------------------------------------------------------------------------

    \74\ See letter from NWC.

    \75\ See letters from NSCP, ABA, and NCCMP.

    ---------------------------------------------------------------------------

    Another commenter suggested that, if documents are delivered

    directly to the Commission, then the representations on a Form TCR

    should be subject to penalty of perjury, similar to Form WB-DEC. This

    commenter also suggested that attorneys who assist clients in

    submitting anonymous claims should be required to review the client's

    information and certify to the Commission that the client can show

    ``particularized facts suggesting a reasonable probability that a

    violation has actually occurred or is occurring.'' This Commenter also

    stated that the 90-day deadline should be eliminated, but that if it is

    not eliminated the deadline should be at least 180 days.\76\

    ---------------------------------------------------------------------------

    \76\ See letter from ABA.

    ---------------------------------------------------------------------------

    3. Final Rule

    After consideration of the comments received on Proposed Rule

    165.3, the Commission has decided to adopt the rule with changes. In

    response to comments calling for the streamlining of process, and in

    the interest of harmonization with the SEC, the Commission has

    incorporated the substance of Form WB-DEC into both the Form TCR and

    WB-APP.\77\ The forms will be changed to advise potential

    whistleblowers (and their attorneys) that the forms must be completed

    under oath and subject to the penalty of perjury. Also, changes have

    been made to Rule 165.3 regarding the incorporation of the WB-DEC form

    into both the Form-TCR and Form WB-APP.

    ---------------------------------------------------------------------------

    \77\ Form WB-APP and the award application process are discussed

    below in section II.G.

    ---------------------------------------------------------------------------

    D. Rule 165.4--Confidentiality

    1. Proposed Rule

    Proposed Rule 165.4 summarized the confidentiality requirements set

    forth in Section 23(h)(2) of the CEA \78\ with

    [[Page 53184]]

    respect to information that could reasonably be expected to reveal the

    identity of a whistleblower. As a general matter, it is the

    Commission's policy and practice to treat all information obtained

    during its investigations as confidential and nonpublic. Disclosures of

    enforcement-related information to any person outside the Commission

    may only be made as authorized by the Commission and in accordance with

    applicable laws and regulations. Consistent with Section 23(h)(2), the

    Proposed Rule explains that the Commission will not reveal the identity

    of a whistleblower or disclose other information that could reasonably

    be expected to reveal the identity of a whistleblower, except under

    circumstances described in the statute and the rule.\79\ As is further

    explained below, there may be circumstances in which disclosure of

    information that identifies a whistleblower will be legally required or

    will be necessary for the protection of market participants.

    ---------------------------------------------------------------------------

    \78\ 7 U.S.C. 26(h)(2).

    \79\ Section 23(h)(2)(A) provides that the Commission shall not

    disclose any information, including that provided by the

    whistleblower to the Commission, which could reasonably be expected

    to reveal the identity of the whistleblower, except in accordance

    with the provisions of Section 552a of title 5, United States Code,

    unless and until required to be disclosed to a defendant or

    respondent in connection with a public proceeding instituted by the

    Commission or governmental organizations described in subparagraph

    (C).

    ---------------------------------------------------------------------------

    Subparagraph (a)(1) of the Proposed Rule authorized disclosure of

    information that could reasonably be expected to reveal the identity of

    a whistleblower when disclosure is required to a defendant or

    respondent in a public proceeding that the Commission files, or in

    another public action or proceeding filed by an authority to which the

    Commission is authorized to provide the information. For example, in a

    related action brought as a criminal prosecution by the Department of

    Justice, disclosure of a whistleblower's identity may be required in

    light of a criminal defendant's constitutional right to be confronted

    by the witnesses against him.\80\ Subparagraph (a)(2) would authorize

    disclosure to: The Department of Justice; another appropriate

    department or agency of the Federal Government acting within the scope

    of its jurisdiction; a registered entity, registered futures

    association, or SRO; a state attorney general in connection with a

    criminal investigation; any appropriate state department or agency

    acting within the scope of its jurisdiction; or a foreign futures

    authority.

    ---------------------------------------------------------------------------

    \80\ See U.S. Const. Amend. VI.

    ---------------------------------------------------------------------------

    Because many whistleblowers may wish to provide information

    anonymously, subparagraph (b) of the Proposed Rule, consistent with

    Section 23(d) of the CEA, states that anonymous submissions are

    permitted with certain specified conditions. Subparagraph (b) would

    require that anonymous whistleblowers who submit information to the

    Commission must follow the procedure in Proposed Rule 165.3(c) for

    submitting original information anonymously. Further, anonymous

    whistleblowers would be required to follow the procedures set forth in

    Proposed Rule 165.7(c) requiring that the whistleblower's identity be

    disclosed to the Commission and verified in a form and manner

    acceptable to the Commission prior to the Commission's payment of any

    award.

    The purpose of this requirement is to prevent fraudulent

    submissions and facilitate communication and assistance between the

    whistleblower and the Commission's staff. A whistleblower may be

    represented by counsel--whether submitting information anonymously or

    not.\81\ The Commission emphasizes that anonymous whistleblowers have

    the same rights and responsibilities as other whistleblowers under

    Section 23 of the CEA and the Final Rules, unless expressly exempted.

    ---------------------------------------------------------------------------

    \81\ See 7 U.S.C. 26(d)(1). Under the statute, however, an

    anonymous whistleblower seeking an award is required to be

    represented by counsel. 7 U.S.C. 26(d)(2).

    ---------------------------------------------------------------------------

    2. Comments

    The Commission received one comment regarding Proposed Rule 165.4.

    The commenter stated that the Commission has no authority to compel an

    attorney to reveal the identity of an anonymous whistleblower, and

    that, in cases where the Commission knows the whistleblower's identity,

    the rules should require the Commission to notify the whistleblower,

    and provide the whistleblower an opportunity to seek a protective

    order, whenever the whistleblower's identity may be subject to

    disclosure.\82\

    ---------------------------------------------------------------------------

    \82\ See letter from NWC.

    ---------------------------------------------------------------------------

    3. Final Rule

    The Commission is adopting Rule 165.4 as proposed. The rule tracks

    the provisions of the statute and identifies those instances where the

    Commission, in furtherance of its regulatory responsibilities, may

    provide information to certain delineated recipients.

    The Commission plans to work closely with whistleblowers, and their

    attorneys if they are represented, in an effort to take appropriate

    steps to maintain their confidentiality, consistent with the

    requirements of Section 23(h)(2).\83\ At the same time, however,

    Congress expressly authorized the Commission to disclose whistleblower-

    identifying information subject to the limitations and conditions set

    forth in Section 23(h)(2)(C) of the CEA. Accordingly, the Commission

    does not believe it would be consistent with either Congress's intent

    or the proper exercise of the Commission's enforcement responsibilities

    to require by rule that Commission staff notify a whistleblower prior

    to any authorized disclosure, and provide the whistleblower with an

    opportunity to seek a protective order.

    ---------------------------------------------------------------------------

    \83\ For example, the Commission is adding a question to our

    whistleblower submission form that asks whistleblowers to tell us if

    they are giving us any particular documents or other information in

    their submission that they believe could reasonably be expected to

    reveal their identity.

    ---------------------------------------------------------------------------

    E. Rule 165.5--Prerequisites to the Consideration of an Award

    1. Proposed Rule

    Proposed Rule 165.5 summarized the general prerequisites for

    whistleblowers to be considered for the payment of awards set forth in

    Section 23(b)(1) of the CEA. As set forth in the statute, subparagraph

    (a) states that, subject to the eligibility requirements in the

    Regulations, the Commission will pay an award or awards to one or more

    whistleblowers who voluntarily provide the Commission with original

    information that led to the successful resolution of a covered

    Commission judicial or administrative action or the successful

    enforcement of a related action by: the Department of Justice; an

    appropriate department or agency of the Federal Government acting

    within the scope of its jurisdiction; a registered entity, registered

    futures association or SRO; a state attorney general in connection with

    a criminal investigation; any appropriate state department or agency

    acting within the scope of its jurisdiction; or a foreign futures

    authority.

    Subparagraph (b) of Proposed Rule 165.5 emphasizes that, in order

    to be eligible, the whistleblower must have submitted to the Commission

    original information in the form and manner required by Proposed Rule

    165.3. The whistleblower must also provide the Commission, upon its

    staff's request, certain additional information, including:

    explanations and other assistance, in the manner and form that staff

    may request, so that the staff may evaluate the use of the information

    [[Page 53185]]

    submitted; all additional information in the whistleblower's possession

    that is related to the subject matter of the whistleblower's

    submission; and testimony or other evidence acceptable to the staff

    relating to the whistleblower's eligibility for an award. Subparagraph

    (b) of Proposed Rule 165.5 further requires that, to be eligible for an

    award, a whistleblower must, if requested by Commission staff, enter

    into a confidentiality agreement in a form acceptable to the

    Commission, including a provision that a violation of the

    confidentiality agreement may lead to the whistleblower's ineligibility

    to receive an award.

    2. Comments

    The Commission received comment on Proposed Rule 165.5 from one

    commenter.\84\ This commenter argued that the Dodd-Frank Act does not

    require or authorize a rule that requires a whistleblower to sign a

    confidentiality or non-disclosure agreement. This commenter reasoned

    that if a whistleblower files a claim and refuses to sign such an

    agreement it could impact the Commission's willingness to share

    information with the whistleblower during the investigation, or even to

    go forward with an enforcement action. Also, this commenter suggested

    that a whistleblower should be able to object to the actions of the

    Commission if the whistleblower believes the Commission is improperly

    handling an investigation, without fear of being disqualified from an

    award. Finally, this commenter argued that a whistleblower should not

    be required to sign a confidentiality agreement in case the

    whistleblower has clients who need to know about the whistleblower's

    underlying concerns. For example, if a whistleblower had clients that

    had funds in a company operating a Ponzi scheme, it would not be

    beneficial to the clients for the whistleblower to not tell the clients

    about the scheme.

    ---------------------------------------------------------------------------

    \84\ See letter from NWC.

    ---------------------------------------------------------------------------

    3. Final Rule

    After considering these comments, the Commission is adopting the

    rule as proposed. The rule tracks and summarizes the general

    prerequisites for a whistleblower to be considered for an award under

    Section 23(b)(1) of the CEA. In addition, the Commission does not share

    information regarding investigations or enforcement actions with

    individuals who provide tips.\85\ Requiring a whistleblower to sign a

    confidentiality agreement will serve to ensure that the entity being

    investigated is not made aware of the investigation prematurely. The

    Commission also has discretion in how it handles investigations and

    enforcement actions.\86\

    ---------------------------------------------------------------------------

    \85\ See, e.g., Rule 11.3, 17 CFR 11.3 (2011) (providing, in

    general, that ``[a]ll information and documents obtained during the

    course of an investigation, whether or not obtained pursuant to

    subpoena, and all investigative proceedings shall be treated as non-

    public by the Commission and its staff * * *.'').

    \86\ See, e.g., Appendix A to Part 11 of the Commission's Rules

    (``Informal Procedure Relating to the Recommendation of Enforcement

    Proceedings;'' providing that the Commission's Division of

    Enforcement, ``in its discretion, may inform persons who may be

    named in a proposed enforcement proceeding of the nature of the

    allegations pertaining to them.'').

    ---------------------------------------------------------------------------

    F. Rule 165.6--Whistleblowers Ineligible for an Award

    1. Proposed Rule

    Subparagraph (a) of Proposed Rule 165.6 specified the categories of

    individuals who are statutorily ineligible for an award under Section

    23 of the CEA. These include persons who are, or were at the time they

    acquired the original information, a member, officer, or employee of:

    The Commission; the Board of Governors of the Federal Reserve System;

    the Office of the Comptroller of the Currency; the Board of Directors

    of the Federal Deposit Insurance Corporation; the Director of the

    Office of Thrift Supervision; the National Credit Union Administration

    Board; the SEC; the Department of Justice; a registered entity; a

    registered futures association; an SRO; or a law enforcement

    organization. Further, Proposed Rule 165.6(a)(2) made clear that no

    award will be made to any whistleblower who is convicted of a criminal

    violation related to the judicial or administrative action for which

    the whistleblower otherwise could receive an award under Proposed Rule

    165.7.

    In order to prevent evasion of these exclusions, subparagraph

    (a)(4) of the Proposed Rule also provided that persons who acquire

    information from ineligible individuals are ineligible for an award.

    Consistent with Section 23(m) of the CEA, a whistleblower is ineligible

    if in his submission of information or application for an award, in his

    other dealings with the Commission, or in his dealings with another

    authority in connection with a related action he: Knowingly and

    willfully makes any false, fictitious, or fraudulent statement or

    representation, or uses any false writing or document, knowing that it

    contains any false, fictitious, or fraudulent statement or entry; or

    omits any material fact the absence of which would make any other

    statement or representation made to the Commission or any other

    authority misleading.

    Subparagraph (b) of Proposed Rule 165.6 reiterated that a

    determination that a whistleblower is ineligible to receive an award

    for any reason does not deprive the individual of the anti-retaliation

    protections set forth in Section 23(h)(1) of the CEA.

    2. Comments

    The Commission has received comments recommending that the

    Commission expand the list of persons ineligible to receive an award to

    individuals who fail to first report violations internally before

    reporting violations to the Commission.\87\ Some commenters have

    suggested that the only exception to a requirement of mandatory

    internal reporting for award eligibility should be when the

    whistleblower can prove that the employer's internal compliance system

    is inadequate.\88\ One commenter proposed that for an employer's

    internal compliance system to be effective it would have to provide

    for: (1) A complaint-reporting hotline; (2) a designated officer (such

    as the chief compliance officer), who is responsible for overseeing

    investigations of complaints, and who has access to senior executive

    officers with authority to respond to well-founded complaints; and (3)

    protection to an individual against retaliation for submitting a

    complaint.\89\ Another commenter similarly suggests that a

    whistleblower who fails to report internally should only be eligible to

    receive an award if he can demonstrate that the company's internal

    reporting program fails to comply with a federal standard (if

    applicable) or is inadequate (if there is no Federal standard).\90\

    This commenter further suggests that the Commission should afford an

    entity a reasonable opportunity (of at least 180 days) to address the

    alleged violation.\91\

    ---------------------------------------------------------------------------

    \87\ See letters from NSCP, EEI, ICI, ABA, and FSR.

    \88\ See letter from SIFMA/FIA.

    \89\ See letter from SIFMA/FIA.

    \90\ See letter from U.S. Chamber of Commerce.

    \91\ See letter from U.S. Chamber of Commerce.

    ---------------------------------------------------------------------------

    Commenters also suggest that a whistleblower who prematurely

    reports to the Commission be eligible for an award, but only at the

    lower end of the permissible range.\92\ Commenters also urge the

    Commission to deem ineligible for a whistleblower award individuals

    who: (1) Violate entity rules requiring that misconduct be reported

    internally; (2) falsely certify that they are not aware

    [[Page 53186]]

    of any misconduct; (3) refuse to cooperate with an entity's internal

    investigation; and (4) provide inaccurate or incomplete information or

    otherwise hinder an internal investigation.\93\ This commenter further

    suggests that a whistleblower who reports violations to an SRO should

    have the same eligibility for an award as a whistleblower who reports

    to the Commission.\94\ Another commenter commented that persons who

    have engaged in culpable conduct should not be eligible for awards.\95\

    This commenter suggested that Rule 165.6(a)(2) provide that a person

    will not be eligible for an award ``if he or she (or an entity whose

    liability is based substantially on conduct that the whistleblower

    directed, planned or initiated) has been convicted of a criminal

    violation (including entering into a plea agreement or entering a plea

    of nolo contendere), or enters into a cooperation, deferred

    prosecution, or non-prosecution agreement in connection with, a

    proceeding brought by the Commission, an SRO, or other regulator or

    government entity, which proceeding is related to a Commission action

    or a related action for which the whistleblower could otherwise receive

    an award.'' One commenter also suggested that the Commission should

    exclude wrong-doers who have participated in or facilitated the

    violation of the CEA from award eligibility.\96\ Another commenter

    suggested that culpable individuals, including in-house lawyers, and

    other compliance personnel should not be eligible for whistleblower

    awards.\97\ The Commission also received comment that the Commission

    follow the SEC's approach and exclude the spouses, parents, children or

    siblings of members of the agency to avoid the appearance of

    impropriety.\98\

    ---------------------------------------------------------------------------

    \92\ See letter from SIFMA/FIA.

    \93\ See letter from SIFMA/FIA.

    \94\ See letter from SIFMA/FIA.

    \95\ See letter from ABA.

    \96\ See letter from U.S. Chamber of Commerce.

    \97\ See letter from Hunton & Williams LLP on behalf of Working

    Group of Commercial Energy Firms (``Working Group'') at 2.

    \98\ See letter from FSR.

    ---------------------------------------------------------------------------

    The Commission also received a number of other miscellaneous

    comments. One commenter suggested that the exclusion should apply to

    the information, and not just persons, by suggesting the Commission

    exclude from award eligibility information reported after an employer

    has initiated an investigation.\99\ The Commission also received a

    comment suggesting that the Rule require use of internal procedures as

    a condition for receiving an award, because such a condition would not

    impinge on a whistleblower's right to contact the Commission or affect

    the anti-retaliation provisions.\100\ This commenter also suggested

    that the Commission revise the rule to include potential exclusions of

    foreign persons.

    ---------------------------------------------------------------------------

    \99\ See letter from U.S. Chamber of Commerce.

    \100\ See letter from FSR.

    ---------------------------------------------------------------------------

    3. Final Rule

    The Commission has considered each of the comments received, and

    has decided to adopt the rule with minor changes. With respect to the

    specific internal reporting issue, after considering the comments

    received, the Commission has concluded not to amend the rule to make

    ineligible any whistleblowers who do not participate in internal

    corporate compliance programs.\101\ The Commission will, however,

    provide whistleblowers with incentives to report internally. The

    Commission has decided to adopt Rule 165.6 with a minor change to make

    ineligible members or officers of any foreign regulatory authority or

    law enforcement organization, extrapolating from Section 23(c)(2)(i)

    and (vi) of the Dodd-Frank Act the category making appropriate

    regulatory agencies and law enforcement organizations ineligible.\102\

    The Commission has also made explicit in Rule 165.6(a)(8) the

    ineligibility of any whistleblower who acquired the original

    information the whistleblower gave the Commission from any other person

    with the intent to evade any provision of the Final Rules.

    ---------------------------------------------------------------------------

    \101\ See also discussion below in Part II.S.

    \102\ See Rule 165.6(a)(6), (7).

    ---------------------------------------------------------------------------

    G. Rule 165.7--Procedures for Award Applications and Commission Award

    Determinations

    1. Proposed Rule

    Proposed Rule 165.7 described the steps a whistleblower would be

    required to follow in order to make an application for an award in

    relation to a Commission covered judicial or administrative action or

    related action. In addition, the rule described the Commission's

    proposed claims review process.

    In regard to covered actions, the proposed process would begin with

    the publication of a ``Notice of a Covered Action'' (``Notice'') on the

    Commission's Web site. Whenever a covered judicial or administrative

    action brought by the Commission results in the imposition of monetary

    sanctions exceeding $1,000,000, the Commission will cause a Notice to

    be published on the Commission's Web site subsequent to the entry of a

    final judgment or order in the action that by itself, or collectively

    with other judgments or orders previously entered in the action,

    exceeds the $1,000,000 threshold. The Commission's Proposed Rule

    required claimants to file their claim for an award within sixty (60)

    days of the date of the Notice.

    In regard to related actions, a claimant would be responsible for

    tracking the resolution of the related action. The Commission's

    Proposed Rule required claimants to file their claim for an award in

    regard to a related action within sixty (60) days after monetary

    sanctions were imposed in the related action. A claimant's failure to

    timely file a request for a whistleblower award would bar that

    individual from later seeking a recovery.\103\

    ---------------------------------------------------------------------------

    \103\ See, e.g., Yuen v. United States, 825 F.2d 244 (9th Cir.

    1987) (taxpayer barred from recovery due to failure to timely file a

    written request for refund).

    ---------------------------------------------------------------------------

    Subparagraph (b) of Proposed Rule 165.7 described the procedure for

    making a claim for an award. Specifically, a claimant would be required

    to submit a claim for an award on proposed Form WB-APP (``Application

    for Award for Original Information Provided Pursuant to Section 23 of

    the Commodity Exchange Act''). Proposed Form WB-APP, and the

    instructions thereto, would elicit information concerning a

    whistleblower's eligibility to receive an award at the time the

    whistleblower filed his claim. The form would also provide an

    opportunity for the whistleblower to ``make his case'' for why he is

    entitled to an award by describing the information and assistance he

    has provided and its significance to the Commission's successful

    action.\104\

    ---------------------------------------------------------------------------

    \104\ See discussion of Proposed Rule 165.9 for a non-exhaustive

    list of factors the Commission preliminarily believes it will

    consider in determining award amounts.

    ---------------------------------------------------------------------------

    Subparagraph (b) of Proposed Rule 165.7 provided that a claim on

    Form WB-APP, including any attachments, must be received by the

    Commission within sixty (60) calendar days of the date of the Notice or

    sixty (60) calendar days of the date of the imposition of the monetary

    sanctions in the related action, the trigger date depending upon which

    action is the basis for the claimant's award request.

    Subparagraph (c) included award application procedures for a

    whistleblower who submitted original information to the Commission

    anonymously. Whistleblowers who submitted original information

    anonymously, but who make a claim for a whistleblower award on a

    disclosed basis, are required to disclose their identity on the Form

    WB-APP and include with the Form WB-APP a

    [[Page 53187]]

    signed and completed Form WB-DEC. Whistleblowers who submitted

    information anonymously, and make a claim for a whistleblower award on

    an anonymous basis, must be represented by counsel and must provide

    their counsel with a completed and signed Form WB-DEC by no later than

    the date upon which the counsel submits to the Commission the

    whistleblower's Form WB-APP. In addition, whistleblower's counsel must

    submit with the Form WB-APP a separate Form WB-DEC certifying that the

    counsel has verified the whistleblower's identity, has reviewed the

    whistleblower's Form WB-DEC for completeness and accuracy, will retain

    the signed original of the whistleblower's Form WB-DEC in counsel's

    records, and will produce the whistleblower's Form WB-DEC upon request

    of the Commission's staff. Proposed Rule 165.7(c) made explicit that

    regardless of whether the whistleblower made an award application on a

    disclosed or anonymous basis, the whistleblower's identity must be

    verified in a form and manner that is acceptable to the Commission

    prior to the payment of any award.

    Subparagraph (d) of Proposed Rule 165.7 described the Commission's

    claims review process. The claims review process would begin upon the

    expiration of the time for filing any appeals of the Commission's

    judicial or administrative action and the related action(s), or, where

    an appeal has been filed, after all appeals in the action or related

    action(s) have been concluded.

    Under the proposed process, the Commission would evaluate all

    timely whistleblower award claims submitted on Form WB-APP. In

    connection with this process, the Commission could require that

    claimants provide additional information relating to their eligibility

    for an award or satisfaction of any of the conditions for an award, as

    set forth in Proposed Rule 165.5(b). Following that evaluation, the

    Commission would send any claimant a determination setting forth

    whether the claim is allowed or denied and, if allowed, setting forth

    the proposed award percentage amount.

    2. Comments

    One commenter stated that Proposed Rule 165.7 is unworkable, and

    that whistleblowers cannot be expected to follow the Commission's Web

    site and understand that a published sanction on the web site is

    related to the information provided by the whistleblower.\105\ This

    commenter also suggested that when the Commission believes it will

    obtain a sanction, discussions should be initiated with the

    whistleblower to negotiate the proper percentage of award because to do

    so would reduce administrative costs, facilitate cooperation between

    the Commission and the whistleblower, and expedite the payment of

    awards.\106\ This commenter supported this assertion by referencing the

    qui tam procedure under the False Claims Act.\107\ Commenters suggested

    that the Commission add or revise rules to incorporate recommendations

    made by the SEC Office of the Inspector General (``OIG'') in its audit

    of the SEC's previous whistleblower award program.\108\ One commenter

    suggested that the Commission examine ways to notify whistleblowers of

    the status of their award without releasing confidential information

    during the course of an investigation.\109\ Another commenter stated

    that Proposed Rule 165.7 unduly burdens and creates hurdles for

    whistleblowers by requiring that they notify the Commission of their

    claim for an award. This commenter argued that because the Commission

    handles enforcement actions and knows which individuals made

    submissions, the Commission should notify potential claimants that

    their claim to an award, if any, has ripened.\110\

    ---------------------------------------------------------------------------

    \105\ See letter from NWC.

    \106\ See letter from NWC.

    \107\ See letter from NWC.

    \108\ See letters from NWC, POGO; see also SEC OIG ``Assessment

    of the SEC's Bounty Program,'' Mar. 29, 2010, Report No. 474.

    \109\ See letter from POGO.

    \110\ See letter from TAF.

    ---------------------------------------------------------------------------

    Similarly, another commenter suggested that the Commission should

    streamline the whistleblower application process by adopting a process

    similar to the whistleblower process adopted by the IRS, which another

    commenter claims is more user-friendly and efficient. This commenter

    contended that it is an onerous condition to require a whistleblower to

    track on the Commission's Web site the disposition of the covered

    action and that the 60-day period is too narrow a window to allow a

    whistleblower to complete an application for an award.\111\

    ---------------------------------------------------------------------------

    \111\ See letter from NCCMP.

    ---------------------------------------------------------------------------

    3. Final Rule

    After considering the comments received, the Commission has decided

    to adopt Rule 165.7 with changes. First, the Commission has decided to

    increase the period for claimants to file their claim for an award from

    sixty (60) days to ninety (90) days. This additional time should

    provide claimants with a better opportunity to review the Commission's

    Web site and file an application following the publication of a Notice.

    In the Commission's view, this 90-day period strikes an appropriate

    balance between competing whistleblower interests--allowing all

    potential whistleblowers a reasonable opportunity to periodically

    review the Commission's Web site and to file an application, on the one

    hand, while providing finality to the application period so that the

    Commission can begin the process of assessing any applications and

    making a timely award to any qualifying whistleblowers, on the other

    hand.

    Second, in light of comments that the Commission simplify the WB-

    APP form, the Commission has made optional Section G (``Entitlement to

    Award) of the form, which provides whistleblowers with the opportunity

    to ``[e]xplain the basis for the whistleblower's belief that the

    whistleblower is entitled to an award'' and to ``[p]rovide any

    additional information the whistleblower think may be relevant in light

    of the criteria for determining the amount of an award.'' As commenters

    stated, when a whistleblower has worked closely with the staff on a

    matter, requiring that whistleblower to furnish a submission explaining

    the degree and value of his or her assistance may be unnecessary. At

    the same time, such a whistleblower--or other claimants who have not

    worked as closely with the staff and wish to advocate the value of

    their assistance--should have the opportunity to do so. The Commission

    has determined not to make any further modifications to the form,

    however, because the remaining information that the Commission requests

    is in its view necessary to provide a sufficient record for a full and

    fair consideration of the claimant's application (and, if a petition

    for review is filed, so that the court of appeals has a sufficient

    record to conduct a review).

    The Commission has decided not to eliminate the Notice or to

    otherwise model the procedures after those employed in the qui tam

    context. The qui tam context is substantially different from the

    Commission's situation because qui tam actions necessarily involve one

    or more known individuals with whom the Department of Justice will have

    worked. By contrast, in enforcement actions that the Commission

    institutes and litigates (based in part on information and assistance

    from one or more whistleblowers), there may be one whistleblower with

    whom the Commission has worked closely, but there may be other

    claimants who have

    [[Page 53188]]

    a potential basis for award eligibility as well. The Commission's

    procedures must provide due process to all potential claimants and

    accordingly cannot be restricted by the happenstance that some

    claimants worked more closely with staff. For that reason, the

    Commission believes the ``Notice of Covered Action'' procedure provides

    the best mechanism to provide notice to all whistleblower claimants who

    may have contributed to the action's success.\112\

    ---------------------------------------------------------------------------

    \112\ The SEC takes the same approach to this issue. See SEC

    Rule 240.21F-10(a).

    ---------------------------------------------------------------------------

    H. Rule 165.8--Amount of Award

    1. Proposed Rule

    If all conditions are met, Proposed Rule 165.8 provided that the

    whistleblower awards shall be in an aggregate amount equal to between

    10 and 30 percent, in total, of what has been collected of the monetary

    sanctions imposed in the Commission's action or related actions. This

    range is specified in Section 23(b)(1) of the CEA. Where multiple

    whistleblowers are entitled to an award, subparagraph (b) stated that

    the Commission will independently determine the appropriate award

    percentage for each whistleblower, but total award payments, in the

    aggregate, will equal between 10 and 30 percent of the monetary

    sanctions collected either in the Commission's action or a related

    action (but not both the Commission's action and the related action).

    2. Comments

    The Commission received one comment on this Proposed Rule. The

    commenter, a United States Senator, suggested that the Commission place

    reasonable monetary limits on awards to protect against inappropriate

    monetary incentives while still encouraging potential whistleblowers to

    come forward. This commenter also suggested that the Commission place

    reasonable limits on amounts of funds that can be awarded to any single

    whistleblower in any one matter.\113\ This commenter further suggested

    that the Commission provide financial incentives to whistleblowers who

    report to their employers' internal compliance programs, which will

    give the company an earlier opportunity to address potential problems

    and prevent further harm.\114\

    ---------------------------------------------------------------------------

    \113\ See letter from Senator Carl Levin.

    \114\ See letter from Senator Carl Levin.

    ---------------------------------------------------------------------------

    3. Final Rule

    After considering the comment received, the Commission is adopting

    Rule 165.8 as proposed because it follows the statutory requirements.

    Paragraph (b) of Section 23 of the CEA states that the Commission will

    independently determine the appropriate award percentage for each

    whistleblower, but total award payments, in the aggregate, will equal

    between 10 and 30 percent of the monetary sanctions collected in the

    Commission's action or any related action. The Commission's Final Rule

    tracks this provision. Thus, for example, one whistleblower could

    receive an award of 25 percent of the collected sanctions, and another

    could receive an award of 5 percent, but they could not each receive an

    award of 30 percent. As the Commission noted in the Proposed Rule,

    because the Commission anticipates that the timing of award

    determinations and the value of a whistleblower's contribution could be

    different for the Commission's action and for related actions, the Rule

    would provide that the percentage awarded in connection with a

    Commission action may differ from the percentage awarded in related

    actions. But, in any case, the amounts would, in total, fall within the

    statutory range of 10 to 30 percent. As to the suggestion that the

    Commission use its discretion to avoid giving excessive awards, the

    Commission notes that the statute requires that the Commission give an

    award of a minimum of 10 percent of the amount collected regardless of

    the overall size of the resultant award, and the Commission does not

    have discretion to reduce that statutory minimum.\115\

    ---------------------------------------------------------------------------

    \115\ See discussion below, in Part II.S., regarding Internal

    Reporting and Harmonization.

    ---------------------------------------------------------------------------

    I. Rule 165.9--Criteria for Determining Amount of Award

    1. Proposed Rule

    Assuming that all of the conditions for making an award to a

    whistleblower have been satisfied, Proposed Rule 165.9 set forth the

    criteria that the Commission would take into consideration in

    determining the amount of the award. Subparagraphs (a)(1) through (3)

    of the Proposed Rule recited three criteria that Section 23(c)(1)(B) of

    the CEA requires the Commission to consider, and subparagraph (a)(4)

    adds a fourth criterion based upon the discretion given to the

    Commission to consider ``additional relevant factors'' in determining

    the amount of an award.

    Subparagraph (a)(1) requires the Commission to consider the

    significance of the information provided by a whistleblower to the

    success of the Commission action or related action. Subparagraph (a)(2)

    requires the Commission to consider the degree of assistance provided

    by the whistleblower and any legal representative of the whistleblower

    in the Commission action or related action. Subparagraph (a)(3)

    requires the Commission to consider the programmatic interest of the

    Commission in deterring violations of the CEA by making awards to

    whistleblowers that provide information that led to successful

    enforcement of covered judicial or administrative actions or related

    actions. Subparagraph (a)(4) would permit the Commission to consider

    whether an award otherwise enhances the Commission's ability to enforce

    the CEA, protect customers, and encourage the submission of high

    quality information from whistleblowers.

    The Commission anticipates that the determination of award amounts

    pursuant to subparagraphs (a)(1)-(4) will involve highly individualized

    review of the circumstances surrounding each award. To allow for this,

    the Commission preliminarily believed that the four criteria afford the

    Commission broad discretion to weigh a multitude of considerations in

    determining the amount of any particular award. Depending upon the

    facts and circumstances of each case, some of the considerations may

    not be applicable or may deserve greater weight than others.

    The permissible Commission considerations include, but are not

    limited to:

    The character of the enforcement action including whether

    its subject matter is a Commission priority, whether the reported

    misconduct involves regulated entities or fiduciaries, the type of CEA

    violations, the age and duration of misconduct, the number of

    violations, and the isolated, repetitive, or ongoing nature of the

    violations;

    The dangers to customers or others presented by the

    underlying violations involved in the enforcement action including the

    amount of harm or potential harm caused by the underlying violations,

    the type of harm resulting from or threatened by the underlying

    violations, and the number of individuals or entities harmed;

    The timeliness, degree, reliability, and effectiveness of

    the whistleblower's assistance;

    The time and resources conserved as a result of the

    whistleblower's assistance;

    Whether the whistleblower encouraged or authorized others

    to

    [[Page 53189]]

    assist the staff who might not have otherwise participated in the

    investigation or related action;

    Any unique hardships experienced by the whistleblower as a

    result of his or her reporting and assisting in the enforcement action;

    The degree to which the whistleblower took steps to

    prevent the violations from occurring or continuing;

    The efforts undertaken by the whistleblower to remediate

    the harm caused by the violations including assisting the authorities

    in the recovery of the fruits and instrumentalities of the violations;

    Whether the information provided by the whistleblower

    related to only a portion of the successful claims brought in the

    covered judicial or administrative action or related action; \116\ and

    ---------------------------------------------------------------------------

    \116\ As described elsewhere in these rules, if the information

    provided by a whistleblower relates to only a portion of a

    successful covered judicial or administrative action or related

    action, the Commission proposes to look to the entirety of the

    action (including all defendants or respondents, all claims, and all

    monetary sanctions obtained) in determining whether the

    whistleblower is eligible for an award and the total dollar amount

    of sanctions on which the whistleblower's award will be based. Under

    subparagraph (a) of Proposed Rule 165.9, the fact that a

    whistleblower's information related to only a portion of the overall

    action would be a factor in determining the amount of the

    whistleblower's award. Thus, if the whistleblower's information

    supported only a small part of a larger action, that would be a

    reason for making an award based upon a smaller percentage amount

    than otherwise would have been awarded.

    ---------------------------------------------------------------------------

    The culpability of the whistleblower, including whether

    the whistleblower acted with scienter, both generally and in relation

    to others who participated in the misconduct.

    These considerations are not listed in order of importance nor are

    they intended to be all-inclusive or to require a specific

    determination in any particular case.

    Finally, subparagraph (b) to Proposed Rule 165.9 reiterated the

    statutory prohibition in Section 23(c)(1)(B)(ii) of the CEA from taking

    into consideration the balance of the Fund when making an award

    determination.

    2. Comments

    The Commission received comment that the Rule should expressly

    permit the Commission to deny an award when it determines that payment

    of an award would be against public policy.\117\ One commenter, a

    Senator, also expressed concern that excessive monetary incentives may

    lead to misreporting causing investigative waste.\118\ The Senator also

    suggested that the Commission should exercise discretion afforded the

    Commission in Section 23(c)(1)(A) to reasonably limit the amount that

    may be awarded to a single whistleblower in any one matter.

    ---------------------------------------------------------------------------

    \117\ See letter from ABA.

    \118\ See letter from Senator Carl Levin.

    ---------------------------------------------------------------------------

    3. Final Rule

    The Commission notes that the SEC, in promulgating its own final

    whistleblower rules, added two additional discretionary factors to

    consider in making award amount decisions: (1) ``whether the

    whistleblower unreasonably delayed reporting the securities violations

    (SEC Rule 240.21F-6(b)(2))''; and (2) whether the whistleblower

    interfered or hindered internal compliance and reporting systems (SEC

    Rule 240.21F-6(b)(3)). The Commission has amended the Rule to add such

    factors in the interest of increasing transparency regarding the

    Commission's award determination process, and to be consistent with the

    statutory mandate in Section 23(c)(1)(B)(IV) of the CEA that the

    Commission establish additional relevant factors per rule or

    regulation. In addition, with respect to the Senator's comment, the

    Rule now affords the Commission discretion regarding award

    determinations to take into consideration ``[p]otential adverse

    incentives from oversize awards''.\119\

    ---------------------------------------------------------------------------

    \119\ Rule 165.9(a)(5).

    ---------------------------------------------------------------------------

    J. Rule 165.10--Contents of Record for Award Determinations

    In order to promote transparency and consistency, and also to

    preserve a clear record for appellate review (under Proposed Rule

    165.13) of Commission award determinations (under Proposed Rule 165.7),

    Proposed Rule 165.10 set forth the contents of record for award

    determinations relating to covered judicial or administrative actions

    or related actions. Under the Proposed Rule, the record shall include:

    required forms the whistleblower submits to the Commission, including

    related attachments; other documentation provided by the whistleblower

    to the Commission; the complaint, notice of hearing, answers and any

    amendments thereto; the final judgment, consent order, or

    administrative speaking order; the transcript of the related

    administrative hearing or civil injunctive proceeding, including any

    exhibits entered at the hearing or proceeding; and any other documents

    that appear on the docket of the proceeding. Under the Proposed Rule,

    the record shall also include statements by litigation staff to the

    Commission regarding the significance of the information provided by

    the whistleblower to the success of the covered judicial or

    administrative action or related action; and the degree of assistance

    provided by the whistleblower and any legal representative of the

    whistleblower in a covered judicial or administrative action or related

    action.

    However, Proposed Rule 165.10(b) explicitly stated that the record

    upon which the award determination under Proposed Rule 165.7 shall be

    made shall not include any Commission pre-decisional or internal

    deliberative process materials related to the Commission's or its

    staff's determinations: (1) To file or settle the covered judicial or

    administrative action; and/or (2) whether, to whom and in what amount

    to make a whistleblower award. Further, the record upon which the award

    determination under Proposed Rule 165.7 shall be made shall not include

    any other entity's pre-decisional or internal deliberative process

    materials related to its or its staff's determination to file or settle

    a related action.

    The Commission did not receive any comments on the contents of

    record for award determinations. The Commission has considered the

    issue and has decided to adopt Rule 165.10 as proposed, with two

    modifications intended to improve clarity. First, the Final Rule

    clarifies that the record shall not include documents protected under

    the attorney-client privilege or the attorney work-product privilege.

    Second, the ``statements by litigation staff'' provision has been

    simplified to include ``[s]worn declarations (including attachments)

    from the Commission's Division of Enforcement staff regarding any

    matters relevant to the award determination.''

    K. Rule 165.11--Awards Based Upon Related Actions

    Proposed Rule 165.11 provided that the Commission, or its delegate,

    may determine an award based on amounts collected in related actions

    brought by appropriate Federal or state agencies, registered entities,

    or SROs rather than on the amount collected in a covered judicial or

    administrative action. Regardless of whether the Commission's award

    determination is based on the Commission's covered judicial or

    administrative action or a related action or actions, Rule 165.7 sets

    forth the procedures for whistleblower award applications and

    Commission award determinations.

    The Commission received one comment regarding awards based upon

    related actions. The commenter suggested that the Commission should

    remove the potential for a whistleblower to recover from both the

    Commission

    [[Page 53190]]

    and the SEC for providing each agency with the same information. This

    commenter noted that the SEC will not make an award for a related

    action, and that the Commission's provisions should be similar.\120\

    ---------------------------------------------------------------------------

    \120\ See letter from FSR.

    ---------------------------------------------------------------------------

    The Commission has considered the comment and has decided to adopt

    Rule 165.11 as proposed, with one modification. Rule 165.11 tracks

    Section 23(a)(5) of the CEA, and the payment of awards on related

    actions is not within in the discretion of the Commission. Rule

    165.11(a)(5) adds ``[a] foreign futures authority'' to the list of

    authorities whose judicial or administrative actions could potentially

    qualify as a ``related action.'' \121\

    ---------------------------------------------------------------------------

    \121\ See 7 U.S.C. 26(a)(5), 26(h)(2)(C)(i)(VI).

    ---------------------------------------------------------------------------

    L. Rule 165.12--Payment of Awards From the Fund, Financing Customer

    Education Initiatives, and Deposits and Credits to the Fund

    1. Proposed Rule

    Proposed Rule 165.12 sets forth Commission procedures with respect

    to the Fund to pay whistleblower awards, fund customer education

    initiatives, and maintain appropriate amounts in the Fund.

    Proposed Rule 165.12(c) provides that the Commission shall

    undertake and maintain customer education initiatives. The initiatives

    shall be designed to help customers protect themselves against fraud or

    other violations of the CEA, or the rules or regulations thereunder.

    The Commission shall fund the customer education initiatives, and may

    utilize funds deposited into the Fund during any fiscal year in which

    the beginning (October 1) balance of the Fund is greater than

    $10,000,000.

    The Commission limits discretion to finance customer education

    initiatives to fiscal years in which the beginning (October 1) balance

    of the Fund is greater than $10,000,000 in order to limit the

    possibility that spending on customer education initiatives may

    inadvertently result in the Commission operating the Fund in a deficit

    and thereby delay award payments to whistleblowers.

    2. Comments

    The Commission received one comment that suggested Fund amounts be

    used to educate the public about the rights of whistleblowers. The

    comment suggests that the Commission publish materials that companies

    can distribute to their employees that are simple and easy to

    understand informing them of their rights as a potential

    whistleblower.\122\ The Commission did not receive any comments

    regarding the Commission's delegation of authority to the Office of the

    Executive Director.

    ---------------------------------------------------------------------------

    \122\ See letter from NCCMP.

    ---------------------------------------------------------------------------

    3. Final Rule

    The Commission has considered the comment received regarding the

    use of the Fund. The Commission has established a working group to make

    suggestions regarding customer education initiatives. The Commission

    has decided to adopt Rule 165.12 with revisions. Specifically, the

    Final Rule includes revisions to reflect the Commission's intent to

    undertake and maintain customer education initiatives through an Office

    of Consumer Outreach. Because Rule 165.12 is a rule of the Commission's

    ``organization, procedure, or practice,'' the Commission is not

    presenting these revisions for notice and comment.\123\

    ---------------------------------------------------------------------------

    \123\ See 5 U.S.C. 553.

    ---------------------------------------------------------------------------

    M. 165.13--Appeals

    1. Proposed Rule

    Section 23(f) of the CEA provided for rights of appeal of Final

    Orders of the Commission with respect to whistleblower award

    determinations.\124\ Subparagraph (a) of Proposed Rule 165.13 tracks

    this provision and describes claimants' rights to appeal. Claimants may

    appeal any Commission final award determination, including whether, to

    whom, or in what amount to make whistleblower awards, to an appropriate

    court of appeals within thirty (30) days after the Commission's final

    order of determination.

    ---------------------------------------------------------------------------

    \124\ See Section 23(f) of the CEA, 7 U.S.C. 26(f).

    ---------------------------------------------------------------------------

    Subparagraph (b) of Proposed Rule 165.13 designates the materials

    that shall be included in the record on any appeal. Those materials

    include: The Contents of Record for Award Determinations, as set forth

    in Proposed Rule 165.10, and any Final Order of the Commission, as set

    forth in Rule 165.7(e).

    2. Comments

    The Commission received one comment regarding appeals.\125\ This

    commenter suggested that a whistleblower who provides information to

    the Commission that the Commission subsequently decides not to pursue

    should have the right to appeal to the Commission's Office of the

    Inspector General the decision not to pursue. This commenter reasons

    that otherwise legitimate claims that could expose violations could be

    dismissed without appropriate investigation.

    ---------------------------------------------------------------------------

    \125\ See letter from NCCMP.

    ---------------------------------------------------------------------------

    3. Final Rule

    After considering the comment received, the Commission has decided

    to adopt Rule 165.13 as proposed. The Final Rule tracks Section 23(f)

    of the CEA, which states that appeals of Commission decisions regarding

    whistleblower awards may be made to the appropriate U.S. Circuit Court

    of Appeals. However, although Section 23(f) provides for appeals of

    Commission determinations of whether, to whom, or in what amount to

    make an award, it does not grant any right to appeal the Commission's

    prosecutorial discretion, including the Commission's decisions to: open

    or close an investigation; file an enforcement action, including the

    Commission's determination of the violations charged; and settling an

    enforcement action.

    N. Rule 165.14--Procedures Applicable to the Payment of Awards

    1. Proposed Rule

    Proposed Rule 165.14 addressed the timing for payment of an award

    to a whistleblower. Any award made pursuant to the rules would be paid

    from the Fund established by Section 23(g) of the CEA.\126\

    Subparagraph (a) provided that a recipient of a whistleblower award

    will be entitled to payment on the award only to the extent that a

    monetary sanction is collected in the covered judicial or

    administrative action or in a related action upon which the award is

    based. This requirement is derived from Section 23(b)(1) of the

    CEA,\127\ which provides that an award is based upon the monetary

    sanctions collected in the covered judicial or administrative action or

    related action.

    ---------------------------------------------------------------------------

    \126\ 7 U.S.C. 26(g).

    \127\ 7 U.S.C. 26(b)(1).

    ---------------------------------------------------------------------------

    Subparagraph (b) stated that any payment of an award for a monetary

    sanction collected in a covered judicial or administrative action shall

    be made within a reasonable period of time following the later of

    either the completion of the appeals process for all whistleblower

    award claims arising from the covered judicial or administrative

    action, or the date on which the monetary sanction is collected.

    Likewise, the payment of an award for a monetary sanction collected in

    a related action shall be made within a reasonable period of time

    following the later of either the completion of the appeals process for

    all whistleblower award claims arising from the related action, or the

    date on which the monetary sanction is collected. This

    [[Page 53191]]

    provision is intended to cover situations where a single action results

    in multiple whistleblowers claims. Under this scenario, if one

    whistleblower appeals a Final Order of the Commission relating to a

    whistleblower award determination, then the Commission would not pay

    any awards in the action until that whistleblower's appeal has been

    concluded, because the disposition of that appeal could require the

    Commission to reconsider its determination and thereby affect all

    payments for that covered judicial or administrative action or related

    action.

    Subparagraph (c) of Proposed Rule 165.14 described how the

    Commission will address situations where there are insufficient amounts

    available in the Fund to pay the entire amount of an award to a

    whistleblower or whistleblowers within a reasonable period of time from

    when payment should otherwise be made. In this situation, the

    whistleblower or whistleblowers will be paid when amounts become

    available in the Fund, subject to the terms set forth in proposed

    subparagraph (c). Under proposed subparagraph (c), where multiple

    whistleblowers are owed payments from the Fund based on awards that do

    not arise from the same Notice or resolution of a related action,

    priority in making payment on these awards would be determined based

    upon the date that the Final Order of the Commission is made. If two or

    more of these Final Orders of the Commission are entered on the same

    date, then those whistleblowers owed payments will be paid on a pro

    rata basis until sufficient amounts become available in the Fund to pay

    their entire payments. Under proposed subparagraph (c)(2), where

    multiple whistleblowers are owed payments from the Fund based on awards

    that arise from the same Notice or resolution of a related action, they

    would share the same payment priority and would be paid on a pro rata

    basis until sufficient amounts become available in the Fund to pay

    their entire payments.

    2. Comments and Final Rule

    The Commission did not receive any comments regarding procedures

    applicable to the payment of awards. The Commission is adopting Rule

    165.14 as proposed. The Final Rule tracks the relevant provisions of

    Section 23 of the CEA.

    O. Rule 165.15--Delegations of Authority

    Proposed Rule 165.15 included the Commission's delegations to the

    Executive Director to take certain actions to carry out this Part 165

    of the Rules and the requirements of Section 23(g) of CEA.

    Specifically, Proposed Rule 165.15 delegated authority to the Executive

    Director, or a designee, upon the concurrence of the General Counsel

    and the Director of the Commission's Division of Enforcement, to make

    both deposits into and award payments out of the Fund.

    The Commission did not receive any comments regarding delegations

    of authority. The Commission is adopting Rule 165.15 with revisions to

    address internal Commission organizational and procedural issues.

    Specifically, the Final Rule includes revisions to reflect the

    Commission's delegation to a Whistleblower Office the authority to

    administer the Commission's whistleblower program. The Final Rule also

    provides that the Commission will exercise its authority to make

    whistleblower award determinations through a delegation of authority to

    a panel that shall be composed of three of the Commission's Offices or

    Divisions. Under Rule 165.15, the Commission's Executive Director will

    select the members of the ``Whistleblower Award Determination Panel.''

    Because Rule 165.15 is a rule of the Commission's ``organization,

    procedure, or practice,'' the Commission is not presenting these

    revisions for notice and comment.\128\

    ---------------------------------------------------------------------------

    \128\ See 5 U.S.C. 553.

    ---------------------------------------------------------------------------

    P. Rule 165.16--No Immunity and Rule 165.17--Awards to Whistleblowers

    Who Engage in Culpable Conduct

    1. Proposed Rules

    Proposed Rule 165.16 provided notice that the provisions of Section

    23 of the CEA do not provide immunity to individuals who provide

    information to the Commission relating to a violation of the CEA. Some

    whistleblowers who provide original information that significantly aids

    in detecting and prosecuting sophisticated manipulation or fraud

    schemes may themselves be participants in the scheme who would be

    subject to Commission enforcement actions. While these individuals, if

    they provide valuable assistance to a successful action, will remain

    eligible for a whistleblower award, they will not be immune from

    prosecution. Rather, the Commission will analyze the unique facts and

    circumstances of each case in accordance with its Enforcement Advisory,

    ``Cooperation Factors in Enforcement Division Sanction

    Recommendations'' to determine whether, how much, and in what manner to

    credit cooperation by whistleblowers who have participated in

    misconduct.\129\

    ---------------------------------------------------------------------------

    \129\ See http://www.cftc.gov/ucm/groups/public/@cpdisciplinaryhistory/documents/file/enfcooperation-advisory.pdf.

    ---------------------------------------------------------------------------

    The options available to the Commission and its staff for

    facilitating and rewarding cooperation ranges from taking no

    enforcement action to pursuing charges and sanctions in connection with

    enforcement actions.

    Whistleblowers with potential civil liability or criminal liability

    for CEA violations that they report to the Commission remain eligible

    for an award. However, pursuant to Section 23(c)(2)(B) of the CEA,\130\

    if a whistleblower is convicted of a criminal violation related to the

    judicial or administrative action, they are not eligible for an award.

    Furthermore, if a defendant or respondent in a Commission action or a

    related action is ordered to pay monetary sanctions in a civil

    enforcement action, Proposed Rule 165.17 stated that the Commission

    will not count the amount of such monetary sanctions toward the

    $1,000,000 threshold in considering an award payment to such a

    defendant or respondent in relation to a covered judicial or

    administrative action, and will not add that amount to the total

    monetary sanctions collected in the action for purposes of calculating

    any payment to the culpable individual. The rationale for this

    limitation is to prevent wrongdoers from financially benefiting from

    their own misconduct, and ensures equitable treatment of culpable and

    non-culpable whistleblowers. For example, without such a prohibition, a

    whistleblower that was the leader or organizer of a fraudulent scheme

    involving multiple defendants that resulted in total monetary sanctions

    of $1,250,000, which would exceed the $1,000,000 minimum threshold

    required for making an award, could potentially be eligible for an

    award even though he personally was ordered to pay $750,000 of those

    monetary sanctions. Under similar circumstances, a non-culpable

    whistleblower would be deemed ineligible for an award if they reported

    a CEA violation that resulted in monetary sanctions of less than

    $1,000,000. The Proposed Rule would prevent such inequitable treatment.

    ---------------------------------------------------------------------------

    \130\ 7 U.S.C. 26(c)(2)(B).

    ---------------------------------------------------------------------------

    2. Comments

    Many commenters suggested that the Commission should not allow

    whistleblowers with varying degrees of culpability to be eligible for

    an

    [[Page 53192]]

    award.\131\ These comments are discussed under Rule 165.6 in the

    context of discussing whistleblowers ineligible for an award.\132\

    ---------------------------------------------------------------------------

    \131\ See letters from SIFMA/FIA, and U.S. Chamber of Commerce.

    \132\ See above, Section II.F.

    ---------------------------------------------------------------------------

    3. Final Rule

    Upon consideration of the comments, the Commission has decided to

    adopt Rules 165.16 and 165.17 as proposed. These rules track the

    Commission's authority to deny whistleblower awards to individuals who

    are criminally culpable as stated in Section 23(c)(2)(B). As discussed

    above with respect to Rule 165.9, the Commission will consider ``the

    culpability or involvement of the whistleblower in matters associated

    with the Commission's action or related actions'' in determining the

    amount of a whistleblower award.\133\

    ---------------------------------------------------------------------------

    \133\ See Section II.I, above, discussing Rule 165.9(c)(1).

    ---------------------------------------------------------------------------

    Q. Rule 165.18--Staff Communications With Whistleblowers From

    Represented Entities

    1. Proposed Rule

    Proposed Rule 165.18 clarified the staff's authority to communicate

    directly with whistleblowers who are directors, officers, members,

    agents, or employees of an entity that has counsel, and who have

    initiated communication with the Commission relating to a potential

    violation of the CEA. The Proposed Rule made clear that the staff is

    authorized to communicate directly with these individuals without first

    seeking the consent of the entity's counsel.

    Section 23 of the CEA evinces a strong Congressional policy to

    facilitate the disclosure of information to the Commission relating to

    potential CEA violations and to preserve the confidentiality of those

    who do so.\134\ This Congressional policy would be significantly

    impaired were the Commission required to seek the consent of an

    entity's counsel before speaking with a whistleblower who contacts the

    Commission and who is a director, officer, member, agent, or employee

    of the entity. For this reason, Section 23 of the CEA implicitly

    authorizes the Commission to communicate directly with these

    individuals without first obtaining the consent of the entity's

    counsel.

    ---------------------------------------------------------------------------

    \134\ See Section 23(b)-(d) and (h) of the CEA, 7 U.S.C 26(b)-

    (d), (h).

    ---------------------------------------------------------------------------

    The Commission included this authority in the Proposed Rule to

    promote whistleblowers' willingness to disclose potential CEA

    violations to the Commission by reducing or eliminating any concerns

    that whistleblowers might have that the Commission is required to

    request consent of the entity's counsel and, in doing so, might

    disclose their identity. The Commission intended the Proposed Rule to

    clarify that, in accordance with American Bar Association Model Rule

    4.2, the staff is authorized by law to make these communications.\135\

    American Bar Association Model Rule 4.2 provides as follows:

    \135\

    In representing a client, a lawyer shall not communicate about

    the subject of the representation with a person the lawyer knows to

    be represented by another lawyer in the matter, unless the lawyer

    has the consent of the other lawyer or is authorized to do so by law

    ---------------------------------------------------------------------------

    or a court order.

    Model Rules of Prof'l Conduct R. 4.2 (emphasis added). Under this

    provision, for example, the Commission could meet or otherwise

    communicate with the whistleblower privately, without the knowledge or

    presence of counsel or other representative of the entity.

    2. Comments

    The ABA strongly disagreed with the Commission's view that Part 165

    authorized the Commission to bypass state bar ethics rules.\136\ The

    ABA also expressed concern that Proposed Rule 165.18 may have profound

    implications with respect to the preservation of an entity's attorney-

    client privilege and information protected by the work-product

    doctrine.\137\ The ABA stated:

    \136\ See letter from ABA.

    \137\ See letter from ABA.

    [W]e strongly disagree with the Commission's view that Part 165

    authorized the Commission to bypass state bar ethics rules. In our

    view, Proposed Rule 165.18 may have profound implications with

    respect to the preservation of an entity's attorney-client privilege

    and information protected by the work-product doctrine * * *. The

    Commission would justify this position by viewing the discussions

    with such a person as having been `authorized by law.' However, it

    is not clear to us as to whether a Commission Rule (as opposed to a

    statute) can supersede the State Bar provisions governing attorney

    conduct * * *. Proposed Rule 165.18 deals not with the initial

    communication by the employee, but instead with responsive

    communications by the staff. Having had the benefit of a

    whistleblower's initial communication, we see no reasonable basis

    not to require the staff to communicate with entity counsel prior to

    ---------------------------------------------------------------------------

    any further communications.

    The ABA also advised, in the alternative, that if the Commission

    retains Proposed Rule 165.18, it should be revised to include

    procedures governing staff communications to ensure that attorney-

    client privileges and the information protected by attorney work-

    product doctrine are not jeopardized.\138\ The ABA elaborated that,

    ``information the CFTC might seek from an employee, and which the

    employee might disclose, might have derived from privileged

    communications the employee or others within the organization might

    have had with the entity's counsel.'' It was also suggested that the

    right to waive the privilege in such circumstances would belong to the

    entity, not to any single employee, and that the ability of Commission

    staff to communicate with an employee without first seeking the consent

    of the entity's counsel may affect the entity's ability to claim

    privilege with respect to such matters.'' Finally, the ABA suggested

    that ``[h]aving had the benefit of a whistleblower's initial

    communication, we see no reasonable basis not to require the [CFTC]

    staff to communicate with entity counsel prior to any further

    communications,'' because in many cases CFTC communications with entity

    counsel preceding further discussions with a whistleblower could assist

    the CFTC's investigative efforts. Another commenter recommended that

    Proposed Rule 165.18 be clarified to provide that ``if the commission

    remains in contact with a whistleblower during the course of an

    entity's internal investigation, it cannot seek from the whistleblower

    information about counsel's views and advice (or the privileged

    information and discussions) that the whistleblower obtains during that

    investigation.'' \139\ Another commenter warned that ``[t]he

    communications contemplated by Section 165.18 of the Proposed Rules run

    afoul of ABA Model Rule 4.2 * * *'' and recommended that the Commission

    ``should withdraw Section 165.18 of the Proposed Rules.'' \140\

    ---------------------------------------------------------------------------

    \138\ See letter from ABA.

    \139\ See letter from SIFMA/FIA.

    \140\ See letter from FSR.

    ---------------------------------------------------------------------------

    3. Final Rule

    After considering the comments received, the Commission has decided

    to adopt Rule 165.18, with modifications. The Final Rule authorizes the

    staff to directly communicate with directors, officers, members,

    agents, or employees of an entity that has counsel where the individual

    first initiates communication with the Commission as a whistleblower;

    the staff is authorized to have such direct communication without the

    consent of the entity's counsel. The Commission believes that the Rule

    implements congressional

    [[Page 53193]]

    intent and meets the ``authorized by law'' exception to ABA Model Rule

    of Professional Conduct 4.2 and similar state bar rules that might

    otherwise prohibit direct communication.

    With respect to the ABA's comment that ``it is not clear to [the

    ABA] as to whether a Commission Rule (as opposed to a statute) can

    supersede the State Bar provisions governing attorney conduct'', the

    Commission does not believe that Final Rule 165.18 ``supersedes'' state

    bar provisions. Rather, the Commission believes that by granting the

    Commission rulemaking authority pursuant to Section 23(i) of the CEA to

    implement an effective whistleblower program, Congress conferred upon

    the Commission the authority to permit its staff to have direct

    communications with whistleblowers without seeking consent of an

    entity's counsel. Final Rule 165.18, therefore, is intended to and does

    satisfy the ``authorized by law'' exception to the rule that would

    otherwise prohibit an attorney from communicating directly with an

    individual about a matter when the individual is represented by counsel

    in the matter.\141\

    ---------------------------------------------------------------------------

    \141\ The Commission is mindful that the SEC has reached the

    same conclusion with respect to the SEC's Dodd-Frank Act

    whistleblower provision. See SEC Rule 240.21F-17(b) (''If you are a

    director, officer, member, agent, or employee of an entity that has

    counsel, and you have initiated communication with the Commission

    relating to a possible securities law violation, the staff is

    authorized to communicate directly with you regarding the possible

    securities law violation without seeking the consent of the entity's

    counsel.'').

    ---------------------------------------------------------------------------

    The Commission disagrees with any suggestion that the Commission

    does not have the authority to give such permission. The authority is

    derived from Congress's direction in Section 23(i) of the CEA to

    promulgate rules to create an effective and robust whistleblower

    program, and to preserve the confidentiality of whistleblowers.\142\

    The Commission believes that it would undermine Congressional intent if

    staff were prohibited from communicating directly with a whistleblower

    merely because the whistleblower was employed by an entity that was

    represented by counsel. Not only would such a prohibition allow a state

    bar rule to trump a federal statute and an independent federal agency's

    rule, but such a blanket prohibition would have the perverse result of

    giving an entity the option to decide whether a whistleblower should be

    allowed to report the entity's misconduct to the Commission. Giving an

    entity the right to stifle a whistleblower plainly is not what Congress

    intended. Nor would it be consistent with congressional intent to

    require staff to identify a whistleblower to an entity, which would be

    necessary if the staff were required to seek the entity's counsel

    consent to speak to the whistleblower. Such a requirement could deter

    whistleblowers from coming forward, which would frustrate congressional

    purpose.

    ---------------------------------------------------------------------------

    \142\ Cf. ABA Formal Ethics Opinion 95-396 (1995) (Rule 4.2's

    exception permitting communication ``authorized by law'' is

    satisfied by ``a constitutional provision, statute or court rule,

    having the force and effect of law, that expressly allows a

    particular communication to occur in the absence of counsel.'');

    see, e.g., Wilkerson v. Brown, 995 P.2d 393 (Kan. Ct. App. 1999)

    (statutes allowing for service of demands and offers of judgment on

    opposing party trigger ``authorized by law'' exception to anti-

    contact rule); Lewis v. Bayer A.G., No. 2353 Aug. Term 2001, 2002 WL

    1472339 (Pa. C.P. June 12, 2002) (drug company's mailings to

    putative members of plaintiff class of patients who experienced

    adverse drug reactions were sent pursuant to FDA regulations and

    thus were ``authorized by law'').

    ---------------------------------------------------------------------------

    Moreover, any state bar prohibition on attorney contact with an

    employee ultimately is premised on the notion that an entity-employer's

    counsel is by extension the employee's counsel. However, a lawyer for

    an entity cannot ethically also represent a whistleblower-employee on

    the same matter when the whistleblower's interests and the entity's

    interests are in conflict, such as when a whistleblower wants to report

    an entity's misconduct to the Commission.\143\ Based on the same

    reasoning, Rule 165.18 does not authorize Commission staff to have

    direct communication with a whistleblower who is personally represented

    by an attorney without the consent of that attorney.

    ---------------------------------------------------------------------------

    \143\ See, e.g., ABA Model Rule 1.7(a) (providing, in general,

    that ``a lawyer shall not represent a client if the representation

    involves a concurrent conflict of interest. A concurrent conflict of

    interest exists if * * * the representation of one client will be

    directly adverse to another client'').

    ---------------------------------------------------------------------------

    Authorizing the staff to have direct communication with a

    whistleblower employed by a represented entity does not mean that the

    staff should be the first to initiate such contact. For the sake of

    clarity, the Commission is explicitly modifying the proposed rule to

    grant authority only when the whistleblower first initiates contact

    with the staff. Thereafter, all direct communications are ``authorized

    by law.''

    In addition, the Commission acknowledges some commenters' concern

    that direct communication with whistleblowers raises the possibility of

    the staff's inadvertent receipt of information covered by an entity's

    attorney-client privilege or the attorney work product protection.

    These concerns are valid. This Rule does not authorize staff to access

    information protected by the attorney-client privilege or attorney work

    product protection. Accordingly, when invoking Rule 165.18, the staff

    shall undertake reasonable best efforts to avoid receiving such

    information.

    R. Rule 165.19--Nonenforceability of Certain Provisions Waiving Rights

    and Remedies or Requiring Arbitration of Disputes

    Consistent with Congressional intent to protect whistleblowers from

    retaliation as reflected in Section 23(h) of the CEA, Proposed Rule

    165.19 provided that the rights and remedies provided for in Part 165

    of the Commission's Regulations may not be waived by any agreement,

    policy, form, or condition of employment including by a predispute

    arbitration agreement. No pre-dispute arbitration agreement shall be

    valid or enforceable, if the agreement requires arbitration of a

    dispute arising under this Part.

    The Commission did not receive any comments on Proposed Rule

    165.19. The Commission is adopting Rule 165.19 as proposed. This rule

    tracks Section 23(n) of the CEA and is in keeping with congressional

    intent to make waiver of certain rights and remedies of whistleblowers

    nonenforceable, as well as any predispute arbitration agreement if the

    agreement requires arbitration of a dispute arising under Part 165.

    S. Internal Reporting and Harmonization

    The Proposed Rules did not require individuals to report potential

    CEA violations to their employers. However, the Proposed Rules did

    include provisions that would allow employees to claim an award from

    the Commission if they reported the information to their employer and

    the employer reported that information to the Commission.\144\ Numerous

    commenters requested that the Commission either make internal reporting

    mandatory for whistleblowers, or at least provide individuals with

    incentives to make internal reports.

    ---------------------------------------------------------------------------

    \144\ See Proposed Rule 165.2(l).

    ---------------------------------------------------------------------------

    Several commenters recommended that the Commission adopt a

    ``provision requiring internal reporting by all employees as a

    condition of eligibility for a whistleblower award.'' \145\ Some

    commentators suggest that the only exception to internal reporting

    should be when the whistleblower can prove that the employer's internal

    system is

    [[Page 53194]]

    inadequate.\146\ One commenter suggested that ``[t]he rules should

    provide that an internal reporting requirement prior to going to the

    CFTC would not apply where it would be futile, for example where

    individuals responsible for investigating complaints were themselves

    involved in the alleged violations,'' and ``if the entity has an

    effective internal compliance reporting system and internal reporting

    would not be futile, the entity should be allowed at least 180 days to

    complete its own internal investigation before the whistleblower can

    report the matter to the CFTC.'' \147\

    ---------------------------------------------------------------------------

    \145\ See letter from NSCP; see also letters from EEI, ICI, ACC,

    Equal Employment Advisory Council (``EEAC''), U.S. Chamber of

    Commerce, ABA, and FSR.

    \146\ See letter from U.S. Chamber of Commerce.

    \147\ See letter from SIFMA/FIA.

    ---------------------------------------------------------------------------

    Other commentators cautioned against making internal reporting

    mandatory. One commenter stated ``[r]equiring that a whistleblower

    first advance his allegations internally to officials who may be the

    architects of the scheme places that individual's livelihood in peril.

    * * * In addition, requiring that whistleblowers report internally

    first in all situations can imperil law enforcement ends, by providing

    opportunities to destroy or conceal evidence, or otherwise thwarting

    the CFTC's investigation of alleged wrongdoing.'' \148\ This commenter

    also expressed belief that ``the Commission's approach of encouraging

    whistleblowers to first report violations internally * * * without

    penalizing those who do not report, strikes an appropriate balance.''

    \149\

    ---------------------------------------------------------------------------

    \148\ See letter from TAF.

    \149\ See letter from TAF.

    ---------------------------------------------------------------------------

    Another commenter advised that whistleblowers should be given the

    option to report problems directly to the Commission, ``especially if

    they have reason to believe that their entity's internal compliance

    program will not do an adequate job of investigating the wrongdoing and

    taking corrective action.'' \150\ This commenter also stated that to

    require internal reporting would be contrary to the meaning and intent

    of Section 23 of the CEA, would have a chilling effect on the

    whistleblower program and would put whistleblowers in harm's way.\151\

    ---------------------------------------------------------------------------

    \150\ See letter from POGO.

    \151\ See letter from POGO.

    ---------------------------------------------------------------------------

    In the alternative to mandatory internal reporting, several

    commenters suggested that the Commission make internal reporting a

    positive criterion in an award determination.\152\ For example, one

    commenter stated that the Commission ``[s]hould make explicit that a

    whistleblower will receive credit in the calculation of award amount

    when the [whistleblower] uses a entity's internal reporting

    mechanism.'' \153\ In addition, this commenter suggested that the Final

    Rule ``should provide strong financial disincentives against

    individuals who violate entity rules requiring them to report

    misconduct internally.'' \154\ Taking another tack, this commenter

    suggested that the Commission deem ineligible for an award any

    individual who refuses to cooperate with the entity's internal

    investigation, or who provides inaccurate or incomplete information or

    otherwise hinders such an investigation.\155\

    ---------------------------------------------------------------------------

    \152\ See letter from FSR at 8; see also letters from NSCP at 3-

    7, 10, Senator Carl Levin at 3, U.S. Chamber of Commerce at 14,

    SIFMA/FIA at 2-3, 6; cf. letter from FSR at 9 (suggesting that

    whistleblowers who fail to report internally ``without clear,

    appropriate justification'' be limited, in general, to the

    ``statutory minimum of 10 percent of the total monetary sanctions

    collected in the action.'').

    \153\ See letter from SIFMA/FIA.

    \154\ See letter from SIFMA/FIA.

    \155\ See letter from SIFMA/FIA.

    ---------------------------------------------------------------------------

    Also, several commenters pointed out that the SEC's whistleblower

    rules incentivize internal reporting through positive consideration of

    internal reporting in award determinations,\156\ and suggested that the

    Commission's whistleblower program be harmonized with that of the SEC

    (harmonization to be discussed below). The SEC's final whistleblower

    rules include factors that may increase a whistleblower's award.\157\

    ---------------------------------------------------------------------------

    \156\ See, e.g., letter from SIFMA/FIA.

    \157\ See SEC Rule 240.21F-6(a)(4) (``Criteria For Determining

    Amount of Award'').

    ---------------------------------------------------------------------------

    The Commission declines to mandate that whistleblowers report

    potential violations internally either before or concurrent to

    reporting to the Commission. The Commission believes that to require

    internal reporting could raise the risk of retaliation, and have a

    chilling effect on whistleblowers who are inclined to come forward and

    bring information to the attention of the Commission.\158\ For these

    same reasons, the Commission has decided not to deem lack of

    cooperation with an internal investigation a basis to render a person

    ineligible for an award.

    ---------------------------------------------------------------------------

    \158\ See letter from POGO.

    ---------------------------------------------------------------------------

    Nonetheless, the Commission recognizes that internal whistleblower,

    compliance and legal systems can contribute to detecting, deterring and

    preventing misconduct including violations of the CEA, goals that are

    consistent with the Commission's mission. Many entities properly

    encourage their employees to use such functions to report misconduct

    internally. By establishing financial incentives to report misconduct

    to the Commission, the Commission does not want to discourage employees

    from making internal reports when appropriate. The Commission

    recognizes that internal compliance and reporting systems ought to

    contribute to the goal of detecting, deterring and preventing

    misconduct, including CEA violations, and does not want to discourage

    employees from using such systems when they are in place.

    The Commission is striking an appropriate balance between the

    interests of maintaining strong internal reporting functions and the

    interests of the Commission's whistleblower program by tailoring the

    Final Rules in two respects. First, the Final Rules state that the

    Commission will consider the whistleblower's decision to report

    internally as a potentially positive factor in the Commission's award

    determination. Whether the decision to report internally increases the

    amount of the award will depend on the facts and circumstances. If the

    whistleblower chooses not to report internally, his award determination

    will be unaffected by that decision. Indeed, the Commission recognizes

    that a whistleblower may reasonably believe that reporting internally

    could risk retaliation or be counterproductive to preventing and/or

    remedying misconduct; but such a whistleblower should be no less

    incentivized to report to the Commission. Second, if a whistleblower

    reports information internally within an entity, according to the Final

    Rules the Commission will attribute to the whistleblower all

    information later reported by the entity to the Commission, including

    any additional information reported by the entity that was not part of

    the whistleblower's internal report.

    In response to this possibility, the Commission has tailored the

    Final Rules to provide whistleblowers who are otherwise pre-disposed to

    report internally, but who may also be affected by financial

    incentives, with additional economic incentives to continue to report

    internally. Specifically, after considering the comments received, the

    Commission has decided to revise and adopt the Proposed Rules to

    incentivize internal reporting, as discussed throughout this Release,

    specifically by providing whistleblowers who report internally with:

    (a) Positive weight in Commission award determinations; \159\ and (b)

    the benefit of the employer's

    [[Page 53195]]

    investigation.\160\ The Commission has decided not to deem ineligible a

    person for an award who does not cooperate with an internal

    investigation because the Commission has previously indicated that the

    Commission will take into consideration the degree to which a

    whistleblower took steps to prevent the violations from occurring, or

    continuing, when making an award determination.\161\

    ---------------------------------------------------------------------------

    \159\ See Rule 165.9 Criteria for determining amount of award.

    \160\ See Rule 165.2(i) (``Information that led to successful

    enforcement'').

    \161\ See 75 FR at 75739.

    ---------------------------------------------------------------------------

    Commission staff has consulted with SEC staff regarding drafting of

    rules to implement the Commission's and SEC's respective Dodd-Frank Act

    whistleblower provisions, Section 748 (Commodity Whistleblower

    Incentives and Protection) and Section 922 (Whistleblower Protection).

    Several commenters noted that some companies may be subject to both

    whistleblower programs, and to reduce uncertainty and cost to these

    companies the respective whistleblower programs should be as uniform as

    possible.\162\ Wherever appropriate and consistent with the underlying

    statutory mandate in Section 23 of the CEA, the Commission has

    endeavored to harmonize its whistleblower rules with those of the SEC.

    ---------------------------------------------------------------------------

    \162\ See letters from NSCP at 2, ABA at 4, ICI at 1, SIFMA/FIA

    at 14.

    ---------------------------------------------------------------------------

    However, the CFTC's Proposed Rules and SEC's Final Rules are

    similar but not identical due to a number of factors, including the

    following: (1) While similar, the provisions of the Sections 748 and

    922 are not identical; (2) certain terms in the SEC's statutory

    provision are either defined terms under the Securities Exchange Act of

    1934 or are terms of art under SEC case law, and there is no comparable

    CFTC precedent; (3) unlike the CFTC, the SEC has an existing

    whistleblower program for insider trading violations that was

    established under Section 21A(e) of the Securities Exchange Act of

    1934, 15 U.S.C. 78u-1(e); and (4) also unlike the CFTC, the SEC has

    existing obligations for persons to report violations to it (see, e.g.,

    Section 10A of the Securities Exchange Act of 1934, 15 U.S.C. 78j-1

    (establishing requirements and procedure for a ``registered public

    accounting firm [that] detects or otherwise becomes aware of

    information indicating that an illegal act (whether or not perceived to

    have a material effect on the financial statements of the issuer) has

    or may have occurred'' to report such illegal act to management, board

    of directors, and the SEC) (alteration in original)).

    III. Administrative Compliance

    A. Cost-Benefit Considerations

    Section 15(a) of the CEA requires the Commission to consider the

    costs and benefits of its action before promulgating a regulation.\163\

    Furthermore, such costs and benefits shall be evaluated in light of the

    following five considerations: (1) Protection of market participants

    and the public; (2) efficiency, competitiveness, and financial

    integrity of futures markets; (3) price discovery; (4) sound risk

    management practices; and (5) other public interest considerations. The

    Commission may in its discretion give greater weight to any one of the

    five enumerated areas depending upon the nature of the regulatory

    action.\164\

    ---------------------------------------------------------------------------

    \163\ 7 U.S.C. 19(a).

    \164\ See, e.g., Fisherman's Doc Co-op., Inc v. Brown, 75 F.3d

    164 (4th Cir. 1996); Center for Auto Safety v. Peck, 751 F.2d 1336

    (D.C. Cir. 1985) (noting that an agency has discretion to weigh

    factors in undertaking cost-benefit analysis).

    ---------------------------------------------------------------------------

    The Final Rules implement Section 23 of the CEA which requires the

    Commission, subject to certain requirements, to pay eligible

    whistleblowers a monetary award for voluntarily providing original

    information about violations of the CEA leading to a successful

    enforcement action. The Final Rules define the key terms, specify

    procedures for the submission and handling of original information, and

    enumerate procedures for consideration and payment of awards including

    appeals.

    Many of the Final Rules are mandated by section 748 of the Dodd-

    Frank Act, leaving the Commission with little or no discretion to

    consider any alternatives where the statute prescribes particular

    procedures. Therefore, the Commission's final regulations adhere

    closely to the enabling language of the statute. For example, the final

    regulations implement, among other provisions, the statutory

    requirement that, if all preconditions are met, the Commission must pay

    an award to one or more whistleblowers in an aggregate amount of not

    less than 10 percent and not more than 30 percent of what has been

    collected of the monetary sanctions imposed in the Commission's action

    or related actions. Another example is the statutory requirement that

    anonymous whistleblowers must be represented by counsel when making a

    claim for a whistleblower award. To the extent that the Commission was

    left with discretion under section 748 of the Dodd-Frank Act, the

    Commission exercised that discretion with consideration of minimizing

    the potential costs while maintaining fidelity to the Congressional

    intent behind section 748 of the Dodd-Frank Act.

    The Commission has considered the costs and benefits of its

    regulations as part of the deliberative rulemaking process, and

    discussed them throughout the preamble. The Commission generally views

    the costs-benefits section of this Final Rulemaking to be an extension

    of that discussion. Paperwork Reduction Act related costs are included

    in the overall compliance costs considered with respect to Final Rule

    165.

    The comments that the Commission received regarding costs and

    benefits can be categorized under three major topics. Broadly speaking,

    the comments assert that (1) Employers and the CFTC will face increased

    costs because the Final Rule does not contain a requirement that a

    whistleblower first report an alleged CEA violation internally to the

    entity committing the alleged offense; (2) firms regulated by both the

    CFTC and the SEC will face increased costs due to the lack of

    regulatory harmonization between the CFTC and SEC whistleblower rules;

    and (3) potential whistleblowers will face costs excessive procedural

    burdens under the rules.

    A discussion of the comments on each topic and the Commission's

    response to those comments in light of the five public interest

    considerations follows.

    1. Costs to Employers and the Commission Associated With the Lack of an

    Internal Reporting Requirement

    Three commenters \165\ commented specifically on the cost-benefit

    section of the Proposed Rules, stating that the cost-benefit section of

    the Proposed Rules only described costs to whistleblowers and did not

    describe costs to employers and the Commission that would arise under

    the Proposed Rules. One commenter stated that the anti-retaliation

    provision would lead to false or spurious whistleblower claims and that

    firms and the Commission would incur significant costs to evaluate

    these claims.\166\ Another commenter stated that two types of costs to

    employers would be incurred by not requiring whistleblowers to report

    to the firm's compliance department.\167\ According to that commenter,

    the costs of responding to Commission investigations exceed the costs

    of internal investigations. In addition, the

    [[Page 53196]]

    commenter stated that the lack of an internal reporting requirement

    would give rise to meritless complaints which would be costly to

    investigate. Further, though not specifically enumerated in its

    analysis of the cost-benefit section, that commenter stated that the

    proposed rule would likely result in slower identification,

    investigation, and potentially remediation by employers of alleged

    violations. Another commenter also stated that the lack of an internal

    reporting requirement would increase employer costs.\168\ The common

    theme in the above cost-benefit comments, as well as other more general

    cost comments submitted by several commenters \169\ focused on the

    potential damage to existing compliance systems without an internal

    reporting requirement. While not specifically commenting on the cost-

    benefit section of the Proposed Rules, several commenters noted

    increased legal, investigative, and remedial costs to firms and

    increased costs to and use of resources by the Commission.\170\ One of

    the commenters expanded upon potential costs and negative consequences

    of the lack of a rule requiring, at a minimum, concurrent reporting to

    the firm. This commenter stated that ``a failure or delay in the

    communication of whistleblower reports of potential violations to these

    entities may reduce the entity's ability of their independent

    accountants to rely on the efficacy of an entity's internal control

    systems and could adversely impact the entity's and independent

    accountants' evaluations of internal control over financial

    reporting.\171\ It could have significant negative consequences for

    investors, reporting entities, and the audit process alike.'' These

    concerns are addressed below in the context of the above mentioned

    Section 15(a) considerations.

    ---------------------------------------------------------------------------

    \165\ See letters from ABA, EEI, and U.S. Chamber of Commerce.

    \166\ See letter from ABA.

    \167\ See letter from EEI.

    \168\ See letter from U.S. Chamber of Commerce.

    \169\ See letters from SIFMA/FIA, EEAC, Working Group, AICPA,

    and NSCP.

    \170\ See letters from NSCP, Working Group, EEAC and AICPA.

    \171\ See letter from AICPA.

    ---------------------------------------------------------------------------

    Considerations of Protection of Market Participants and the Public

    The Commission believes that the Final Rules implement the

    statutory mandate and serve the purpose of protecting market

    participants and the public. The statute does not require

    whistleblowers to report violations through an entity's internal

    reporting process. To impose such a requirement may be inconsistent

    with Congressional intent in establishing the whistleblower program.

    Specifically, the Commission believes that this potential alternative

    would impose substantial costs and burdens on whistleblowers, victims

    of CEA violations, market participants, and the public. Such a rule

    could prevent or deter whistleblowers from making legitimate complaints

    out of fear of reprisal from their employer. Consequently, some

    violations may never be brought to the attention of the Commission,

    which would prevent the Commission from bringing actions against

    violators of the CEA. A rule requiring internal reporting could

    therefore deprive victims of restitution and could deprive market

    participants and the public of the benefits associated with detection,

    prosecution, and deterrence of such violations of the CEA. Thus, the

    Commission believes that the overall cost of an internal reporting

    requirement and the attendant risks of undetected violations are

    greater than the cost to firms subject to a potential whistleblower

    referral. Indeed, if Congress thought such a requirement was necessary,

    Congress could have incorporated such a provision in Section 748 of the

    Dodd Frank Act. Regarding the comment that the anti-retaliation

    provision of Section 748 would lead to more meritless complaints, the

    Commission notes that Section 748 of the Dodd-Frank Act prohibits

    retaliation against whistleblowers for any lawful act done by the

    whistleblower. Because the Final Rules implement this statutory

    mandate, the commenter did not provide any basis for claiming that the

    language of the proposed rule will cause such consequences under the

    statutory provision.

    The whistleblower program is distinct from and does not undermine

    or require any changes to any entity's existing compliance systems.

    However, the Commission is cognizant that firms may be incentivized to

    re-evaluate and adjust their existing internal compliance systems to

    encourage employees to report internally and forestall the occurrence

    of CEA violations.

    While the Commission is not persuaded of the need to adopt a rule

    to require internal reporting, after consideration of the comments on

    internal reporting, the Commission has included incentives for internal

    reporting in Final Rule 165.2(i) and 165.9. The Commission has

    determined that the risk of meritless complaints is outweighed by the

    benefits of a Final Rule that enables whistleblowers to make referrals

    without fear of retaliation. Regarding the comment that the lack of an

    internal reporting requirement would likely result in slower

    identification, investigation, and potential remediation of violations

    by firms, the Commission will evaluate whistleblower referrals promptly

    and take action as necessary and appropriate. The comment does not

    illustrate how and to what extent the lack of an internal reporting

    requirement undermines existing compliance protocols. The whistleblower

    program, by definition, is an external reporting regime. To the extent

    there is a delay in the entity learning of violations and taking

    corrective measures in the absence of internal reporting, the cost of

    such a delay is outweighed by the risks of discouraging meritorious

    claims.

    Considerations of Efficiency, Competitiveness, and Financial Integrity

    of Futures Markets, Price Discovery, and Sound Risk Management

    Practices

    The Commission has determined that its Final Rules implement

    Congressional intent. After consideration and evaluation of the public

    comments, and to the extent the Commission declines to impose an

    additional internal reporting requirement upon whistleblowers beyond

    the statutory mandate under section 748 of the Dodd-Frank Act, the

    Commission has determined that the Final Rules will further the goals

    of each of these three considerations under Section 15(a) of the CEA.

    For example, to the extent whistleblowers are incentivized to refer

    cases of market manipulation and disruptive trading practices, the

    efficiency, competitiveness and financial integrity of futures markets,

    the price discovery process, and effective risk management will be

    enhanced by improved detection and enforcement of such violations. The

    Commission is not persuaded by, nor was there any reliable evidence to

    support, assertions that the Commission and affected parties will bear

    excess costs due to a high volume of meritless claims in the absence of

    an internal reporting requirement. Congress placed a procedural

    safeguard in the statute by advising whistleblowers that they can be

    criminally prosecuted for making false statements to the Commission

    under 18 U.S.C. 1001.\172\ These and other provisions will reduce the

    risk of meritless referrals. Moreover, whistleblowers are incentivized

    to provide referrals only if they believe those referrals have merit

    since they can only get an award if their referrals lead

    [[Page 53197]]

    to a successful enforcement action (see Rules 165.2(i) and 165.9.).

    ---------------------------------------------------------------------------

    \172\ Such false statements also could be a violation of

    Sections 6(c)(2) and 9(a)(3) of the CEA, 7 U.S.C. 9, 13(a)(3), 15.

    ---------------------------------------------------------------------------

    2. Costs to Firms Regulated by Both the Commission and SEC

    One commenter stated that the lack of regulatory harmonization

    between the Commission and SEC whistleblower rules would ``impose costs

    and lead to the potential for confusion for dually-regulated firms

    without any corresponding benefit.'' \173\ Another commenter stated

    that Commission-SEC harmonization would benefit ``dually registered

    firms [and] the financial industry generally.'' \174\ In addition,

    another commenter stated that the Proposed Rules are ``inconsistent

    with the framework of compliance processes established under Sarbanes-

    Oxley and other federal laws and regulations.'' This commenter further

    stated the importance of harmonizing the implementation of the Dodd-

    Frank Act with existing processes.\175\ We address each of these

    concerns below in the context of the above mentioned Section 15(a)

    considerations.

    ---------------------------------------------------------------------------

    \173\ See letter from SIFMA/FIA.

    \174\ See letter from NSCP.

    \175\ See letter from EEI.

    ---------------------------------------------------------------------------

    The Commission has considered the public comments calling for

    harmonization with SEC whistleblower rules. The Dodd-Frank Act does not

    require harmonization between the Commission and the SEC with respect

    to their respective whistleblower provisions. Moreover, this is not a

    joint Commission-SEC rulemaking. Having considered the comments and

    consulted with SEC staff, the Commission has revised several

    whistleblower rules, as discussed in detail under Section II.S. above,

    with those of the SEC's whistleblower rules to enhance regulatory

    certainty for market participants subject to both whistleblower

    programs, which furthers the public interest.\176\

    ---------------------------------------------------------------------------

    \176\ Similar to the SEC, the Commission is not persuaded by the

    commenter's suggestion that the Proposed Rules were inconsistent

    with the Sarbanes-Oxley Act of 2002. See 76 FR at 34326 n.230 (the

    SEC concluded that the mandates of Section 301 of the Sarbanes-Oxley

    Act of 2002 and Section 21F of the Securities Exchange Act of 1934

    were different and declined to follow the commenters' suggestion

    that the SEC impose a ``requirement that employees of listed

    companies also utilize internal audit committee or other complaint

    procedures.'').

    ---------------------------------------------------------------------------

    With respect to costs, as explained in various places throughout

    this release, the remaining differences between the SEC and Commission

    rules are due to differences between the statutes governing the two

    agencies and their respective regulatory objectives. Consequently,

    costs associated with these remaining differences are not likely to be

    significant under the five broad areas as enumerated in Section 15(a)

    of the CEA.

    3. Costs to Whistleblowers

    A commenter stated that the proposed claims process is burdensome

    and backwards. Specifically, this commenter noted that it is

    problematic to require that a whistleblower notify the Commission of a

    claim for reward upon the successful completion of an enforcement

    action. The commenter also recommended that the Commission notify the

    individual about a reward after an administrative or judicial action

    has been taken.\177\ Another commenter shared similar concerns and

    stated that the Commission should establish better policies for

    communicating with whistleblowers throughout the application process to

    lessen whistleblowers' burden to explain the importance of their

    disclosures.\178\ We address each of these concerns below in the

    context of Section 15(a) considerations.

    ---------------------------------------------------------------------------

    \177\ See letter from TAF.

    \178\ See letter from POGO.

    ---------------------------------------------------------------------------

    Protection of Market Participants and the Public Considerations of

    Efficiency, Competitiveness, and Financial Integrity of Futures

    Markets, Price Discovery, and Sound Risk Management Practices

    The Final Rules implement procedures mandated by section 748 of the

    Dodd-Frank Act for whistleblowers to report CEA violations. The

    Commission is aware of the concerns expressed by Commenters and intends

    to implement policies and procedures for communicating with

    whistleblowers that will address these concerns. Specifically,

    following the successful completion of a covered action, the Commission

    will publish a Notice of Covered Action on the Commission web site.

    Whistleblowers will be able to utilize the Commission's Email

    Subscriptions service \179\ to receive an email message when their

    actions are resolved successfully. The Final Rules also reduce the

    number of forms that a whistleblower must submit to the Commission from

    three to two.

    ---------------------------------------------------------------------------

    \179\ See https://service.govdelivery.com/service/multi_subscribe.html?code=USCFTC.

    ---------------------------------------------------------------------------

    The Commission has considered the paperwork requirements in light

    of all five of the considerations in Section 15(a) of the CEA. With

    respect to benefits, the procedural requirements under the Final Rule

    will enable the Commission to effectively implement and administer the

    mandated whistleblower program in furtherance of these considerations

    without imposing excessive costs or burdens upon whistleblowers.

    B. Anti-Trust Considerations

    Section 15(b) of the CEA \180\ requires the Commission to consider

    the public interests protected by the antitrust laws and to take

    actions involving the least anti-competitive means of achieving the

    objectives of the CEA. The Commission believes that the Proposed Rules

    will have a positive effect on competition by improving the fairness

    and efficiency of the markets through improving detection and

    remediation of potential violations of the CEA and Commission

    regulations.

    ---------------------------------------------------------------------------

    \180\ 7 U.S.C. 19(b).

    ---------------------------------------------------------------------------

    IV. Paperwork Reduction Act

    Certain provisions of the Proposed Rules contained ``collection of

    information'' requirements within the meaning of the Paperwork

    Reduction Act (``PRA'') of 1995.\181\ An agency may not sponsor,

    conduct, or require a response to an information collection unless a

    currently valid Office of Management and Budget (``OMB'') control

    number is displayed. The Commission submitted proposed collections of

    information to OMB for review in accordance with the PRA.\182\ The

    titles for the collections of information were: (1) Form TCR (Tip,

    Complaint or Referral); (2) Form WB-DEC (Declaration Concerning

    Original Information Provided Pursuant to Section 23 of the Commodity

    Exchange Act); and (3) Form WB-APP (Application for Award for Original

    Information Provided Pursuant to Section 23 of the Commodity Exchange

    Act). These three forms were proposed to implement Section 23 of the

    CEA. The proposed forms allowed a whistleblower to provide information

    to the Commission and its staff regarding: (1) Potential violations of

    the CEA; and (2) the whistleblower's eligibility for and entitlement to

    an award.

    ---------------------------------------------------------------------------

    \181\ 44 U.S.C. 3501 et seq.

    \182\ 44 U.S.C. 3507(d); 5 CFR 1320.11.

    ---------------------------------------------------------------------------

    The Commission did not receive any comments that directly addressed

    its PRA analysis or its burden estimates. In comments on the Proposing

    Release, a commenter suggested that the three-form process proposed for

    obtaining information from whistleblowers was burdensome.\183\ As the

    Commission discusses in connection with Rule 165.3, its Final Rules

    require largely the same information to be collected, but in response

    to comments the Commission has combined the information collection

    [[Page 53198]]

    into only two forms--Form TCR, which incorporates several questions

    previously posed on Proposed Form WB-DEC, and Form WB-APP--to simplify

    the process for whistleblowers.

    ---------------------------------------------------------------------------

    \183\ See letter from NWC.

    ---------------------------------------------------------------------------

    A. Summary of Collection of Information

    Form TCR, submitted pursuant to Rule 165.3, requests the following

    information:

    1. Background information regarding each complainant submitting the

    TCR, including the person's name and contact information. The

    Commission has added a section for the identification of additional

    complainants;

    2. If the complainant is represented by an attorney, the name and

    contact information for the complainant's attorney;

    3. Information regarding the individual or entity that is the

    subject of the tip or complaint, including contact information;

    4. Information regarding the tip or complaint, including: the date

    of the alleged violation; the nature of the complaint; the name and

    type of financial product or investment, if relevant; whether the

    complainant or counsel has had prior contact with Commission staff and

    with whom; whether information has been communicated to another agency

    and, if so, details about that communication, including the name and

    contact information for the point of contact at such agency, if

    available; whether the complaint relates to an entity of which the

    complainant is or was an officer, director, counsel, employee,

    consultant or contractor; whether the complainant has reported this

    violation to his or her supervisor, compliance office, whistleblower

    hotline, ombudsman, or any other available mechanism at the entity for

    reporting violations and the date of such action was taken;

    5. A description of the facts pertinent to the alleged violation,

    including an explanation of why the complainant believes the acts

    described constitute a violation of the CEA;

    6. A description of all supporting materials in the complainant's

    possession and the availability and location of any additional

    supporting materials not in the complainant's possession;

    7. An explanation of how the person submitting the complaint

    obtained the information and, if any information was obtained from an

    attorney or in a communication where an attorney was present, the

    identification of any such information;

    8. A description of any information obtained from a public source

    and a description of such source;

    9. A description of any documents or other information in the

    complainant's submission that the complainant believes could reasonably

    be expected to reveal his or her identity, including an explanation of

    the basis for the complainant's belief that his or her identity would

    be revealed if the documents were disclosed to a third party; and

    10. Any additional information the complainant believes may be

    relevant.

    Also included in Form TCR are several items previously included in

    proposed Form WB-DEC, which was required to be submitted pursuant to

    Proposed Rule 165.3. First, there are several questions that require a

    complainant to provide eligibility-related information by checking a

    series of ``yes/no'' answers. Second, the form contains a declaration,

    signed under penalty of perjury, that the information provided to the

    Commission pursuant to Rule 165.3 is true, correct and complete to the

    best of the person's knowledge, information and belief. Third, there is

    a counsel certification, which is required to be executed in instances

    where a complainant makes an anonymous submission pursuant to the

    whistleblower program and is represented by an attorney. This statement

    certifies that the attorney has verified the complainant's identity,

    and has reviewed the complainant's completed and signed Form TCR for

    completeness and accuracy, and that the information contained therein

    is true, correct and complete to the best of the attorney's knowledge,

    information and belief. The certification also contains new statements,

    which were not included in proposed Form WB-DEC, that: (i) The attorney

    has obtained the complainant's non-waivable consent to provide the

    Commission with the original completed and signed Form TCR in the event

    that the Commission requests it due to concerns that the form may

    contain false, fictitious or fraudulent statements or representations

    that were knowingly or willfully made by the complainant; and (ii) the

    attorney consents to be legally obligated to provide the signed Form

    TCR within seven (7) calendar days of receiving such request from the

    Commission.

    Form WB-APP, submitted pursuant to Rule 165.7, requires the

    following information:

    1. The applicant's name, address and contact information;

    2. The applicant's social security number, if any;

    3. If the person is represented by an attorney, the name and

    contact information for the attorney;

    4. Details concerning the tip or complaint, including (a) The

    manner in which the information was submitted to the Commission, (b)

    the subject of the tip, complaint or referral, (c) the Form TCR number,

    and (d) the date the Form TCR was submitted to the Commission;

    5. Information concerning the Notice of Covered Action to which the

    claim relates, including (a) The date of the Notice, (b) the Notice

    number, and (c) the case name and number;

    6. For related actions, (a) The name and contact information for

    the agency or organization to which the person provided the original

    information, (b) the date the person provided this information, (c) the

    date the agency or organization filed the related action, (d) the case

    name and number of the related action, and (e) the name and contact

    information for the point of contact at the agency or organization, if

    known;

    7. A series of questions concerning the person's eligibility to

    receive an award as described in the Form TCR discussion above;

    8. An optional explanation of the reasons why that the person

    believes he is entitled to an award in connection with his submission

    of information to the Commission, or to another agency in a related

    action, including any additional information and supporting documents

    that may be relevant in light of the criteria for determining the

    amount of an award set forth in Rule 165.9, and any supporting

    documents; and

    9. A declaration, signed under penalty of perjury, that the

    information provided in Form WB-APP is true, correct and complete to

    the best of the person's knowledge, information and belief.

    B. Use of Information

    The collection of information on Forms TCR and WB-APP will be used

    to permit the Commission and its staff to collect information from

    whistleblowers regarding alleged violations of the CEA and the rules

    and regulations thereunder and to determine claims for whistleblower

    awards.

    C. Respondents

    The likely respondents to Form TCR will be individuals who wish to

    provide information relating to possible violations of the CEA and the

    rules and regulations thereunder, and who wish to be eligible for

    whistleblower awards. The likely respondents to Form WB-APP will be

    individuals who have provided the Commission, or another

    [[Page 53199]]

    agency in a related action, with information relating to a possible

    violation of the CEA and who believe they are entitled to an award.

    D. Total Annual Reporting and Recordkeeping Burden

    1. Form TCR

    The Commission estimates that it will receive submissions of

    approximately 3,800 tips, complaints and referrals each year.\184\ Of

    those 3,800 submissions, the Commission estimates that it will receive

    approximately 100 whistleblower tips, complaints and referrals on Form

    TCR each year.\185\ Each respondent would submit only one Form TCR and

    would not have a recurring obligation to file additional Forms TCR. In

    the Proposing Release, the Commission proposed that a whistleblower

    would have to complete two forms, proposed Form TCR and proposed Form

    WB-DEC, to be eligible for an award. In the Final Rules, the Commission

    has eliminated Form WB-DEC and added the eligibility questions from

    that proposed form to Form TCR.

    ---------------------------------------------------------------------------

    \184\ This number is a staff estimate based upon the volume of

    tips, complaints or referrals received by the Commission in recent

    years.

    \185\ This number is a staff estimate based on the volume of

    whistleblower tips, complaints and referrals that the Commission has

    received in the first eleven months after the enactment of the Dodd-

    Frank Act (less than two dozen) and an expectation that this volume

    will increase as the public becomes more aware of the Commission's

    whistleblower program.

    ---------------------------------------------------------------------------

    The Commission estimates that it will take a whistleblower, on

    average, two and one-half hours to complete the Form TCR, which

    includes the questions that had previously been included in proposed

    Form WB-DEC. The completion time will depend largely on the complexity

    of the alleged violation and the amount of information the

    whistleblower possesses in support of the allegations. As a result, the

    Commission estimates that the annual PRA burden of Form TCR is 250

    hours.

    2. Form WB-APP

    Each whistleblower who believes that he is entitled to an award

    because he provided original information to the Commission that led to

    successful enforcement of a covered judicial or administrative action,

    or a related action, is required to submit a Form WB-APP to be

    considered for an award. The Commission estimates that it will receive

    approximately nine Forms WB-APP each year.\186\ Finally, the Commission

    estimates that it will take a whistleblower, on average, ten hours to

    complete Form WB-APP. The completion time will depend largely on the

    complexity of the alleged violation and the amount of information the

    whistleblower possesses in support of his application for an award.

    This estimate assumes that most whistleblowers will elect to complete

    optional Section G (Entitlement to Award) of Form WB-APP. As a result,

    the Commission estimates that the annual PRA burden of Form WB-APP is

    90 hours.

    ---------------------------------------------------------------------------

    \186\ This number is a staff estimate based on two expectations:

    First, that the Commission will receive Forms WB-APP in

    approximately 15 percent of cases in which it posts a Notice of

    Covered Action because the Commission expects that the Commission

    will continue to bring a substantial number of enforcement cases

    that are not based on whistleblower information; and second, that

    the Commission will receive approximately three Forms WB-APP in each

    of those cases. Because this is a new program, the staff does not

    have prior relevant data on which it can base these estimates.

    ---------------------------------------------------------------------------

    3. Involvement and Cost of Attorneys

    Under the Proposed Rules, an anonymous whistleblower is required

    (when filing a claim for an award), and a whistleblower whose identity

    is known may elect to retain counsel to represent the whistleblower in

    the whistleblower program. The Commission expects that, in most of

    those instances, the whistleblower's counsel will complete, or assist

    in the completion, of some or all of the required forms on behalf of

    the whistleblower. The Commission also expects that in the vast

    majority of cases in which a whistleblower is represented by counsel,

    the whistleblower will enter into a contingency fee arrangement with

    counsel, providing that counsel will be paid for the representation

    through a fixed percentage of any recovery by the whistleblower under

    the program. Thus, most whistleblowers will not incur any direct,

    quantifiable expenses for attorneys' fees for the completion of the

    required forms.

    The Commission anticipates that a small number of whistleblowers

    (no more than five percent) will enter into hourly fee arrangements

    with counsel.\187\ In those cases, a whistleblower will incur direct

    expenses for attorneys' fees for the completion of the required forms.

    To estimate those expenses, the Commission makes the following

    assumptions:

    ---------------------------------------------------------------------------

    \187\ This estimate is based, in part, on the Commission's

    belief that most whistleblowers likely will not retain counsel to

    assist them in preparing the forms.

    ---------------------------------------------------------------------------

    1. The Commission will receive approximately 100 Forms TCR, and

    nine Forms WB-APP annually; \188\

    ---------------------------------------------------------------------------

    \188\ The basis for these assumed amounts are explained in Parts

    IV.D.1. and I.V.D.2. above.

    ---------------------------------------------------------------------------

    2. Whistleblowers will pay hourly fees to counsel for the

    submission of approximately five Forms TCR and one Form WB-APP

    annually; \189\

    ---------------------------------------------------------------------------

    \189\ These amounts are based on the assumption, as noted above,

    that no more than five percent of all whistleblowers will be

    represented by counsel pursuant to an hourly fee arrangement.

    ---------------------------------------------------------------------------

    3. Counsel retained by whistleblowers pursuant to an hourly fee

    arrangement will charge on average $400 per hour; \190\ and

    ---------------------------------------------------------------------------

    \190\ The Commission uses this hourly rate for estimating the

    billing rates of lawyers for purposes of other rules. Absent

    historical data for the Commission to rely upon in connection with

    the whistleblower program, the Commission believes that this billing

    rate estimate is appropriate, recognizing that some attorneys

    representing whistleblowers may charge different average hourly

    rates.

    ---------------------------------------------------------------------------

    4. Counsel will bill on average: (a) 2.5 hours to complete a Form

    TCR, and (b) 10 hours to complete a Form WB-APP.

    Based on those assumptions, the Commission estimates that each year

    whistleblowers will incur the following total amounts of attorneys'

    fees for completion of the whistleblower program forms: (i) $5,000 for

    the completion of Forms TCR; and (ii) $4,000 for the completion of Form

    WB-APP.

    E. Mandatory Collection of Information

    A whistleblower would be required to complete a Form TCR, or submit

    his information electronically, and a Form WB-APP, or submit his

    information electronically, to qualify for a whistleblower award.

    F. Confidentiality

    As explained above, the statute provides that the Commission must

    maintain the confidentiality of the identity of each whistleblower,

    subject to certain exceptions. Section 23(h)(2) of the CEA states that,

    except as expressly provided:

    [T]he Commission, and any officer or employee of the Commission,

    shall not disclose any information, including information provided

    by a whistleblower to the Commission, which could reasonably be

    expected to reveal the identity of a whistleblower, except in

    accordance with the provisions of section 552a of title 5, United

    States Code, unless and until required to be disclosed to a

    defendant or respondent in connection with a public proceeding

    instituted by the Commission [or certain specific entities listed in

    paragraph (C) of Section 23(h)(2)].

    Section 23(h)(2) also allows the Commission to share information

    received from whistleblowers with certain domestic and foreign

    regulatory and law enforcement agencies. However, the statute requires

    the domestic entities to maintain such

    [[Page 53200]]

    information as confidential, and requires foreign entities to maintain

    such information in accordance with such assurances of confidentiality

    as the Commission deems appropriate.

    In addition, Section 23(d)(2) provides that a whistleblower may

    submit information to the Commission anonymously, so long as the

    whistleblower is represented by counsel when the time comes for the

    whistleblower to make a claim for an award. However, the statute also

    provides that a whistleblower must disclose his or her identity prior

    to receiving payment of an award.

    V. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act \191\ requires that agencies

    consider whether the rules they propose will have a significant

    economic impact on a substantial number of small entities and, if so,

    provide a regulatory flexibility analysis respecting the impact.\192\

    In the Commission's Proposing Release, the Chairman, on behalf of the

    Commission, certified that a regulatory flexibility analysis is not

    required because the persons that would be subject to the rules--

    individuals--are not ``small entities'' for purposes of the Regulatory

    Flexibility Act and the rules therefore would not have a significant

    economic impact on a substantial number of small entities. The

    Commission received no comments regarding this conclusion.

    ---------------------------------------------------------------------------

    \191\ 5 U.S.C. 601, et seq.

    \192\ Id.

    ---------------------------------------------------------------------------

    VI. Statutory Authority

    The Commission is adopting the rules and forms contained in this

    document under the authority contained in Sections 2, 5, 8a(5) and 23

    of the Commodity Exchange Act.

    List of Subjects in 17 CFR Part 165

    Whistleblowing.

    In consideration of the foregoing and pursuant to the authority

    contained in the Commodity Exchange Act, in particular, Sections 2, 5,

    8a(5) and 23 thereof, the Commodity Futures Trading Commission adds a

    new 17 CFR Part 165 as set forth below:

    PART 165--WHISTLEBLOWER RULES

    Sec.

    165.1 General.

    165.2 Definitions.

    165.3 Procedures for submitting original information.

    165.4 Confidentiality.

    165.5 Prerequisites to the consideration of an award.

    165.6 Whistleblowers ineligible for an award.

    165.7 Procedures for award applications and Commission award

    determinations.

    165.8 Amount of award.

    165.9 Criteria for determining amount of award.

    165.10 Contents of record for award determination.

    165.11 Awards based upon related actions.

    165.12 Payment of awards from the Fund, financing of customer

    education initiatives, and deposits and credits to the Fund.

    165.13 Appeals.

    165.14 Procedures applicable to the payment of awards.

    165.15 Delegations of authority.

    165.16 No immunity.

    165.17 Awards to whistleblowers who engage in culpable conduct.

    165.18 Staff communications with whistleblowers from represented

    entities.

    165.19 Nonenforceability of certain provisions waiving rights and

    remedies or requiring arbitration of disputes.

    Appendix A to Part 165--Guidance With Respect to the Protection of

    Whistleblowers Against Retaliation

    Authority: 7 U.S.C. 2, 5, 12a(5) and 26, as amended by Title

    VII of the Dodd-Frank Wall Street Reform and Consumer Protection

    Act, Pub. L. 111-203, 124 Stat. 1376 (July 16, 2010).

    Sec. 165.1 General.

    Section 23 of the Commodity Exchange Act, entitled ``Commodity

    Whistleblower Incentives and Protection,'' requires the Commission to

    pay awards, subject to certain limitations and conditions, to

    whistleblowers who voluntarily provide the Commission with original

    information about violations of the Commodity Exchange Act. This part

    165 describes the whistleblower program that the Commission intends to

    establish to implement the provisions of Section 23, and explains the

    procedures the whistleblower will need to follow in order to be

    eligible for an award. Whistleblowers should read these procedures

    carefully, because the failure to take certain required steps within

    the time frames described in this part may result in disqualification

    from receiving an award. Unless expressly provided for in this part, no

    person is authorized to make any offer or promise, or otherwise to bind

    the Commission with respect to the payment of any award or the amount

    thereof.

    Sec. 165.2 Definitions.

    As used in this part:

    (a) Action. The term ``action'' generally means a single captioned

    judicial or administrative proceeding. Notwithstanding the foregoing:

    (1) For purposes of making an award under Sec. 165.7, the

    Commission will treat as a Commission action two or more administrative

    or judicial proceedings brought by the Commission if these proceedings

    arise out of the same nucleus of operative facts; or

    (2) For purposes of determining the payment on an award under Sec.

    165.14, the Commission will deem as part of the Commission action upon

    which the award was based any subsequent Commission proceeding that,

    individually, results in a monetary sanction of $1,000,000 or less, and

    that arises out of the same nucleus of operative facts.

    (b) Aggregate amount. The phrase ``aggregate amount'' means the

    total amount of an award granted to one or more whistleblowers pursuant

    to Sec. 165.8.

    (c) Analysis. The term ``analysis'' means the whistleblower's

    examination and evaluation of information that may be generally

    available, but which reveals information that is not generally known or

    available to the public.

    (d) Collected by the Commission. The phrase ``collected by the

    Commission'' refers to any funds received, and confirmed by the U.S.

    Department of the Treasury, in satisfaction of part or all of a civil

    monetary penalty, disgorgement obligation, or fine owed to the

    Commission.

    (e) Covered judicial or administrative action. The phrase ``covered

    judicial or administrative action'' means any judicial or

    administrative action brought by the Commission under the Commodity

    Exchange Act whose successful resolution results in monetary sanctions

    exceeding $1,000,000.

    (f) Fund. The term ``Fund'' means the Commodity Futures Trading

    Commission Customer Protection Fund.

    (g) Independent knowledge. The phrase ``independent knowledge''

    means factual information in the whistleblower's possession that is not

    generally known or available to the public. The whistleblower may gain

    independent knowledge from the whistleblower's experiences,

    communications and observations in the whistleblower's personal

    business or social interactions. The Commission will not consider the

    whistleblower's information to be derived from the whistleblower's

    independent knowledge if the whistleblower obtained the information:

    (1) From sources generally available to the public such as

    corporate filings and the media, including the Internet;

    (2) Through a communication that was subject to the attorney-client

    privilege, unless the disclosure is

    [[Page 53201]]

    otherwise permitted by the applicable federal or state attorney conduct

    rules;

    (3) In connection with the legal representation of a client on

    whose behalf the whistleblower, or the whistleblower's employer or

    firm, have been providing services, and the whistleblower seek to use

    the information to make a whistleblower submission for the

    whistleblower's own benefit, unless disclosure is authorized by the

    applicable federal or state attorney conduct rules;

    (4) Because the whistleblower was an officer, director, trustee, or

    partner of an entity and another person informed the whistleblower of

    allegations of misconduct, or the whistleblower learned the information

    in connection with the entity's processes for identifying, reporting,

    and addressing possible violations of law;

    (5) Because the whistleblower was an employee whose principal

    duties involved compliance or internal audit responsibilities; or

    (6) By a means or in a manner that is determined by a United States

    court to violate applicable Federal or state criminal law.

    (7) Exceptions. Paragraphs (g)(4) and (5) of this section shall not

    apply if:

    (i) The whistleblower has a reasonable basis to believe that

    disclosure of the information to the Commission is necessary to prevent

    the relevant entity from engaging in conduct that is likely to cause

    substantial injury to the financial interest or property of the entity

    or investors;

    (ii) The whistleblower has a reasonable basis to believe that the

    relevant entity is engaging in conduct that will impede an

    investigation of the misconduct; or

    (iii) At least 120 days have elapsed since the whistleblower

    provided the information to the relevant entity's audit committee,

    chief legal officer, chief compliance officer (or their equivalents),

    or the whistleblower's supervisor, or since the whistleblower received

    the information, if the whistleblower received it under circumstances

    indicating that the entity's audit committee, chief legal officer,

    chief compliance officer (or their equivalents), or the whistleblower's

    supervisor was already aware of the information.

    (h) Independent analysis. The phrase ``independent analysis'' means

    the whistleblower's own analysis, whether done alone or in combination

    with others.

    (i) Information that led to successful enforcement. The Commission

    will consider that the whistleblower provided original information that

    led to the successful enforcement of a judicial or administrative

    action, or related action, in the following circumstances:

    (1) The whistleblower gave the Commission original information that

    was sufficiently specific, credible, and timely to cause the Commission

    staff to commence an examination, open an investigation, reopen an

    investigation that the Commission had closed, or to inquire concerning

    different conduct as part of a current examination or investigation,

    and the Commission brought a successful judicial or administrative

    action based in whole or in part on conduct that was the subject of the

    whistleblower's original information; or

    (2) The whistleblower gave the Commission original information

    about conduct that was already under examination or investigation by

    the Commission, the Congress, any other authority of the federal

    government, a state Attorney General or securities regulatory

    authority, any self-regulatory organization, futures association or the

    Public Company Accounting Oversight Board (except in cases where the

    whistleblower was an original source of this information as defined in

    paragraph (i) of this section), and the whistleblower's submission

    significantly contributed to the success of the action.

    (3) The whistleblower reported original information through an

    entity's internal whistleblower, legal, or compliance procedures for

    reporting allegations of possible violations of law before or at the

    same time the whistleblower reported them to the Commission; the entity

    later provided the whistleblower's information to the Commission, or

    provided results of an audit or investigation initiated in whole or in

    part in response to information the whistleblower reported to the

    entity; and the information the entity provided to the Commission

    satisfies either paragraph (i)(1) or (i)(2) of this section. Under this

    paragraph (i)(3), the whistleblower must also submit the same

    information to the Commission in accordance with the procedures set

    forth in Sec. 165.3 within 120 days of providing it to the entity.

    (j) Monetary sanctions. The phrase ``monetary sanctions,'' when

    used with respect to any judicial or administrative action, or related

    action, means--

    (1) Any monies, including penalties, disgorgement, restitution, and

    interest ordered to be paid; and

    (2) Any monies deposited into a disgorgement fund or other fund

    pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C.

    7246(b)) as a result of such action or any settlement of such action.

    (k) Original information. The phrase ``original information'' means

    information that--

    (1) Is derived from the independent knowledge or independent

    analysis of a whistleblower;

    (2) Is not already known to the Commission from any other source,

    unless the whistleblower is the original source of the information;

    (3) Is not exclusively derived from an allegation made in a

    judicial or administrative hearing, in a governmental report, hearing,

    audit, or investigation, or from the news media, unless the

    whistleblower is a source of the information; and

    (4) Is submitted to the Commission for the first time after July

    21, 2010 (the date of enactment of the Wall Street Transparency and

    Accountability Act of 2010).

    (5) Original information shall not lose its status as original

    information solely because the whistleblower submitted such information

    prior to October 24, 2011, provided such information was submitted

    after July 21, 2010, the date of enactment of the Wall Street

    Transparency and Accountability Act of 2010. In order to be eligible

    for an award, a whistleblower who submits original information to the

    Commission after July 21, 2010, but prior to October 24, 2011, must

    comply with the procedure set forth in Sec. 165.3(d).

    (l) Original source. The whistleblower must satisfy the

    whistleblower's status as the original source of information to the

    Commission's satisfaction.

    (1) Information obtained from another source. The Commission will

    consider the whistleblower to be an ``original source'' of the same

    information that the Commission obtains from another source if the

    information the whistleblower provide satisfies the definition of

    original information and the other source obtained the information from

    the whistleblower or the whistleblower's representative.

    (i) In order to be considered an original source of information

    that the Commission receives from Congress, any other federal, state or

    local authority, or any self-regulatory organization, the whistleblower

    must have voluntarily given such authorities the information within the

    meaning of this part. In determining whether the whistleblower is the

    original source of information, the Commission may seek assistance and

    confirmation from one of the other entities or authorities described

    above.

    (ii) In the event that the whistleblower claims to be the original

    source of

    [[Page 53202]]

    information that an authority or another entity, other than as set

    forth in paragraph (l)(1)(i) of this section, provided to the

    Commission, the Commission may seek assistance and confirmation from

    such authority or other entity.

    (2) Information first provided to another authority or person. If

    the whistleblower provides information to Congress, any other federal

    or state authority, a registered entity, a registered futures

    association, a self-regulatory organization, or to any of any of the

    persons described in paragraphs (g)(4) and (5) of this section, and the

    whistleblower, within 120 days, make a submission to the Commission

    pursuant to Sec. 165.3, as the whistleblower must do in order for the

    whistleblower to be eligible to be considered for an award, then, for

    purposes of evaluating the whistleblower's claim to an award under

    Sec. 165.7, the Commission will consider that the whistleblower

    provided original information as of the date of the whistleblower's

    original disclosure, report, or submission to one of these other

    authorities or persons. The whistleblower must establish the

    whistleblower's status as the original source of such information, as

    well as the effective date of any prior disclosure, report, or

    submission, to the Commission's satisfaction. The Commission may seek

    assistance and confirmation from the other authority or person in

    making this determination.

    (3) Information already known by the Commission. If the Commission

    already knows some information about a matter from other sources at the

    time the whistleblower makes the whistleblower's submission, and the

    whistleblower is not an original source of that information, as

    described above, the Commission will consider the whistleblower an

    ``original source'' of any information the whistleblower separately

    provides that is original information that materially adds to the

    information that the Commission already possesses.

    (m) Related action. The phrase ``related action,'' when used with

    respect to any judicial or administrative action brought by the

    Commission under the Commodity Exchange Act, means any judicial or

    administrative action brought by an entity listed in Sec. 165.11(a)

    that is based upon the original information voluntarily submitted by a

    whistleblower to the Commission pursuant to Sec. 165.3 that led to the

    successful resolution of the Commission action.

    (n) Successful resolution. The phrase ``successful resolution,''

    when used with respect to any judicial or administrative action brought

    by the Commission under the Commodity Exchange Act, includes any

    settlement of such action or final judgment in favor of the Commission.

    It shall also have the same meaning as ``successful enforcement.''

    (o) Voluntary submission or voluntarily submitted. (1) The phrase

    ``voluntary submission'' or ``voluntarily submitted'' within the

    context of submission of original information to the Commission under

    this part, shall mean the provision of information made prior to any

    request from the Commission, Congress, any other federal or state

    authority, the Department of Justice, a registered entity, a registered

    futures association, or a self-regulatory organization to the

    whistleblower or anyone representing the whistleblower (such as an

    attorney) about a matter to which the information in the

    whistleblower's submission is relevant. If the Commission or any of

    these other authorities makes a request, inquiry, or demand to the

    whistleblower or the whistleblower's representative first, the

    whistleblower's submission will not be considered voluntary, and the

    whistleblower will not be eligible for an award, even if the

    whistleblower's response is not compelled by subpoena or other

    applicable law. For purposes of this paragraph, the whistleblower will

    be considered to have received a request, inquiry or demand if

    documents or information from the whistleblower is within the scope of

    a request, inquiry, or demand that the whistleblower's employer

    receives, unless, after receiving the documents or information from the

    whistleblower, the whistleblower's employer fails to provide the

    whistleblower's documents or information to the requesting authority in

    a timely manner.

    (2) In addition, the whistleblower's submission will not be

    considered voluntary if the whistleblower is under a pre-existing legal

    or contractual duty to report the violations that are the subject of

    the whistleblower's original information to the Commission, Congress,

    any other federal or state authority, the Department of Justice, a

    registered entity, a registered futures association, or a self-

    regulatory organization, or a duty that arises out of a judicial or

    administrative order.

    (p) Whistleblower(s). (1) The term ``whistleblower'' or

    ``whistleblowers'' means any individual, or two (2) or more individuals

    acting jointly, who provides information relating to a potential

    violation of the Commodity Exchange Act to the Commission, in the

    manner established by Sec. 165.3. A company or another entity is not

    eligible to be a whistleblower.

    (2) Prohibition against retaliation. The anti-retaliation

    protections under Section 23(h) of the Commodity Exchange Act apply

    whether or not the whistleblower satisfies the requirements, procedures

    and conditions to qualify for an award. For purposes of the anti-

    retaliation protections afforded by Section 23(h)(1)(A)(i) of the

    Commodity Exchange Act, the whistleblower is a whistleblower if:

    (i) The whistleblower possess a reasonable belief that the

    information the whistleblower is providing relates to a possible

    violation of the CEA, or the rules or regulations thereunder, that has

    occurred, is ongoing, or is about to occur; and

    (ii) The whistleblower provides that information in a manner

    described in Sec. 165.3.

    Sec. 165.3 Procedures for submitting original information.

    A whistleblower's submission of information to the Commission will

    be a two-step process.

    (a) First, the whistleblower will need to submit the

    whistleblower's information to the Commission. The whistleblower may

    submit the whistleblower's information:

    (1) By completing and submitting a Form TCR online and submitting

    it electronically through the Commission's Web site at http://www.cftc.gov; or

    (2) By completing the Form TCR and mailing or faxing the form to

    the Commission, Three Lafayette Centre, 1155 21st Street, NW.,

    Washington, DC 20581, Fax (202) 418-5975.

    (b) Further, to be eligible for an award, the whistleblower must

    declare under penalty of perjury at the time the whistleblower submits

    the whistleblower's information pursuant to paragraph (a)(1) or (2) of

    this section that the whistleblower's information is true and correct

    to the best of the whistleblower's knowledge and belief.

    (c) Notwithstanding paragraph (b) of this section, if the

    whistleblower submitted the whistleblower's original information to the

    Commission anonymously, then the whistleblower's identity must be

    disclosed to the Commission and verified in a form and manner

    acceptable to the Commission consistent with the procedure set forth in

    Sec. 165.7(c) prior to Commission's payment of any award.

    (d) If the whistleblower submitted original information in writing

    to the Commission after July 21, 2010 (the date of enactment of the

    Wall Street Transparency and Accountability Act of

    [[Page 53203]]

    2010) but before the effective date of these rules, the whistleblower

    will be eligible for an award only in the event that the whistleblower

    provided the original information to the Commission in a format or

    manner other than that described in paragraph (a) of this section, the

    whistleblower submits a completed Form TCR within 120 days of the

    effective date of these rules and otherwise follows the procedures set

    forth above in paragraphs (a) and (b) of this section.

    Sec. 165.4 Confidentiality.

    (a) In general. Section 23(h)(2) of the Commodity Exchange Act

    requires that the Commission not disclose information that could

    reasonably be expected to reveal the identity of a whistleblower,

    except that the Commission may disclose such information in the

    following circumstances:

    (1) When disclosure is required to a defendant or respondent in

    connection with a public proceeding that the Commission institutes or

    in another public proceeding that is filed by an authority to which the

    Commission provides the information, as described below;

    (2) When the Commission determines that it is necessary to

    accomplish the purposes of the Commodity Exchange Act and to protect

    customers, it may provide whistleblower information to: The Department

    of Justice; an appropriate department or agency of the Federal

    Government, acting within the scope of its jurisdiction; a registered

    entity, registered futures association, or a self-regulatory

    organization; a state attorney general in connection with a criminal

    investigation; any appropriate state department or agency, acting

    within the scope of its jurisdiction; or a foreign futures authority;

    and

    (3) The Commission may make disclosures in accordance with the

    Privacy Act of 1974 (5 U.S.C. 552a).

    (b) Anonymous whistleblowers. A whistleblower may anonymously

    submit information to the Commission, however, the whistleblower must

    follow the procedures in Sec. 165.3(c) for submitting original

    information anonymously. Such whistleblower who anonymously submits

    information to the Commission must also follow the procedures in Sec.

    165.7(c) in submitting to the Commission an application for a

    whistleblower award.

    Sec. 165.5 Prerequisites to the consideration of an award.

    (a) Subject to the eligibility requirements described in these

    rules, the Commission will pay an award to one or more whistleblowers

    who:

    (1) Provide a voluntary submission to the Commission;

    (2) That contains original information; and

    (3) That leads to the successful resolution of a covered Commission

    judicial or administrative action or successful enforcement of a

    related action; and

    (b) In order to be eligible, the whistleblower must:

    (1) Have given the Commission original information in the form and

    manner that the Commission requires in Sec. 165.3 and be the original

    source of information;

    (2) Provide the Commission, upon its staff's request, certain

    additional information, including: explanations and other assistance,

    in the manner and form that staff may request, in order that the staff

    may evaluate the use of the information submitted; all additional

    information in the whistleblower's possession that is related to the

    subject matter of the whistleblower's submission; and testimony or

    other evidence acceptable to the staff relating to the whistleblower's

    eligibility for an award; and

    (3) If requested by Commission staff, enter into a confidentiality

    agreement in a form acceptable to the Commission, including a provision

    that a violation of the confidentiality agreement may lead to the

    whistleblower's ineligibility to receive an award.

    Sec. 165.6 Whistleblowers ineligible for an award.

    (a) No award under Sec. 165.7 shall be made:

    (1) To any whistleblower who is, or was at the time the

    whistleblower acquired the original information submitted to the

    Commission, a member, officer, or employee of: the Commission; the

    Board of Governors of the Federal Reserve System; the Office of the

    Comptroller of the Currency; the Board of Directors of the Federal

    Deposit Insurance Corporation; the Director of the Office of Thrift

    Supervision; the National Credit Union Administration Board; the

    Securities and Exchange Commission; the Department of Justice; a

    registered entity; a registered futures association; a self-regulatory

    organization; or a law enforcement organization;

    (2) To any whistleblower who is convicted of a criminal violation

    related to the judicial or administrative action for which the

    whistleblower otherwise could receive an award under Sec. 165.7;

    (3) To any whistleblower who submits information to the Commission

    that is based on the facts underlying the covered judicial or

    administrative action submitted previously by another whistleblower;

    (4) To any whistleblower who acquired the information the

    whistleblower gave the Commission from any of the individuals described

    in paragraphs (a)(1), (2), (3) or (6) of this section;

    (5) To any whistleblower who, in the whistleblower's submission,

    the whistleblower's other dealings with the Commission, or the

    whistleblower's dealings with another authority in connection with a

    related action, knowingly and willfully makes any false, fictitious, or

    fraudulent statement or representation, or uses any false writing or

    document, knowing that it contains any false, fictitious, or fraudulent

    statement or entry, or omitted any material fact, where, in the absence

    of such fact, other statements or representations made by the

    whistleblower would be misleading;

    (6) To any whistleblower who acquired the original information

    reported to the Commission as a result of the whistleblower's role as a

    member, officer or employee of either a foreign regulatory authority or

    law enforcement organization;

    (7) To any whistleblower who is, or was at the time the

    whistleblower acquired the original information submitted to the

    Commission, a member, officer, or employee of a foreign regulatory

    authority or law enforcement organization; or

    (8) To any whistleblower who acquired the original information the

    whistleblower gave the Commission from any other person with the intent

    to evade any provision of these rules.

    (b) Notwithstanding a whistleblower's ineligibility for an award

    for any reason set forth in paragraph (a) of this section, the

    whistleblower will remain eligible for the anti-retaliation protections

    set forth in Section 23(h)(1) of the Commodity Exchange Act.

    Sec. 165.7 Procedures for award applications and Commission award

    determinations.

    (a) Whenever a Commission judicial or administrative action results

    in monetary sanctions totaling more than $1,000,000 (i.e., a covered

    judicial or administrative action) the Commission will publish on the

    Commission's Web site a ``Notice of Covered Action.'' Such Notice of

    Covered Action will be published subsequent to the entry of a final

    judgment or order that alone, or collectively with other judgments or

    orders previously entered in the Commission covered administrative or

    judicial action, exceeds $1,000,000 in

    [[Page 53204]]

    monetary sanctions. The Commission will not contact whistleblower

    claimants directly as to Notices of Covered Actions; prospective

    claimants should monitor the Commission Web site for such Notices. A

    whistleblower claimant will have 90 days from the date of the Notice of

    Covered Action to file a claim for an award based on that action, or

    the claim will be barred.

    (b) To file a claim for a whistleblower award, the whistleblower

    must file Form WB-APP, Application for Award for Original Information

    Provided Pursuant to Section 23 of the Commodity Exchange Act. The

    whistleblower must sign this form as the claimant and submit it to the

    Commission by mail or fax to Commodity Futures Trading Commission,

    Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581,

    Fax (202) 418-5975. The Form WB-APP, including any attachments, must be

    received by the Commission within 90 calendar days of the date of the

    Notice of Covered Action or 90 calendar days following the date of a

    final judgment in a related action in order to be considered for an

    award.

    (c) If the whistleblower provided the whistleblower's original

    information to the Commission anonymously pursuant to Sec. Sec. 165.3

    and 165.4 and:

    (1) The whistleblower is making the whistleblower's claim for a

    whistleblower award on a disclosed basis, the whistleblower must

    disclose the whistleblower's identity on the Form WB-APP. The

    whistleblower's identity must be verified in a form and manner that is

    acceptable to the Commission prior to the payment of any award; or

    (2) The whistleblower is making the whistleblower's claim for a

    whistleblower award on an anonymous basis, the whistleblower must be

    represented by counsel. The whistleblower must provide the

    whistleblower's counsel with a completed Form WB-APP that is signed by

    the whistleblower by no later than the date upon which the

    whistleblower's counsel submits to the Commission a copy of the Form

    WB-APP that does not disclose the whistleblower's identity and is

    signed solely by the whistleblower's counsel. In addition, the

    whistleblower's counsel must retain the signed original of the

    whistleblower's Form WB-APP in counsel's records. Upon request of the

    Commission staff, whistleblower's counsel must produce to the

    Commission the whistleblower's signed original WB-APP and the

    whistleblower's identity must be verified in a form and manner that is

    acceptable to the Commission prior to the payment of any award.

    (d) Once the time for filing any appeals of the Commission's

    judicial or administrative action and all related actions has expired,

    or, where an appeal has been filed, after all appeals in the judicial,

    administrative and related actions have concluded, the Commission will

    evaluate all timely whistleblower award claims submitted on Form WB-APP

    in accordance with the criteria set forth in this Part 165. In

    connection with this process, the Commission may require that the

    whistleblower provide additional information relating to the

    whistleblower's eligibility for an award or satisfaction of any of the

    conditions for an award, as set forth in Sec. 165.5(b). Following that

    evaluation, the Commission will send the whistleblower a Final Order

    setting forth whether the claim is allowed or denied and, if allowed,

    setting forth the award percentage amount.

    (e) The Commission's Office of the Secretariat will provide the

    whistleblower with the Final Order of the Commission.

    Sec. 165.8 Amount of award.

    If all of the conditions are met for a whistleblower award in

    connection with a covered judicial or administrative action or a

    related action, the Commission will then decide the amount of the award

    pursuant to the procedure set forth in Sec. 165.7.

    (a) Whistleblower awards shall be in an aggregate amount equal to--

    (1) Not less than 10 percent, in total, of what has been collected

    of the monetary sanctions imposed in the covered judicial or

    administrative action or related actions; and

    (2) Not more than 30 percent, in total, of what has been collected

    of the monetary sanctions imposed in the covered judicial or

    administrative action or related actions.

    (b) If the Commission makes awards to more than one whistleblower

    in connection with the same action or related action, the Commission

    will determine an individual percentage award for each whistleblower,

    but in no event will the total amount awarded to all whistleblowers as

    a group be less than 10 percent or greater than 30 percent of the

    amount the Commission or the other authorities collect.

    Sec. 165.9 Criteria for determining amount of award.

    The determination of the amount of an award shall be in the

    discretion of the Commission. The Commission may exercise this

    discretion directly or through delegated authority pursuant to Sec.

    165.15.

    (a) In determining the amount of an award, the Commission shall

    take into consideration--

    (1) The significance of the information provided by the

    whistleblower to the success of the covered judicial or administrative

    action or related action;

    (2) The degree of assistance provided by the whistleblower and any

    legal representative of the whistleblower in a covered judicial or

    administrative action or related action;

    (3) The programmatic interest of the Commission in deterring

    violations of the Commodity Exchange Act by making awards to

    whistleblowers who provide information that leads to the successful

    enforcement of such laws;

    (4) Whether the award otherwise enhances the Commission's ability

    to enforce the Commodity Exchange Act, protect customers, and encourage

    the submission of high quality information from whistleblowers; and

    (5) Potential adverse incentives from oversize awards.

    (b) Factors that may increase the amount of a whistleblower's

    award. In determining whether to increase the amount of an award, the

    Commission will consider the following factors, which are not listed in

    order of importance.

    (1) Significance of the information provided by the whistleblower.

    The Commission will assess the significance of the information provided

    by a whistleblower to the success of the Commission action or related

    action. In considering this factor, the Commission may take into

    account, among other things:

    (i) The nature of the information provided by the whistleblower and

    how it related to the successful enforcement action, including whether

    the reliability and completeness of the information provided to the

    Commission by the whistleblower resulted in the conservation of

    Commission resources; and

    (ii) The degree to which the information provided by the

    whistleblower supported one or more successful claims brought in the

    Commission action or related action.

    (2) Assistance provided by the whistleblower. The Commission will

    assess the degree of assistance provided by the whistleblower and any

    legal representative of the whistleblower in the Commission action or

    related action. In considering this factor, the Commission may take

    into account, among other things:

    (i) Whether the whistleblower provided ongoing, extensive, and

    timely

    [[Page 53205]]

    cooperation and assistance by, for example, helping to explain complex

    transactions, interpreting key evidence, or identifying new and

    productive lines of inquiry;

    (ii) The timeliness of the whistleblower's initial report to the

    Commission or to an internal compliance or reporting system of business

    organizations committing, or impacted by, the violations of the

    Commodity Exchange Act, where appropriate;

    (iii) The resources conserved as a result of the whistleblower's

    assistance;

    (iv) Whether the whistleblower appropriately encouraged or

    authorized others to assist the staff of the Commission who might

    otherwise not have participated in the investigation or related action;

    (v) The efforts undertaken by the whistleblower to remediate the

    harm caused by the violations of the Commodity Exchange Act, including

    assisting the authorities in the recovery of the fruits and

    instrumentalities of the violations; and

    (vi) Any unique hardships experienced by the whistleblower as a

    result of his or her reporting and assisting in the enforcement action.

    (3) Law enforcement interest. The Commission will assess its

    programmatic interest in deterring violations of the Commodity Exchange

    Act by making awards to whistleblowers who provide information that

    leads to the successful enforcement of such laws. In considering this

    factor, the Commission may take into account, among other things:

    (i) The degree to which an award enhances the Commission's ability

    to enforce the commodity laws;

    (ii) The degree to which an award encourages the submission of high

    quality information from whistleblowers by appropriately rewarding

    whistleblower submissions of significant information and assistance,

    even in cases where the monetary sanctions available for collection are

    limited or potential monetary sanctions were reduced or eliminated by

    the Commission because an entity self-reported a commodities violation

    following the whistleblower's related internal disclosure, report, or

    submission;

    (iii) Whether the subject matter of the action is a Commission

    priority, whether the reported misconduct involves regulated entities

    or fiduciaries, whether the whistleblower exposed an industry-wide

    practice, the type and severity of the commodity violations, the age

    and duration of misconduct, the number of violations, and the isolated,

    repetitive, or ongoing nature of the violations;

    (iv) The dangers to market participants or others presented by the

    underlying violations involved in the enforcement action, including the

    amount of harm or potential harm caused by the underlying violations,

    the type of harm resulting from or threatened by the underlying

    violations, and the number of individuals or entities harmed; and

    (v) The degree, reliability and effectiveness of the

    whistleblower's assistance, including the consideration of the

    whistleblower's complete, timely truthful assistance to the Commission

    and criminal authorities.

    (4) Participation in internal compliance systems. The Commission

    will assess whether, and the extent to which, the whistleblower and any

    legal representative of the whistleblower participated in internal

    compliance systems. In considering this factor, the Commission may take

    into account, among other things:

    (i) Whether, and the extent to which, a whistleblower reported the

    possible Commodity Exchange Act violations through internal

    whistleblower, legal or compliance procedures before, or at the same

    time as, reporting them to the Commission; and

    (ii) Whether, and the extent to which, a whistleblower assisted any

    internal investigation or inquiry concerning the reported Commodity

    Exchange Act violations.

    (c) Factors that may decrease the amount of a whistleblower's

    award. In determining whether to decrease the amount of an award, the

    Commission will consider the following factors, which are not listed in

    order of importance.

    (1) Culpability. The Commission will assess the culpability or

    involvement of the whistleblower in matters associated with the

    Commission's action or related actions. In considering this factor, the

    Commission may take into account, among other things:

    (i) The whistleblower's role in the Commodity Exchange Act

    violations;

    (ii) The whistleblower's education, training, experience, and

    position of responsibility at the time the violations occurred;

    (iii) Whether the whistleblower acted with scienter, both generally

    and in relation to others who participated in the violations;

    (iv) Whether the whistleblower financially benefitted from the

    violations;

    (v) Whether the whistleblower is a recidivist;

    (vi) The egregiousness of any wrongdoing committed by the

    whistleblower; and

    (vii) Whether the whistleblower knowingly interfered with the

    Commission's investigation of the violations or related enforcement

    actions.

    (2) Unreasonable reporting delay. The Commission will assess

    whether the whistleblower unreasonably delayed reporting the Commodity

    Exchange Act violations. In considering this factor, the Commission may

    take into account, among other things:

    (i) Whether the whistleblower was aware of the relevant facts but

    failed to take reasonable steps to report or prevent the violations

    from occurring or continuing;

    (ii) Whether the whistleblower was aware of the relevant facts but

    only reported them after learning about a related inquiry,

    investigation, or enforcement action; and

    (iii) Whether there was a legitimate reason for the whistleblower

    to delay reporting the violations.

    (3) Interference with internal compliance and reporting systems.

    The Commission will assess, in cases where the whistleblower interacted

    with his or her entity's internal compliance or reporting system,

    whether the whistleblower undermined the integrity of such system. In

    considering this factor, the Commission will take into account whether

    there is evidence provided to the Commission that the whistleblower

    knowingly:

    (i) Interfered with an entity's established legal, compliance, or

    audit procedures to prevent or delay detection of the reported

    Commodity Exchange Act violation;

    (ii) Made any material false, fictitious, or fraudulent statements

    or representations that hindered an entity's efforts to detect,

    investigate, or remediate the reported Commodity Exchange Act

    violations; or

    (iii) Provided any false writing or document knowing the writing or

    document contained any false, fictitious or fraudulent statements or

    entries that hindered an entity's efforts to detect, investigate, or

    remediate the reported Commodity Exchange Act violations.

    (d) The Commission shall not take into consideration the balance of

    the Fund in determining the amount of an award.

    Sec. 165.10 Contents of record for award determinations.

    (a) The following items constitute the record upon which the award

    determination under Sec. 165.7 shall be made:

    [[Page 53206]]

    (1) The whistleblower's Form TCR, ``Tip, Complaint or Referral,''

    including related attachments, and other documentation provided by the

    whistleblower to the Commission;

    (2) The whistleblower's Form WB-APP, ``Application for Award for

    Original Information Provided Pursuant to Section 23 of the Commodity

    Exchange Act,'' and related attachments;

    (3) The complaint, notice of hearing, answers and any amendments

    thereto;

    (4) The final judgment, consent order, or administrative speaking

    order;

    (5) The transcript of the related administrative hearing or civil

    injunctive proceeding, including any exhibits entered at the hearing or

    proceeding;

    (6) Any other documents that appear on the docket of the

    proceeding; and

    (7) Sworn declarations (including attachments) from the

    Commission's Division of Enforcement staff regarding any matters

    relevant to the award determination.

    (b) The record upon which the award determinations under Sec.

    165.7 shall be made shall not include any Commission pre-decisional,

    attorney-client privilege, attorney work product privilege, or internal

    deliberative process materials related to the Commission or its staff's

    determination: To file or settle the related covered judicial or

    administrative action; and/or whether, to whom and in what amount to

    make a whistleblower award. Further, the record upon which the award

    determination under Sec. 165.7 shall be made shall not include any

    other entity's pre-decisional, attorney-client privilege, attorney work

    product privilege, or internal deliberative process materials related

    to its or its staff's determination to file or settle a related action.

    Sec. 165.11 Awards based upon related actions.

    Provided that a whistleblower or whistleblowers comply with the

    requirements in Sec. Sec. 165.3, 165.5 and 165.7, and pursuant to

    Sec. 165.8, the Commission or its delegate may grant an award based on

    the amount of monetary sanctions collected in a ``related action'' or

    ``related actions'' rather than on the amount collected in a covered

    judicial or administrative action, where:

    (a) A ``related action'' is a judicial or administrative action

    that is brought by:

    (1) The Department of Justice;

    (2) An appropriate department or agency of the Federal Government,

    acting within the scope of its jurisdiction;

    (3) A registered entity, registered futures association, or self-

    regulatory organization;

    (4) A State criminal or appropriate civil agency, acting within the

    scope of its jurisdiction; or

    (5) A foreign futures authority; and

    (b) The ``related action'' is based on the same original

    information that the whistleblower voluntarily submitted to the

    Commission and led to a successful resolution of the Commission

    judicial or administrative action.

    Sec. 165.12 Payment of awards from the Fund, financing of customer

    education initiatives, and deposits and credits to the Fund.

    (a) The Commission shall pay awards to whistleblowers from the

    Fund.

    (b) The Commission shall deposit into or credit to the Fund:

    (1) Any monetary sanctions collected by the Commission in any

    covered judicial or administrative action that is not otherwise

    distributed, or ordered to be distributed, to victims of a violation of

    the Commodity Exchange Act underlying such action, unless the balance

    of the Fund at the time the monetary sanctions are collected exceeds

    $100,000,000. In the event the Fund's value exceeds $100,000,000, any

    monetary sanctions collected by the Commission in a covered judicial or

    administrative action that is not otherwise distributed, or ordered to

    be distributed, to victims of violations of the Commodity Exchange Act

    or the rules and regulations thereunder underlying such action, shall

    be deposited into the general fund of the U.S. Treasury.

    (2) In the event that the amounts deposited into or credited to the

    Fund under paragraph (b)(1) of this section are not sufficient to

    satisfy an award made pursuant to Sec. 165.7, then, pursuant to

    Section 23(g)(3)(B) of the Commodity Exchange Act;

    (i) An amount equal to the unsatisfied portion of the award;

    (ii) Shall be deposited into or credited to the Fund;

    (iii) From any monetary sanction collected by the Commission in any

    judicial or administrative action brought by the Commission under the

    Commodity Exchange Act, regardless of whether it qualifies as a

    ``covered judicial or administrative action''; provided, however, that

    such judicial or administrative action is based on information provided

    by a whistleblower.

    (c) Office of Consumer Outreach. The Commission shall undertake and

    maintain customer education initiatives through its Office of Consumer

    Outreach. The initiatives shall be designed to help customers protect

    themselves against fraud or other violations of the Commodity Exchange

    Act, or the rules or regulations thereunder. The Commission shall fund

    the initiatives and may utilize funds deposited into the Fund during

    any fiscal year in which the beginning (October 1) balance of the Fund

    is greater than $10,000,000. The Commission shall budget, on an annual

    basis, the amount used to finance customer education initiatives,

    taking into consideration the balance of the Fund.

    Sec. 165.13 Appeals.

    (a) Any Final Order of the Commission relating to a whistleblower

    award determination, including whether, to whom, or in what amount to

    make whistleblower awards, may be appealed to the appropriate court of

    appeals of the United States not more than 30 days after the Final

    Order of the Commission is issued.

    (b) The record on appeal shall consist of:

    (1) The Contents of Record for Award Determinations, as set forth

    in Sec. 165.9; and

    (2) The Final Order of the Commission, as set forth in Sec. 165.7.

    Sec. 165.14 Procedures applicable to the payment of awards.

    (a) A recipient of a whistleblower award is entitled to payment on

    the award only to the extent that the monetary sanction upon which the

    award is based is collected in the Commission judicial or

    administrative action or in a related action.

    (b) Payment of a whistleblower award for a monetary sanction

    collected in a Commission action or related action shall be made within

    a reasonable time following the later of:

    (1) The date on which the monetary sanction is collected; or

    (2) The completion of the appeals process for all whistleblower

    award claims arising from:

    (i) The Notice of Covered Action, in the case of any payment of an

    award for a monetary sanction collected in a covered judicial or

    administrative action; or

    (ii) The related action, in the case of any payment of an award for

    a monetary sanction collected in a related action.

    (c) If there are insufficient amounts available in the Fund to pay

    the entire amount of an award payment within a reasonable period of

    time from the time for payment specified by paragraph (b) of this

    section, then subject to the following terms, the balance of the

    payment shall be paid when amounts become available in the Fund, as

    follows:

    [[Page 53207]]

    (1) Where multiple whistleblowers are owed payments from the Fund

    based on awards that do not arise from the same Notice of Covered

    Action (or related action), priority in making these payments will be

    determined based upon the date that the Final Order of the Commission

    is made. If two or more of these Final Orders of the Commission are

    entered on the same date, then those whistleblowers owed payments will

    be paid on a pro rata basis until sufficient amounts become available

    in the Fund to pay their entire payments.

    (2) Where multiple whistleblowers are owed payments from the Fund

    based on awards that arise from the same Notice of Covered Action (or

    related action), they will share the same payment priority and will be

    paid on a pro rata basis until sufficient amounts become available in

    the Fund to pay their entire payments.

    Sec. 165.15 Delegations of authority.

    (a) Delegation of authority to the Executive Director. The

    Commission hereby delegates, until such time as the Commission orders

    otherwise, to the Executive Director or to any Commission employee

    under the Executive Director's supervision as he or she may designate,

    the authority to take the following actions to carry out this Part 165

    and the requirements of Section 23(h) of Commodity Exchange Act.

    (1) Delegated authority under Sec. 165.12(a), (b). The Executive

    Director's delegated authority to deposit into or credit collected

    monetary sanctions to the Fund and the payment of awards therefrom

    shall be with the concurrence of the General Counsel and the Director

    of the Division of Enforcement or of their respective designees.

    (2) Delegated authority to select a Whistleblower Award

    Determination Panel that shall be composed of three of the Commission's

    Offices or Divisions. The Whistleblower Award Determination Panel shall

    include neither the Division of Enforcement nor the Office of General

    Counsel.

    (b) Delegation of Authority to Whistleblower Award Determination

    Panel. The Commission hereby delegates, until such time as the

    Commission orders otherwise, to the Whistleblower Award Determination

    Panel the authority to make whistleblower award determinations under

    this Part 165, including the determinations as whether, to whom, or in

    what amount to make awards. Award determinations in matters involving

    monetary sanctions in either the Commission's action or a related

    action that total more than $15,000,000 (i.e., matters with a maximum

    potential whistleblower award greater than $5,000,000) must be

    determined by the heads of the Offices or Divisions comprising the

    Whistleblower Award Determination Panel. In all other matters, award

    determinations may be determined by the employee designees of the heads

    of the Offices or Divisions comprising the Whistleblower Award

    Determination Panel.

    (c) Delegation of Authority to the Whistleblower Office. With the

    exception of Sec. 165.12, the Commission hereby delegates, until such

    time as the Commission orders otherwise, to the head of the

    Whistleblower Office the authority to take any action under this Part

    165 that is not otherwise delegated to either the Executive Director or

    the Whistleblower Award Determination Panel under this section,

    including the authority to administer the Commission's whistleblower

    program and liaise with whistleblowers.

    Sec. 165.16 No immunity.

    The Commodity Whistleblower Incentives and Protections provisions

    set forth in Section 23(h) of Commodity Exchange Act and this Part 165

    do not provide individuals who provide information to the Commission

    with immunity from prosecution. The fact that an individual may become

    a whistleblower and assist in Commission investigations and enforcement

    actions does not preclude the Commission from bringing an action

    against the whistleblower based upon the whistleblower's own conduct in

    connection with violations of the Commodity Exchange Act and the

    Commission's regulations. If such an action is determined to be

    appropriate, however, the Commission's Division of Enforcement will

    take the whistleblower's cooperation into consideration in accordance

    with its sanction recommendations to the Commission.

    Sec. 165.17 Awards to whistleblowers who engage in culpable conduct.

    In determining whether the required $1,000,000 threshold has been

    satisfied for purposes of making any award, the Commission will not

    take into account any monetary sanctions that the whistleblower is

    ordered to pay, or that is ordered against any entity whose liability

    is based primarily on conduct that the whistleblower principally

    directed, planned, or initiated. Similarly, if the Commission

    determines that a whistleblower is eligible for an award, any amounts

    that the whistleblower or such an entity pay in sanctions as a result

    of the action or related actions will not be included within the

    calculation of the amounts collected for purposes of making payments

    pursuant to Sec. 165.14.

    Sec. 165.18 Staff communications with whistleblowers from represented

    entities.

    If the whistleblower is a whistleblower who is a director, officer,

    member, agent, or employee of an entity that has counsel, and the

    whistleblower has initiated communication with the Commission relating

    to a potential violation of the Commodity Exchange Act, the

    Commission's staff is authorized to communicate directly with the

    whistleblower regarding the subject of the whistleblower's

    communication without seeking the consent of the entity's counsel.

    Sec. 165.19 Nonenforceability of certain provisions waiving rights

    and remedies or requiring arbitration of disputes.

    The rights and remedies provided for in this Part 165 of the

    Commission's regulations may not be waived by any agreement, policy,

    form, or condition of employment, including by a predispute arbitration

    agreement. No predispute arbitration agreement shall be valid or

    enforceable if the agreement requires arbitration of a dispute arising

    under this Part.

    Appendix A to Part 165--Guidance With Respect to the Protection of

    Whistleblowers Against Retaliation

    Section 23(h)(1) of Commodity Exchange Act prohibits employers

    from engaging in retaliation against whistleblowers. This provision

    provides whistleblowers with certain protections against

    retaliation, including: A federal cause of action against the

    employer, which must be filed in the appropriate district court of

    the United States within two (2) years of the employer's retaliatory

    act; and potential relief for prevailing whistleblowers, including

    reinstatement, back pay, and compensation for other expenses,

    including reasonable attorney's fees.

    (a) In General. No employer may discharge, demote, suspend,

    threaten, harass, directly or indirectly, or in any other manner

    discriminate against, a whistleblower in the terms and conditions of

    employment because of any lawful act done by the whistleblower--

    (1) In providing information to the Commission in accordance

    with this part 165; or

    (2) In assisting in any investigation or judicial or

    administrative action of the Commission based upon or related to

    such information.

    (b) Enforcement--(1) Cause of Action.--An individual who alleges

    discharge or other discrimination in violation of section

    23(h)(1)(A) of the Commodity Exchange Act may bring an action under

    section 23(h)(1)(B) of the Commodity Exchange Act in the appropriate

    district court of the United States

    [[Page 53208]]

    for the relief provided in section 23(h)(1)(C) of the Commodity

    Exchange Act, unless the individual who is alleging discharge or

    other discrimination in violation of section 23(h)(1)(A) of the

    Commodity Exchange Act is an employee of the Federal Government, in

    which case the individual shall only bring an action under section

    1221 of title 5, United States Code.

    (2) Subpoenas.--A subpoena requiring the attendance of a witness

    at a trial or hearing conducted under section 23(h)(1)(A) of the

    Commodity Exchange Act may be served at any place in the United

    States.

    (3) Statute of Limitations.--An action under section 23(h)(1)(B)

    of the Commodity Exchange Act may not be brought more than 2 years

    after the date on which the violation reported in Section

    23(h)(1)(A) of the Commodity Exchange Act is committed.

    (c) Relief.--Relief for an individual prevailing in an action

    brought under section 23(h)(1)(B) of the Commodity Exchange Act

    shall include--

    (1) Reinstatement with the same seniority status that the

    individual would have had, but for the discrimination;

    (2) The amount of back pay otherwise owed to the individual,

    with interest; and

    (3) Compensation for any special damages sustained as a result

    of the discharge or discrimination, including litigation costs,

    expert witness fees, and reasonable attorney's fees.

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    Privacy Act Statement

    This notice is given under the Privacy Act of 1974. The Privacy

    Act requires that the Commodity Futures Trading Commission (CFTC or

    Commission) inform individuals of the following when asking for

    information. This form may be used by anyone wishing to provide the

    CFTC with information concerning a violation of the Commodity

    Exchange Act or the Commission's regulations. If the whistleblower

    is submitting this information for the Commission's whistleblower

    award program pursuant to Section 23 of the Commodity Exchange Act,

    the information provided will enable the Commission to determine the

    whistleblower's eligibility for payment of an award. This

    information may be disclosed to Federal, state, local, or foreign

    agencies responsible for investigating, prosecuting, enforcing, or

    implementing laws, rules, or regulations implicated by the

    information consistent with the confidentiality requirements set

    forth therein, including pursuant to Section 23 of the Commodity

    Exchange Act and Part 165 of the Commission's regulations

    thereunder. Furnishing the information is voluntary, but a decision

    not to do so may result in the whistleblower not being eligible for

    award consideration.

    Questions concerning this form may be directed to the Commodity

    Futures Trading Commission, Three Lafayette Centre, 1155 21st

    Street, NW., Washington, DC 20581.

    Submission Procedures

    After completing this Form TCR, please send it

    electronically, by mail, e-mail or delivery to the Commission:

    electronically via the Commission's Web site; by mail or delivery to

    the Commodity Futures Trading Commission, Three Lafayette Centre,

    1151 21st Street, NW., Washington, DC 20581; by e-mail to XXXXX.gov;

    or by facsimile to (202) XXX-XXXX.

    The whistleblower has the right to submit information

    anonymously.

    If the whistleblower is submitting information for the

    Commission's whistleblower award program, the whistleblower must

    submit the whistleblower's information using this Form TCR.

    Instructions for Completing Form TCR

    Section A: Information About You

    Questions 1-4: Please provide the following information about

    yourself:

    Last name, first name, and middle initial;

    Complete address, including city, state and zip code;

    Telephone number and, if available, an alternate number

    where the whistleblower can be reached;

    The whistleblower's e-mail address (to facilitate

    communications, we strongly encourage the whistleblower to provide

    the whistleblower's email address);

    The whistleblower's preferred method of communication;

    and

    The whistleblower's occupation.

    Section B: Information about the Whistleblower's Attorney. Complete

    this Section Only if the Whistleblower is Represented by an

    Attorney in this Matter

    Questions 1-4: Provide the following information about the

    attorney representing the whistleblower in this matter:

    Attorney's name;

    Firm name;

    Complete address, including city, state and zip code;

    Telephone number and fax number; and

    E-mail address.

    Section C: Tell Us About the Individual and/or Entity The

    Whistleblower Has a Complaint Against

    If the whistleblower's complaint relates to more than two

    individuals and/or entities, the whistleblower may use additional

    sheets, if necessary.

    Question 1: Choose one of the following that best describes the

    individual's profession or entity's type to which the

    whistleblower's complaint relates:

    For Individuals: Accountant, analyst, associated

    person, attorney, auditor, broker, commodity trading advisor,

    commodity pool operator, compliance officer, employee, executing

    broker, executive officer or director, financial planner, floor

    broker, floor trader, trader, unknown, or other (specify).

    For Entities: Bank, commodity trading advisor,

    commodity pool operator, commodity pool, futures commission

    merchant, hedge fund, introducing broker, major swap participant,

    retail foreign exchange dealer, swap dealer, unknown, or other

    (specify).

    Questions 2-4: For each individual and/or entity, provide the

    following information, if known:

    Full name;

    Complete address, including city, state and zip code;

    Telephone number;

    E-mail address; and

    Internet address, if applicable.

    Section D: Tell Us About the Whistleblower's Complaint

    Question 1: State the date (mm/dd/yyyy) that the alleged conduct

    began.

    Question 2: Choose the option that the whistleblower believes

    best describes the nature of the whistleblower's complaint. If the

    whistleblower is alleging more than one violation, please list all

    that the whistleblower believes may apply. Use additional sheets, if

    necessary.

    Theft/misappropriation;

    Misrepresentation/omission (i.e., false/misleading

    marketing/sales literature; inaccurate, misleading or non-disclosure

    by commodity pool operator, commodity trading advisor, futures

    commission merchant, introducing broker, retail foreign exchange

    [[Page 53217]]

    dealer, major swap participant, swap dealer, or their associated

    person(s); false/material misstatements in any report or statement);

    Ponzi/pyramid scheme;

    Off-exchange foreign currency, commodity, or precious

    metal fraud;

    Registration violations (including unregistered

    commodity pool operator; commodity trading advisor; futures

    commission merchant; introducing broker; retail foreign exchange

    dealer; swap dealer; or their associated person(s));

    Trading (after hours trading; algorithmic trading;

    disruptive trading; front running; insider trading; manipulation/

    attempted manipulation of commodity prices; market timing;

    inaccurate quotes/pricing information; program trading; trading

    suspensions; volatility);

    Fees/mark-ups/commissions (excessive, unnecessary or

    unearned administrative, commission or sales fees; failure to

    disclose fees; insufficient notice of change in fees; excessive or

    otherwise improper spreads or fills);

    Sales and advisory practices (background information on

    past violations/integrity; breach of fiduciary duty/responsibility;

    churning/excessive trading; cold calling; conflict of interest;

    abuse of authority in discretionary trading; failure to respond to

    client, customer or participant; guarantee against loss; promise to

    profit; high pressure sales techniques; instructions by client,

    customer or participant not followed; investment objectives not

    followed; solicitation methods (e.g., cold calling, seminars);

    Customer accounts (unauthorized trading); identity

    theft affecting account; inaccurate valuation of Net Asset Value; or

    Other (analyst complaints; market maker activities;

    employer/employee disputes; specify other).

    Question 3a: State whether the whistleblower or the

    whistleblower's counsel has had any prior communications with the

    CFTC concerning this matter.

    Question 3b: If the answer to question 3a is yes, provide the

    name of the CFTC staff member with whom the whistleblower or the

    whistleblower's counsel communicated.

    Question 4a: Indicate whether the whistleblower or the

    whistleblower's counsel has provided the information the

    whistleblower is providing to the CFTC to any other agency or

    organization.

    Question 4b: If the answer to question 4a is yes, provide

    details.

    Question 4c: Provide the name and contact information of the

    point of contact at the other agency or organization, if known.

    Question 5a: Indicate whether the whistleblower's complaint

    relates to an entity of which the whistleblower is, or was in the

    past, an officer, director, counsel, employee, consultant, or

    contractor.

    Question 5b: If the answer to question 5a is yes, state whether

    the whistleblower has reported this violation to the whistleblower's

    supervisor, compliance office, whistleblower hotline, ombudsman, or

    any other available mechanism at the entity for reporting

    violations.

    Question 5c: If the answer to question 5b is yes, provide

    details.

    Question 5d: Provide the date on which the whistleblower took

    the actions described in questions 5a and 5b.

    Question 6a: Indicate whether the whistleblower has taken any

    other action regarding the whistleblower's complaint, including

    whether the whistleblower complained to the Commission, another

    regulator, a law enforcement agency, or any other agency or

    organization; initiated legal action, mediation or arbitration, or

    initiated any other action.

    Question 6b: If the whistleblower answered yes to question 6a,

    provide details, including the date on which the whistleblower took

    the action(s) described, the name of the person or entity to whom

    the whistleblower directed any report or complaint and contact

    information for the person or entity, if known, and the complete

    case name, case number, and forum of any legal action the

    whistleblower has taken. Use additional sheets, if necessary.

    Question 7a: Choose from the following the option that the

    whistleblower believes best describes the type of financial product

    or investment at issue, if applicable:

    Commodity futures;

    Options on commodity futures;

    Commodity options;

    Foreign currency transactions;

    Swaps; or

    Other (specify).

    Question 7b: Provide the name of the financial product or

    investment, if applicable.

    Question 8: State in detail all the facts pertinent to the

    alleged violation. Explain why the whistleblower believes the facts

    described constitute a violation of the Commodity Exchange Act. Use

    additional sheets, if necessary.

    Question 9: Describe all supporting materials in the

    whistleblower's possession, custody or control, and the availability

    and location of additional supporting materials not in the

    whistleblower's possession, custody or control. Use additional

    sheets, if necessary.

    Question 10: Describe how the whistleblower obtained the

    information that supports the whistleblower's allegation. If any

    information was obtained from an attorney or in a communication

    where an attorney was present, identify such information with as

    much particularity as possible. In addition, if any information was

    obtained from a public source, identify the source with as much

    particularity as possible. Use additional sheets, if necessary.

    Question 11: The whistleblower may use this space to identify

    any documents or other information in the whistleblower's submission

    on this Form TCR that the whistleblower believes could reasonably be

    expected to reveal the whistleblower's identity. Explain the basis

    for the whistleblower's belief that the whistleblower's identity

    would be revealed if the documents or information were disclosed to

    a third party.

    Question 12: Provide any additional information the

    whistleblower thinks may be relevant.

    Section E: Eligibility Requirements

    Question 1: State whether the whistleblower is currently, or was

    at the time the whistleblower acquired the original information that

    the whistleblower is submitting to the Commodity Futures Trading

    Commission, a member, officer or employee of the Department of

    Justice, the Commodity Futures Trading Commission, the Comptroller

    of the Currency, the Board of Governors of the Federal Reserve

    System, the Federal Deposit Insurance Corporation, the Office Thrift

    Supervision, National Credit Union Administration, the Securities

    and Exchange Commission, a registered entity, a registered futures

    association, a self-regulatory organization, or any law enforcement

    organization.

    Question 2: State whether the whistleblower is providing the

    information pursuant to a cooperation agreement with the Commodity

    Futures Trading Commission or with any other agency or organization.

    Question 3: State whether the whistleblower is providing this

    information before the whistleblower (or anyone representing you)

    received any request, inquiry or demand that relates to the subject

    matter of the whistleblower's submission: (i) From the CFTC; (ii) in

    connection with an investigation, inspection or examination by any

    registered entity, registered futures association or self-regulatory

    organization; or (iii) in connection with an investigation by the

    Congress, or any other federal or state authority.

    Question 4: State whether the whistleblower is currently a

    subject or target of a criminal investigation, or has the

    whistleblower been convicted of a criminal violation, in connection

    with the information the whistleblower is submitting to the

    Commodity Futures Trading Commission.

    Question 5: State whether the whistleblower acquired the

    information the whistleblower is providing to the Securities and

    Exchange Commission from any individual described in Questions 1

    through 5 of this Section.

    Question 6: State whether the whistleblower is currently, or was

    at the time the whistleblower acquired the original information that

    the whistleblower is submitting to the Commodity Futures Trading

    Commission, a member, officer, or employee of a foreign regulatory

    authority or law enforcement organization.

    Question 7: Use this space to provide additional details

    relating to the whistleblower's responses to questions 1 through 6.

    Use additional sheets, if necessary.

    Section F: Whistleblower's Declaration

    The whistleblower must sign this Declaration if the

    whistleblower is submitting this information pursuant to the

    Commodity Futures Trading Commission whistleblower program and wish

    to be considered for an award. If the whistleblower is submitting

    the whistleblower's information anonymously, the whistleblower must

    still sign this Declaration, and the whistleblower must provide the

    whistleblower's attorney with the original of this signed form.

    If the whistleblower is not submitting the whistleblower's

    information pursuant to the

    [[Page 53218]]

    Commodity Futures Trading Commission whistleblower program, the

    whistleblower do not need to sign this Declaration.

    Section G: Counsel Certification

    If the whistleblower is submitting this information pursuant to

    the Commodity Futures Trading Commission whistleblower program and

    is doing so anonymously through an attorney, the whistleblower's

    attorney must sign the Counsel Certification section.

    If the whistleblower is represented in this matter but the

    whistleblower is not submitting the whistleblower's information

    pursuant to the Commodity Futures Trading Commission whistleblower

    program, the whistleblower's attorney does not need to sign the

    Counsel Certification Section.

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    BILLING CODE-C

    Privacy Act Statement

    This notice is given under the Privacy Act of 1974. The Privacy

    Act requires that the Commodity Futures Trading Commission (CFTC or

    Commission) inform individuals of the following when asking for

    information. The information provided will enable the Commission to

    determine the whistleblower's eligibility for payment of an award

    pursuant to Section 23 of the Commodity Exchange Act. This

    information may be disclosed to Federal, state, local, or foreign

    agencies responsible for investigating, prosecuting, enforcing, or

    implementing laws, rules, or regulations implicated by the

    information consistent with the confidentiality requirements set

    forth in Section 23 of the Commodity Exchange Act and Part 165 of

    the Commission's Regulations thereunder. Furnishing the information

    is voluntary, but a decision not

    [[Page 53221]]

    to do so may result in the whistleblower not being eligible for

    award consideration.

    Questions concerning this form may be directed to the Commodity

    Futures Trading Commission, Three Lafayette Centre, 1155 21st

    Street, NW., Washington, DC 20581.

    General

    This form should be used by persons making a claim for

    a whistleblower award in connection with information provided to the

    CFTC or to another agency in a related action. In order to be deemed

    eligible for an award, the whistleblower must meet all the

    requirements set forth in Section 23 of the Commodities Exchange Act

    and the rules thereunder.

    The whistleblower must sign the Form WB-APP as the

    claimant. If the whistleblower provided the whistleblower's

    information to the CFTC anonymously, the whistleblower must now

    disclose the whistleblower's identity on this form and the

    whistleblower's identity must be verified in a form and manner that

    is acceptable to the CFTC prior to the payment of any award.

    [cir] If the whistleblower is filing the whistleblower's claim

    in connection with information that the whistleblower provided to

    the CFTC, then the whistleblower's Form WB-APP, and any attachments

    thereto, must be received by the CFTC within ninety (90) days of the

    date of the Notice of Covered Action or the date of a final judgment

    in a related action to which the claim relates.

    [cir] If the whistleblower is filing the whistleblower's claim

    in connection with information the whistleblower provided to another

    agency in a related action, then the whistleblower's Form WB-APP,

    and any attachments there to, must be received by the Commodity

    Futures Trading Commission as follows:

    If a final order imposing monetary sanctions has been

    entered in a related action at the time the whistleblower submits

    the whistleblower's claim for an award in connection with a

    Commission action, the whistleblower must submit the whistleblower's

    claim for an award in that related action on the same Form WB-APP

    that the whistleblower uses for the Commission action.

    If a final order imposing monetary sanctions in a

    related action has not been entered at the time the whistleblower

    submits the whistleblower's claim for an award in connection with a

    Commission action, the whistleblower must submit the whistleblower's

    claim on Form WB-APP within ninety (90) days of the issuance of a

    final order imposing sanctions in the related action.

    The whistleblower must submit the whistleblower's Form

    WB-APP to us in one of the following two ways:

    [cir] By mailing or delivering the signed form to the Commodity

    Futures Trading Commission, Three Lafayette Centre, 1155 21st

    Street, NW., Washington, DC 20581; or

    [cir] By faxing the signed form to (202) XXX-XXXX.

    Instructions for Completing Form WB-APP

    Section A: Applicant's Information

    Questions 1-3: Provide the following information about yourself:

    First and last name, and middle initial, and social

    security number;

    Complete address, including city, state and zip code;

    Telephone number and, if available, an alternate number

    where the whistleblower can be reached; and

    E-mail address.

    Section B: Attorney's Information

    If the whistleblower is represented by an attorney in this

    matter, provide the information requested. If the whistleblower is

    not represented by an attorney in this matter, leave this Section

    blank.

    Questions 1-4: Provide the following information about the

    attorney representing the whistleblower in this matter:

    Attorney's name;

    Firm name;

    Complete address, including city, state and zip code;

    Telephone number and fax number; and

    E-mail address.

    Section C: Tip/Complaint Details

    Question 1: Indicate the manner in which the whistleblower's

    original information was submitted to the CFTC.

    Question 2a: Include the TCR (Tip, Complaint or Referral) number

    to which this claim relates.

    Question 2b: Provide the date on which the whistleblower

    submitted the whistleblower's information to the CFTC.

    Question 2c: Provide the name of the individual(s) or entity(s)

    to which the whistleblower's tip, complaint, or referral related.

    Section D: Notice of Covered Action

    The process for making a claim for a whistleblower award begins

    with the publication of a ``Notice of a Covered Action'' on the

    Commission's Web site. This Notice is published whenever a judicial

    or administrative action brought by the Commission results in the

    imposition of monetary sanctions exceeding $1,000,000. The Notice is

    published on the Commission's Web site subsequent to the entry of a

    final judgment or order in the action that by itself, or

    collectively with other judgments or orders previously entered in

    the action, exceeds the $1,000,000 threshold required for a

    whistleblower to be potentially eligible for an award. The

    Commission will not contact whistleblower claimants directly as to

    Notices of Covered Actions; prospective claimants should monitor the

    Commission Web site for such Notices.

    Question 1: Provide the date of the Notice of Covered Action to

    which this claim relates.

    Question 2: Provide the notice number of the Notice of Covered

    Action.

    Question 3a: Provide the case name referenced in Notice of

    Covered Action.

    Question 3b: Provide the case number referenced in Notice of

    Covered Action.

    Section E: Claims Pertaining to Related Actions

    Question 1: Provide the name of the agency or organization to

    which the whistleblower provided the whistleblower's information.

    Question 2: Provide the name and contact information for the

    whistleblower's point of contact at the agency or organization, if

    known.

    Question 3a: Provide the date on which that the whistleblower

    provided the whistleblower's information to the agency or

    organization referenced in question E1.

    Question 3b: Provide the date on which the agency or

    organization referenced in question E1 filed the related action that

    was based upon the information the whistleblower provided.

    Question 4a: Provide the case name of the related action.

    Question 4b: Provide the case number of the related action.

    Section F: Eligibility Requirements and Other Information

    Question 1: State whether the whistleblower is currently, or was

    at the time the whistleblower acquired the original information that

    the whistleblower submitted to the CFTC, a member, officer or

    employee of the Department of Justice, the Commodity Futures Trading

    Commission, the Comptroller of the Currency, the Board of Governors

    of the Federal Reserve System, the Federal Deposit Insurance

    Corporation, the Office of Thrift Supervision, the National Credit

    Union Administration, the Securities and Exchange Commission, a

    registered entity, a registered futures association, a self-

    regulatory organization, any law enforcement organization, or a

    foreign regulatory authority or law enforcement organization.

    Question 2: State whether the whistleblower provided the

    information submitted to the CFTC pursuant to a cooperation

    agreement with the CFTC or with any other agency or organization.

    Question 3: State whether the whistleblower acquired the

    information the whistleblower provided to the CFTC from any

    individual described in Question 1 through 2 of this Section.

    Question 5: If the whistleblower answered ``yes'' to questions 1

    though 3 of this Section, please provide details.

    Question 5a: State whether the whistleblower provided the

    information submitted to the CFTC before the whistleblower (or

    anyone representing the whistleblower) received any request, inquiry

    or demand that relates to the subject matter of the whistleblower's

    submission: (i) From the CFTC; (ii) in connection with an

    investigation, inspection or examination by any registered entity,

    registered futures association or self-regulatory organization; or

    (iii) in connection with an investigation by the Congress, or any

    other federal or state authority.

    Question 5b: If the whistleblower answered ``yes'' to questions

    5a, please provide details. Use additional sheets if necessary.

    Question 6a: State whether the whistleblower is the subject or

    target of a criminal investigation, or has been convicted of a

    criminal violation, in connection with the information upon which

    the whistleblower's application for an award is based.

    Question 6b: If the whistleblower answered ``yes'' to question

    6a, please provide details,

    [[Page 53222]]

    including the name of the agency or organization that conducted the

    investigation or initiated the action against you, the name and

    telephone number of the whistleblower's point of contact at the

    agency or organization, if available, and the investigation/case

    name and number, if applicable. Use additional sheets, if necessary.

    Section G: Entitlement to Award

    This section is optional. Use this section to explain the basis

    for the whistleblower's belief that the whistleblower is entitled to

    an award in connection with the whistleblower's submission of

    information to the Commission or to another agency in connection

    with a related action. Specifically, address how the whistleblower

    believes the whistleblower voluntarily provided the Commission with

    original information that led to the successful enforcement of a

    judicial or administrative action filed by the Commission, or a

    related action. Refer to Sec. 165.11 of Part 165 of the

    Commission's Regulations for further information concerning the

    relevant award criteria. The whistleblower may use additional

    sheets, if necessary.

    Section 23(c)(1)(B) of the CEA requires the Commission to

    consider in determining the amount of an award the following

    factors: (a) The significance of the information provided by a

    whistleblower to the success of the Commission action or related

    action; (b) the degree of assistance provided by the whistleblower

    and any legal representative of the whistleblower in the Commission

    action or related action; (c) the programmatic interest of the

    Commission in deterring violations of the Commodity Exchange Act

    (including Regulations under the Act) by making awards to

    whistleblowers who provide information that leads to the successful

    enforcement of such laws; and (d) whether the award otherwise

    enhances the Commission's ability to enforce the Commodity Exchange

    Act, protect customers, and encourage the submission of high quality

    information from whistleblowers. Address these factors in the

    whistleblower's response as well.

    Section H: Declaration

    This section must be signed by the claimant.

    Issued in Washington, DC, on August 4, 2011, by the Commission.

    David A. Stawick,

    Secretary of the Commission.

    Appendices to Final Rules for Implementing the Whistleblower Provisions

    of Section 23 of the Commodity Exchange Act--Commission Voting Summary

    and Statements of Commissioners

    Note: The following appendices will not appear in the Code of

    Federal Regulations

    Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn, Chilton

    and O'Malia voted in the affirmative; Commissioner Sommers voted in

    the negative.

    Appendix 2--Statement of Chairman Gary Gensler

    I support the final rulemaking to establish a program for

    whistleblowers as mandated by the Dodd-Frank Wall Street Reform and

    Consumer Protection Act. Congress enacted these provisions to

    incentivize whistleblowers to come forward with new information

    about potential fraud, manipulation or other misconduct in the

    financial markets. The final rule authorizes the Commodity Futures

    Trading Commission (CFTC) to provide a monetary award to

    whistleblowers when their original information leads to a successful

    enforcement action that results in sanctions over $1 million. The

    rule encourages people to assist the CFTC in identifying,

    investigating and prosecuting potential violations of the Commodity

    Exchange Act.

    [FR Doc. 2011-20423 Filed 8-24-11; 8:45 am]

    BILLING CODE P

    Last Updated: August 25, 2011



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