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2010-29022

  • FR Doc 2010-29022[Federal Register: December 6, 2010 (Volume 75, Number 233)]

    [Proposed Rules]

    [Page 75727-75760]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr06de10-18]

    [[Page 75727]]

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    Part II

    Commodity Futures Trading Corporation

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    17 CFR Part 165

    Implementing the Whistleblower Provisions of Section 23 of the

    Commodity Exchange Act; Proposed Rule

    [[Page 75728]]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 165

    RIN 3038-AD04

    Implementing the Whistleblower Provisions of Section 23 of the

    Commodity Exchange Act

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice of proposed rulemaking.

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    SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

    ``CFTC'') is proposing rules to implement new statutory provisions

    enacted by Title VII of the Dodd-Frank Wall Street Reform and Consumer

    Protection Act. These proposed rules apply to the whistleblowers

    incentives and protection of section 748. The proposed rules establish

    a whistleblower program that enables 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 Commodity

    Exchange Act that leads to the successful enforcement of a covered

    judicial or administrative action, or a related action. The proposed

    rules also provide public notice of section 748's prohibition on

    retaliation by employers against individuals that provide the

    Commission with information about potential violations.

    DATES: Comments must be received on or before February 4, 2011.

    ADDRESSES: You may submit comments, identified by RIN number 3038-AD04,

    by any of the following methods:

    Agency Web site, via its Comments Online process: http://

    comments.cftc.gov. Follow the instructions for submitting comments

    through the Web site.

    Mail: David A. Stawick, Secretary of the Commission,

    Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

    Street, NW., Washington, DC 20581.

    Hand Delivery/Courier: Same as mail above.

    Federal eRulemaking Portal: http://www.regulations.gov.

    Follow the instructions for submitting comments.

    Please submit your comments using only one method.

    All comments must be submitted in English, or if not, accompanied

    by an English translation. Comments will be posted as received to

    http://www.cftc.gov. You should submit only information that you wish

    to make available publicly. If you wish the Commission to consider

    information that you believe is exempt from disclosure under the

    Freedom of Information Act, a petition for confidential treatment of

    the exempt information may be submitted according to the procedures

    established procedures in CFTC Regulation 145.9, 17 CFR 145.9.

    The Commission reserves the right, but shall have no obligation, to

    review, pre-screen, filter, redact, refuse or remove any or all of your

    submission from http://www.cftc.gov that it may deem to be

    inappropriate for publication, such as obscene language. All

    submissions that have been redacted or removed that contain comments on

    the merits of the rulemaking will be retained in the public comment

    file and will be considered as required under the Administrative

    Procedure Act and other applicable laws, and may be accessible under

    the Freedom of Information Act.

    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:

    I. Background

    On July 21, 2010, President Obama signed the Dodd-Frank Wall Street

    Reform and Consumer Protection Act (``Dodd-Frank Act'').\1\ Title VII

    of the Dodd-Frank Act \2\ amended the Commodity Exchange Act (``CEA'')

    \3\ to establish a comprehensive new regulatory framework for swaps and

    security-based swaps. The legislation was enacted to reduce risk,

    increase transparency, and promote market integrity within the

    financial system by, among other things: (1) Providing for the

    registration and comprehensive regulation of swap dealers and major

    swap participants; (2) imposing clearing and trade execution

    requirements on standardized derivative products; (3) creating robust

    recordkeeping and real-time reporting regimes; and 4) enhancing the

    Commission's rulemaking and enforcement authorities with respect to,

    among others, all registered entities and intermediaries subject to the

    Commission's oversight.

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    \1\ See Dodd-Frank Wall Street Reform and Consumer Protection

    Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the

    Dodd-Frank Act may be accessed at http://www.cftc.gov./

    LawRegulation/OTCDERIVATIVES/index.htm.

    \2\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may

    be cited as the ``Wall Street Transparency and Accountability Act of

    2010.''

    \3\ 7 U.S.C. 1 et seq. (2006).

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    In addition, Title VII of the Dodd-Frank Act contains provisions to

    provide incentives and protections for whistleblowers.

    Section 748 of the Dodd-Frank Act amends the CEA by adding Section

    23, entitled ``Commodity Whistleblower Incentives and Protection.'' \4\

    Section 23 directs that the Commission must 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 successful enforcement of an action brought by

    the Commission that results in monetary sanctions exceeding $1,000,000,

    and of certain related actions.

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    \4\ Section 922(a), Public Law 111-203, 124 Stat. 1841 (2010).

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    The Commission is proposing Regulation 165 to implement Section 23

    of the CEA. As described in detail below, the rules contained in

    proposed Regulation 165 define certain terms critical to the operation

    of the whistleblower program, outline the procedures for applying for

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

    and generally explain the scope of the whistleblower program to the

    public and to potential whistleblowers. Further, Proposed Regulation

    165 includes an appendix informing whistleblowers of their protections

    from employer retaliation under Section 23 of the CEA.

    Section 23 of the CEA also requires the Commission to fund customer

    education initiatives designed to help customers protect themselves

    against fraud or other violations of the CEA, or rules or regulations

    thereundeCr. The Commission will, in a future rulemaking, address

    related internal procedural and organizational issues, including

    establishment of, and delegation of authority to, an office or offices

    to administer the Commission's whistleblower and customer education

    programs.

    Accordingly, the Commission is proposing rules to implement Section

    748 and establish a whistleblower program. The Commission requests

    comment on all aspects of the proposed rules, as well as comment on the

    specific provisions and issues highlighted in the discussion below.

    II. Description of the Proposed Rules

    A. Proposed Rule 165.1--General

    Proposed Rule 165.1 provides a general, plain English description

    of

    [[Page 75729]]

    Section 23 of the CEA. It sets forth the purposes of the rules and

    states that the Commission administers the whistleblower program. In

    addition, the proposed 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. Proposed Rule 165.2--Definitions

    1. Proposed Rule 165.2(a) Action

    Proposed Rule 165.2(a) defines the term ``action'' to mean a single

    captioned civil or administrative proceeding. This defined term 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.\5\ The Commission

    proposes to interpret the ``action'' to include all defendants or

    respondents, and all claims, 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. This approach to

    determining the scope of an ``action'' appears consistent with the most

    common meaning of the term,\6\ will effectuate the purposes of Section

    23 by enhancing the incentives for individuals to come forward and

    report potential violations to the Commission,\7\ and will avoid the

    challenges associated with attempting to allocate monetary sanctions

    involving multiple individuals and claims based upon the select

    individuals and claims reported by whistleblowers.

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    \5\ See Proposed Rule 165.8.

    \6\ See Black's Law Dictionary 31 (8th ed. 2004) (defining an

    ``action'' as ``a civil or criminal judicial proceeding''). Section

    23 of the CEA does not appear to contemplate the aggregation of

    separate judicial or administrative actions for purposes of

    determining whether the $1,000,000 threshold is satisfied, even if

    the actions arise out of a single investigation.

    \7\ This approach offers enhanced potential incentives for

    whistleblowers when compared to other similar programs because those

    programs have typically limited awards to successful claims that the

    whistleblower actually identified. See Rockwell International Corp.

    v. United States, 549 U.S. 457 (2007) (False Claims Act); John Doe

    v. United States, 65 Fed. Cl. 184 (2005) (Customs moiety statute, 19

    U.S.C. 1619); Internal Revenue Manual 25.2.2.2.8.A (under IRS

    whistleblower program, collected proceeds only include proceeds from

    the single issue identified by the whistleblower, or substantially

    similar improper activity).

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    The Commission requests comment on the proposed definition of the

    word ``action.'' Is it appropriate to pay whistleblower awards based on

    all monetary sanctions obtained in a single proceeding, even when the

    whistleblower's information did not concern all defendants or claims in

    that proceeding?

    2. Proposed Rule 165.2(b) Aggregate Amount

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

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

    pursuant to Proposed Rule 165.7. The term is relevant for purposes of

    determining the amount of an award pursuant to Proposed Rule 165.8.

    3. Proposed Rule 165.2(c) Analysis

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

    provided by a whistleblower can include information that is derived

    from independent knowledge and also from independent ``analysis'' of a

    whistleblower. Proposed Rule 165.2(c) defines 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. This definition recognizes

    that there are circumstances where individuals can 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.

    The Commission requests comment on the definition of ``analysis.''

    Is there a different or more specific definition of ``analysis'' that

    would better effectuate the purposes of Section 23 of the CEA?

    4. Proposed Rule 165.2(d) Collected by the Commission

    Proposed Rule 165.2(d) defines 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 is recorded as a payment receivable on the Commission's

    books and records. While the amount of a whistleblower award is based

    upon ``what has been collected of the monetary sanctions imposed in an

    action or related action,'' see Section 23(b), Congress used different

    language to describe the source of funding for whistleblower awards.

    Specifically, Congress states that the Fund will be financed through

    monetary sanctions ``collected by the Commission,'' meaning that

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

    collects. See Section 23(g)(3). The Commission generally collects civil

    monetary sanctions and disgorgement amounts in civil actions, or fines

    in administrative actions. A federal court or the Commission generally

    awards restitution to victims in civil and administrative actions,

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

    i.e., restitution is not recorded as a payment receivable on the

    Commission's books and records. Consequently, restitution amounts

    collected in a covered action or related action will not be deposited

    into the Fund.

    5. Proposed Rule 165.2(e) Covered Judicial or Administrative Action

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

    administrative action'' to mean any judicial or administrative action

    brought by the Commission under the CEA whose successful resolution

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

    6. Proposed Rule 165.2(f) Fund

    Proposed Rule 165.2(f) defines 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 Proposed 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.

    7. Proposed Rule 165.2(g) Independent Knowledge

    Proposed Rule 165.2(g) defines ``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'' does not require that a

    whistleblower have direct, first-hand knowledge of potential

    violations. 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.

    The Commission preliminarily believes that defining ``independent

    [[Page 75730]]

    knowledge'' in this manner best effectuates the purposes of Section 23

    of the CEA. An individual may learn about potential violations of the

    CEA without being personally involved in the conduct. If an individual

    voluntarily comes forward with such information, and the information

    leads the Commission to a successful enforcement action (as defined in

    Proposed Rule 165.2(i)), that individual should be eligible to receive

    a whistleblower award.\8\

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    \8\ 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.

    3130(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(h)(2), Public

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

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    Proposed Rule 165.2(g) further provides that an individual will not

    be considered to have ``independent knowledge'' in four other

    circumstances. The effect of these provisions would be to exclude

    individuals who obtain information under these circumstances from being

    eligible for whistleblower awards.

    The first exclusion contemplated is for information that was

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

    privilege. (Proposed Rule 165.2(g)(2) and (3).) 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 exception for knowledge obtained through privileged attorney-

    client communications would not apply in circumstances where the

    disclosure of the information is otherwise permitted. This could

    include, for example, circumstances where the privilege has been

    waived, and where the privilege is not applicable because of a

    recognized exception such as the crime-fraud exception to the attorney-

    client privilege.

    The second 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.\9\

    (Proposed Rule 165.2(g)(4).)

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    \9\ 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 third exclusion is closely related to the second, and applies

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

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

    identifying, reporting, and addressing potential non-compliance with

    applicable law. (Proposed Rule 165.2(g)(5).) However, each of these two

    exclusions ceases to be applicable, with the result that an individual

    may be deemed to have ``independent knowledge,'' and therefore may

    become a whistleblower, if the entity fails to disclose the information

    to the Commission within sixty (60) days or otherwise proceeds in bad

    faith.

    Compliance with the CEA is promoted when companies implement

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

    rationale for these proposed exclusions is the concern that Section 23

    not be implemented in a way that would create incentives for persons

    involved in such functions, as well as other responsible persons who

    are informed of wrongdoing, to circumvent or undermine the proper

    operation of the entity's internal processes for investigating and

    responding to violations of law. Accordingly, under the proposed rule,

    officers, directors, employees, and others who learn of potential

    violations as part of their official duties in the expectation that

    they will take steps to address the violations, or otherwise from or

    through the various processes that companies employ to identify

    problems and advance compliance with legal standards, would not be

    permitted to use that knowledge to obtain a personal benefit by

    becoming whistleblowers.

    Nevertheless, if the entity failed to disclose the information to

    the Commission within sixty (60) days or otherwise proceeds in bad

    faith, the exclusion would no longer apply, thereby making an

    individual who knows this undisclosed information eligible to become a

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

    fails to report information concerning the violation to the Commission,

    it would be inconsistent with the purposes of Section 23 to continue to

    disable 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 fourth and final exclusion to ``independent knowledge'' in the

    proposed rule applies if the whistleblower obtains the information by

    means or in a manner that violates applicable federal or state criminal

    law. This exclusion is necessary to avoid the unintended effect of

    incentivizing criminal misconduct.

    The Commission requests comment on the definition of ``independent

    knowledge.'' Is it appropriate to include within the scope of the

    phrase ``independent knowledge'' knowledge that is not direct, first-

    hand knowledge, but is instead learned from others, subject only to an

    exclusion for knowledge learned from publicly-available sources? Is it

    appropriate to exclude from the definition of ``independent knowledge''

    information that is obtained through a communication that is protected

    by the attorney-client privilege? Are there other ways these rules

    should address privileged communications?

    The Commission also requests comment on the proposed exclusions for

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

    supervisory, or governance responsibilities for an entity under an

    expectation that the person would cause the entity to take steps to

    remedy the violation, and for information otherwise obtained from or

    through an entity's legal, compliance, audit, or similar functions.

    Does this exclusion strike the proper balance? Will the carve-out for

    situations where the entity fails to disclose the information within

    sixty

    [[Page 75731]]

    (60) days promote effective self-policing functions and compliance with

    the law without undermining the operation of Section 23? Is sixty (60)

    days a ``reasonable time'' for the entity to disclose the information

    and, if not, what period should be specified (e.g., three months, six

    months, one year)? Are there alternative provisions the Commission

    should consider that would promote effective self-policing and self-

    reporting while still being consistent with the goals and text of

    Section 23?

    Finally, the Commission seeks comment on whether there are other

    sources of knowledge that should or should not be deemed

    ``independent'' for purposes of Section 23 and that should be

    specifically addressed by rule?

    8. Proposed Rule 165.2(h) Independent Analysis

    Proposed Rule 165.2(h) defines the phrase ``independent analysis''

    to mean the whistleblower's own analysis, whether done alone or in

    combination with others. The proposed rule thus recognizes that

    analysis--in particular academic or professional studies--is often the

    product of collaboration among two or more individuals. The phrase is

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

    165.2(k).

    9. Proposed Rule 165.2(i) Information That Led to Successful

    Enforcement

    Under Section 23, a whistleblower's eligibility for an award

    depends in part on whether the whistleblower's original information

    ``led to the successful enforcement'' of the Commission's covered

    judicial or administrative action or a related action. Proposed Rule

    165.2(i) defines when original information ``led to successful

    enforcement.''

    The Commission's enforcement practice generally proceeds in several

    stages. First, the staff opens an investigation based upon some

    indication of potential violations of the CEA and/or Commission

    regulations. Second, the staff conducts its investigation to gather

    additional facts in order to determine whether there is sufficient

    basis to recommend enforcement action. If so, the staff may recommend,

    and the Commission may authorize, the filing of an action. The

    definition in Proposed Rule 165.2(i) addresses the significance of the

    whistleblower's information to both the decision to open an

    investigation and the success of the resulting enforcement action. The

    proposed rule would distinguish between situations where the

    whistleblower's information causes the staff to begin an investigation

    or inquire about new or different conduct as part of a current

    investigation, and situations where the whistleblower provides

    information about conduct that is already under investigation. In the

    latter case, awards would be limited to the rare circumstances where

    the whistleblower provided essential information that the staff would

    not have otherwise obtained in the normal course of the investigation.

    Subparagraphs (1) and (2) of Proposed Rule 165.2(i) reflect these

    considerations.

    Subparagraph (1) of Proposed Rule 165.2(i) applies to situations

    where the staff is not already reviewing the conduct in question, and

    establishes a two-part test for determining whether ``original

    information'' voluntarily provided by a whistleblower led to successful

    enforcement of a Commission action. First, the information must have

    caused the staff to open an investigation, reopen an investigation that

    had been closed, or to inquire concerning new and different conduct as

    part of an open investigation. This does not necessarily contemplate

    that the whistleblower's information will be the only information that

    the staff obtains before deciding to proceed. However, the proposed

    rule would apply when the whistleblower gave the staff information

    about conduct that the staff is not already investigating or examining,

    and that information was the principal motivating factor behind the

    staff's decision to begin looking into the whistleblower's allegations.

    Second, if the whistleblower's information caused the Commission

    staff to start looking at the conduct for the first time, the proposed

    rule would require that the information ``significantly contributed''

    to the success of an enforcement action filed by the Commission. The

    proposed rule includes this requirement because the Commission believes

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

    awards for any and all tips about conduct that led to the opening of an

    investigation if the resulting investigation concludes in a successful

    covered judicial or administrative action. Rather, implicit in the

    requirement in Section 23(b) that a whistleblower's information ``led

    to * * * successful enforcement'' is the further expectation that the

    information, because of its high quality, reliability, and specificity,

    had a meaningful connection to the Commission's ability to successfully

    complete its investigation and to either obtain a settlement or prevail

    in a litigated proceeding.

    At bottom, successful enforcement of a judicial or administrative

    action depends on the staff's ability to establish unlawful conduct by

    a preponderance of evidence. Thus, in order to have ``led to successful

    enforcement,'' the ``original information'' provided by a whistleblower

    should be connected to evidence that plays a significant role in

    successfully establishing the Commission's claim. For example, the

    ``led to'' standard of Proposed Rule 165.2(i)(1) would be met if a

    whistleblower were to provide the Commission staff with strong, direct

    evidence of violations that supported one or more claims in a

    successful enforcement action. To give another example, a whistleblower

    whose information did not provide this degree of evidence in itself,

    but who played a critical role in advancing the investigation by

    leading the staff directly to evidence that provided important support

    for one or more of the Commission's claims could also receive an award,

    in particular if the evidence the whistleblower pointed to might have

    otherwise been difficult to obtain. A whistleblower who only provided

    vague information, or an unsupported tip, or evidence that was

    tangential and did not significantly help the Commission successfully

    establish its claims, would ordinarily not meet the standard of this

    proposed rule.

    If information that a whistleblower provides to the Commission

    consists of ``independent analysis'' (Proposed Rule 165.2(h)) rather

    than ``independent knowledge'' (Proposed Rule 165.2(g)), the evaluation

    of whether this analysis ``led to successful enforcement'' similarly

    would turn on whether it significantly contributed to the success of

    the action. This would involve, for example, considering the degree to

    which the analysis, by itself and without further investigation,

    indicated a high likelihood of unlawful conduct that was the basis, or

    was substantially the basis, for one or more claims in the Commission's

    enforcement action. The purpose of this provision is to ensure that the

    analysis provided to the Commission results in the efficiency and

    effectiveness benefits to the enforcement program that were intended by

    Congress. Thus, if a person provided analysis based upon readily

    available public information and the staff opened an inquiry based upon

    this analysis but was required to conduct significant additional

    analysis and investigation to conclude a successful enforcement action,

    the person would not be deemed to have provided ``independent

    analysis.''

    [[Page 75732]]

    Subparagraph (2) of Proposed Rule 165.2(i) sets forth a separate,

    and higher, standard for cases in which a whistleblower provides

    original information to the Commission about conduct that is already

    under investigation by the Commission, Congress, any other federal,

    state, or local authority, any self-regulatory organization, or the

    Public Company Accounting Oversight Board. In this situation, the

    information will be considered to have led to the successful

    enforcement of a judicial or administrative action if the information

    would not have otherwise been obtained and was essential to the success

    of the action.\10\ Although the Commission believes that awards under

    Section 23 generally should be limited to cases where whistleblowers

    provide original information about violations that are not already

    under investigation,\11\ there may be rare circumstances where

    information received from a whistleblower in relation to an ongoing

    investigation is so significant for the success of a Commission action

    that a whistleblower award should be considered. For example, a

    whistleblower who is not within the scope of the staff's investigation,

    but who nonetheless has access to, and comes forward with a document

    that had been concealed from the staff, and that establishes proof of

    wrongdoing that is critical to the Commission's ability to sustain its

    burden of proof, provides the type of assistance that should be

    considered for an award without regard to whether the staff was already

    investigating the conduct at the time the document was provided. The

    Commission anticipates applying Proposed Rule 165.2(i) in a strict

    fashion, however, such that awards under the proposed rule would be

    exceedingly rare.

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    \10\ The proposed rule also makes clear that subparagraph (2) of

    Proposed Rule 165.2(i) does not apply when a whistleblower provides

    information to the Commission about a matter that is already under

    investigation by another authority if the whistleblower is the

    ``original source'' for that investigation under Proposed Rule

    165.2(l)). In those circumstances, subparagraph (1) of Proposed Rule

    165.2(i) would govern the Commission's analysis.

    \11\ See Lacy v. United States, 221 Ct. Cl. 526 (1979); cf.

    United States ex rel. Merena v. Smith-Kline Beecham Corp., 205 F.3d

    97 (3d Cir. 2000).

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    In considering the relationship between information obtained from a

    whistleblower and the success of a covered judicial or administrative

    action, the Commission will take into account the difference between

    settled and litigated actions. Specifically, in a litigated action the

    whistleblower's information must significantly contribute, or, in the

    case of conduct that is already under investigation, be essential, to

    the success of a claim on which the Commission prevails in litigation.

    For example, if a court finds in favor of the Commission on a number of

    claims in an enforcement action, but rejects the claims that are based

    upon the information the whistleblower provided, the whistleblower

    would not be considered eligible to receive an award.\12\ By contrast,

    in a settled action the Commission would consider whether the

    whistleblower's information significantly contributed, or was

    essential, to allegations included in the Commission's federal court

    complaint, or to factual findings in the Commission's administrative

    order.

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    \12\ As discussed below, however, if the Commission prevails on

    a claim that is based upon the information the whistleblower

    provided, and if all the conditions for an award are otherwise

    satisfied, the award to the whistleblower would be based upon all of

    the monetary sanctions obtained as a result of the action. See

    Proposed Rule 165.8.

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

    The Commission requests comment on the proposed standard for when

    original information voluntarily provided by a whistleblower ``led to''

    successful enforcement action. Is the proposed standard appropriate?

    The Commission also requests comment on cases where the original

    information provided by the whistleblower caused the staff to begin

    looking at conduct for the first time. Should the standard also require

    that the whistleblower's information ``significantly contributed'' to a

    successful enforcement action? If not, what standards should be used in

    the evaluation? If yes, should the proposed rule define with greater

    specificity when information ``significantly contributed'' to

    enforcement action? In what way should the phrase be defined?

    Finally, the Commission requests comment on the proposal in

    Subparagraph (i)(2), which would consider that a whistleblower's

    information ``led to'' successful enforcement even in cases where the

    whistleblower gave the Commission original information about conduct

    that was already under investigation. Is this proposal appropriate?

    Should the Commission's evaluation turn on whether the whistleblower's

    information would not otherwise have been obtained and was essential to

    the success of the action? If not, what other standard(s) should apply?

    10. Proposed Rule 165.2(j) Monetary Sanctions

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

    when used with respect to any judicial or administrative 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 ``covered judicial or administrative action'' in Proposed

    Rule 165.2(d) and to the amount of a whistleblower award under Proposed

    Rule 165.8.

    11. Proposed Rule 165.2(k) Original Information and Proposed Rule

    165.2(l) Original Source

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

    information'' set forth in Section 23(a)(4) of the CEA.\13\ ``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 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.\14\ Consistent with Congress's intent, Proposed Rule

    165.2(k)(4) also requires 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).

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    \13\ 7 U.S.C. 26(a)(4).

    \14\ 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 Wall Street Transparency and

    Accountability Act of 2010.''

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

    Under the statutory definition of ``original information,'' a

    whistleblower who provides information that the Commission already

    knows from another source has not provided original information, unless

    the whistleblower is

    [[Page 75733]]

    the ``original source'' of that information. Proposed Rule 165.2(l)

    defines the term ``original source,'' which will be used 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, this situation may arise if the staff

    receives a referral from another authority such as the Department of

    Justice, a self-regulatory organization, or another organization that

    is identified in the proposed rule. On occasion, the situation may also

    arise that the ``original source'' of information shares his

    information with another person, and such other person files a

    whistleblower claim with the Commission prior to the original source

    filing a claim for whistleblower status. 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.

    As is described elsewhere in these proposed rules, a whistleblower

    will need to submit two forms, a Form TCR (``Tip, Complaint or

    Referral'') and Form WB-DEC (``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.\15\ A whistleblower who either

    provides information to another authority first, or who shared his

    independent knowledge or analysis with another who is also claiming to

    be a whistleblower, will need to follow these same procedures and

    submit 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), as long as the whistleblower

    submits 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 submits his claim to the

    Commission, the Commission will consider the whistleblower's submission

    to be effective.

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

    \15\ See Proposed 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 extends 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 compliance or similar functions, or who are

    informed about potential violations with the expectation that they will

    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 companies have effective programs for identifying,

    correcting, and self-reporting unlawful conduct by company officers or

    employees. The objective of this provision is to support, not

    undermine, the effective functioning of company compliance and related

    systems by allowing employees to take their concerns about potential

    violations to appropriate company officials while still preserving

    their rights under the Commission's whistleblower program.

    Proposed Rule 165.2(l)(3) addresses 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 after the definition of ``original source'' that Congress

    included in the False Claims Act through amendments earlier this

    year.\16\

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    \16\ 31 U.S.C. 3730(e)(4)(B), Public Law 111-148 Sec.

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

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

    The Commission requests comment on all aspects of the definitions

    of ``original information'' and ``original source'' set forth in

    Proposed Rules 165.2(k) and (l). Is the provision that would credit

    individuals with providing original information to the Commission, as

    of the date of their submission to another Governmental or regulatory

    authority, or to company legal, compliance, or audit personnel,

    appropriate? In particular, does the provision regarding the providing

    of information to a company's legal, compliance, or audit personnel

    appropriately accommodate the internal compliance process?

    The Commission also requests comment on whether the ninety (90) day

    deadline for submitting Forms TCR and WB-DEC to the Commission (after

    initially providing information about violations or potential

    violations to another authority or the employer's legal, compliance, or

    audit personnel) is the appropriate time frame? Should there be

    different time frames for disclosures to other authorities and

    disclosures to an employer's legal, compliance or audit personnel?

    12. Proposed Rule 165.2(m) Related Action

    The phrase ``related action,'' 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) 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.

    13. Proposed Rule 165.2(n) Successful Resolution or Successful

    Enforcement

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

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

    action brought by the Commission under the Commodity Exchange Act, to

    include any settlement of such action or final judgment in favor of the

    Commission. It shall also have the same meaning as ``successful

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

    ``covered

    [[Page 75734]]

    judicial or administrative action'' as set forth in Proposed Rule

    165.2(e).

    14. Proposed Rule 165.2(o) Voluntary Submission or Voluntarily

    Submitted

    Under Section 23(b)(1) of the CEA,\17\ whistleblowers are eligible

    for awards only when they provide original information to the

    Commission ``voluntarily.'' Proposed Rule 165.2(o) would define

    ``voluntary submission'' or ``voluntarily submitted'' in the context of

    submission to the Commission of original information as a

    whistleblower's provision of information to the Commission before

    receipt by the whistleblower (or anyone representing the whistleblower,

    including counsel) of any request, inquiry, or demand from the

    Commission, Congress, any other federal, state or local authority, or

    any self-regulatory organization about a matter to which the

    information in the whistleblower's submission is relevant. The fact

    that such request, inquiry or demand is not compelled by subpoena or

    other applicable law, does not render a subsequent submission

    voluntary.

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

    \17\ 7 U.S.C. 26(b)(1).

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

    Proposed Rule 165.2(o) would make clear that, in order to have

    acted ``voluntarily'' under the statute, a whistleblower must do more

    than merely provide the Commission with information that is not

    compelled by subpoena (or by a court order following a Commission

    action to enforce a subpoena) or by other applicable law.\18\ Rather,

    the whistleblower or his representative (such as an attorney) must come

    forward with the information before receiving any request, inquiry, or

    demand from the Commission staff or from any other investigating

    authority described in the proposed rule about a matter to which the

    whistleblower's information is relevant. A request, inquiry, or demand

    that is directed to an employer is also considered to be directed to

    employees who possess the documents or other information that is

    necessary for the employer to respond. Accordingly, a subsequent

    whistleblower submission from any such employee will not be considered

    ``voluntary'' for purposes of the rule, and the employee will not be

    eligible for award consideration, unless the employer fails to provide

    the employee's documents or information to the requesting authority

    within sixty (60) days.

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    \18\ Various books and records provisions of the CEA and

    Commission regulations generally require registrants to furnish

    records to the Commission upon request. See e.g., Section 4(g) of

    the CEA, 7 U.S.C. 6(g).

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

    This approach is consistent with the statutory purpose of creating

    a strong incentive for whistleblowers to come forward early with

    information about possible violations of the CEA rather than wait until

    Government or other official investigators ``come knocking on the

    door.'' \19\ This approach is also consistent with the approach federal

    courts have taken in determining whether a private plaintiff, suing on

    behalf of the Government under the qui tam provisions of the False

    Claims Act, ``voluntarily'' provided information about the false or

    fraudulent claims to the Government before filing suit.\20\

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

    \19\ See S. Rep. No. 111-176 at 110 (2010) (discussing Section

    922 of the Dodd-Frank Act, which establishes ``Securities

    Whistleblower Incentives and Protection'' similar to the ``Commodity

    Whistleblower Incentives and Protection'' in Section 748; ``The

    Whistleblower Program aims to motivate those with inside knowledge

    to come forward and assist the Government to identify and prosecute

    persons who have violated securities laws * * *.'').

    \20\ See United States ex rel. 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); 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).

    The qui tam provisions of the False Claims Act include a ``public

    disclosure bar,'' which, as recently amended, requires a court to

    dismiss a private action or claim if substantially the same

    allegations or transactions as alleged in the action or claim were

    publicly disclosed in certain fora, unless the Government opposes

    dismissal or the plaintiff is an ``original source'' of the

    information. 31 U.S.C. 3730(e)(4). An ``original source'' is further

    defined, in part, with reference to whether the plaintiff

    ``voluntarily'' disclosed the information to the Government before

    filing suit. Id. Because the qui tam provisions of the False Claims

    Act have played a significant role in the development of

    whistleblower law generally, and because some of the terminology

    used by Congress in Section 23 has antecedents in the False Claims

    Act, the Commission believes that precedent under the False Claims

    Act can provide helpful guidance in the interpretation of Section 23

    of the CEA. At the same time, because the False Claims Act and

    Section 23 serve different purposes, are structured differently, and

    the two statutes may use the same words in different contexts, the

    Commission does not view False Claims Act precedent as necessarily

    controlling or authoritative in all circumstances for purposes of

    Section 23 of the CEA.

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

    Disclosure to the Government should also not be considered

    voluntary if the individual has a pre-existing legal or contractual

    duty to report violations of the type at issue to the Commission,

    Congress, any other federal or state authority, or any self-regulatory

    organization.\21\ Thus, for example, Section 23(c)(2) of the CEA \22\

    prohibits awards to members, officers, or employees of an appropriate

    regulatory agency, the Department of Justice, a registered entity, a

    registered futures association, or a self-regulatory organization. The

    Commission anticipates that other similarly-situated persons should not

    be eligible for award consideration if they are under a pre-existing

    legal duty to report the information to the Commission or to any of the

    other authorities described above. Proposed Rule 165.2(o) accomplishes

    this goal by providing that submissions from such individuals will not

    be considered voluntary for purposes of Section 23 of the CEA. Proposed

    Rule 165.2(o) also includes a similar exclusion for information that

    the whistleblower is contractually obligated to provide. This exclusion

    is intended to preclude awards to persons who provide information

    pursuant to preexisting agreements that obligate them to assist

    Commission staff or other investigative authorities.

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

    \21\ See United States ex rel. Biddle v. Board of Trustees of

    The Leland Stanford, Jr. University, 161 F.3d 533 (9th Cir. 1998),

    cert. denied, 526 U.S. 1066 (1999); United States ex rel. Schwedt v.

    Planning Research Corp., 39 F. Supp. 2d 28 (D.D.C. 1999).

    \22\ 15 U.S.C. 78u-6(c)(2).

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

    The Commission requests comment on the definition of

    ``voluntarily.'' Does Proposed Rule 165.2(o) appropriately define the

    circumstances when a whistleblower should be considered to have acted

    ``voluntarily'' in providing information about CEA or Commission

    regulation violations to the Commission? Are there other circumstances

    not clearly included that should be in the rule? Is it appropriate for

    the proposed rule to consider a request or inquiry directed to an

    employer to be directed at individual employees who possess the

    documents or other information needed for the employer's response?

    Should the persons who are considered to be within the scope of an

    inquiry be narrowed or expanded? Will the carve-out that permits such

    an employee to become a whistleblower if the employer fails to disclose

    the information the employee provided within sixty (60) days promote

    compliance with the law and the effective operation of Section 23? Is

    sixty (60) days a ``reasonable time'' for employers to disclose the

    information the employee provided, or should a different period be

    specified (e.g., three months, six months, one year)?

    The Commission also requests comment on the standard described in

    Proposed Rule 165.2(o) that would credit an individual with acting

    ``voluntarily'' in circumstances where the individual was aware of

    fraudulent conduct for an extended period of time, but chose not to

    come forward as a whistleblower until after he became aware of a

    governmental investigation (such as by observing document requests

    being served on his employer or colleagues, but before he received an

    [[Page 75735]]

    inquiry, request, or demand himself, assuming that he was not within

    the scope of an inquiry directed to his employer). Is this an

    appropriate result, and, if not, how should the proposed rule be

    modified to account for it?

    Finally, the Commission seeks Comment on the exclusion set forth in

    Proposed Rule 165.2(o) for information provided pursuant to a pre-

    existing legal or contractual duty to report violations. Is the

    exclusion appropriate? Should the exclusion be expanded to other forms

    of duties such as ethical duties or duties imposed by codes of conduct?

    15. Proposed Rule 165.2(p) Whistleblower(s)

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

    CEA.\23\ Consistent with this language, Proposed Rule 165.2(p) would

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

    others, provides information to the Commission relating to a potential

    violation of the CEA. A company or another entity 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.

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

    \23\ 7 U.S.C. 26(a)(7).

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

    Proposed Rule 165.2(p) (and Proposed Rule 165.6(b)) would further

    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 that are provided

    for 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.

    The Commission requests comment on whether the anti-retaliation

    protections set forth in Section 23(h)(1) of the CEA should be applied

    broadly to any person who provides information to the Commission

    concerning a potential violation of the CEA, or should they be limited

    by the various procedural or substantive prerequisites to consideration

    for a whistleblower award? Should the application of the anti-

    retaliation provisions be limited or broadened in any other ways?

    C. Proposed Rule 165.3--Procedures for Submitting Original Information

    The Commission proposes 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 the thousands of tips that it receives annually.

    This will also better enable the Commission to connect tips to each

    other so as to make better use of the information provided, and to

    connect tips to requests for payment under the whistleblower

    provisions. The purpose of requiring a sworn declaration is to help

    deter the submission of false and misleading tips and the resulting

    inefficient use of the Commission's resources. The requirement should

    also mitigate the potential harm to companies and individuals that may

    be caused by 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.

    1. Form TCR and Instructions

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

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

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

    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.

    2. Form WB-DEC and Instructions

    In addition to Form TCR, the Commission proposes 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 makes

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

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

    contains 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 would

    require 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 Commission's payment of any award.

    The Commission proposes 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

    website, 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 website or, alternatively,

    by mailing or faxing the form to the Commission.

    [[Page 75736]]

    3. Perfecting Whistleblower Status for Submissions Made Before

    Effectiveness of the Rules

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

    that information submitted to the Commission by a whistleblower after

    the date of enactment, but before the effective date of these proposed

    rules, retains 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) would provide a

    mechanism by which potential whistleblowers who provide tips between

    enactment of the Dodd-Frank Act and the effective date of the final

    rules could perfect their status as whistleblowers under the

    Commission's award program once final rules are adopted. Subparagraph

    (d)(1) requires 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 proposed rules and to otherwise follow the

    procedures set forth in subparagraphs (a) and (b) of Proposed Rule

    165.3. If the 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 proposed rules in the manner set

    forth in subparagraph (b) of Proposed Rule 165.3.

    Although the Commission is proposing alternative methods of

    submission of the Form TCR and WB-DEC, it expects that electronic

    submissions would dramatically reduce the administrative costs, enhance

    ability to evaluate tips (generally and using automated tools), and

    improve efficiency in processing whistleblower submissions.

    Accordingly, the Commission solicits comment on whether it would be

    appropriate to eliminate the fax and mail option and require that all

    submissions of proposed Form TCRs and WB-DEC be made electronically.

    Would the elimination of submissions by fax and mail create an undue

    burden for some potential whistleblowers who may not have easy access

    to a computer or who may prefer to submit their information in that

    manner? Is there other information that the Commission should elicit

    from whistleblowers on Form TCRs and WB-DEC? Are there categories of

    information included on these forms that are unnecessary, or should be

    modified?

    The Commission also requests comment on whether the requirement

    that an attorney for an anonymous whistleblower certify that the

    attorney has verified the whistleblower's identity and eligibility for

    an award is appropriate? Is there an alternative process the Commission

    should consider that would accomplish its goal of ensuring that it is

    communicating with a legitimate whistleblower?

    Finally, the Commission seeks comment on whether the Commission's

    proposed process for allowing whistleblowers 120 days to perfect their

    status in cases where the whistleblower provided original information

    to the Commission in writing after the date of enactment of the Dodd-

    Frank Act but before adoption of the proposed rules is reasonable?

    Should the period be made shorter (e.g., 30 or 60 days) or longer

    (e.g., 180 days)?

    D. Proposed Rule 165.4--Confidentiality

    Proposed Rule 165.4 summarizes the confidentiality requirements set

    forth in Section 23(h)(2) of the CEA \24\ with 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.\25\ 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 investors.

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

    \24\ 7 U.S.C. 26(h)(2).

    \25\ Section 23(h)(2)(A) provides that the Commission shall not

    disclose any information, including that provided to 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 subparagraph (C).

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

    Subparagraph (a)(1) of the proposed rule would authorize 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 a public 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 the requirement of the Sixth Amendment of the

    Constitution that a criminal defendant have the right to be confronted

    with witnesses against him.\26\ Subparagraph (a)(2) would authorize

    disclosure 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, 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.

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

    \26\ 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 Commission's payment of any

    award.

    The purpose of this requirement is to prevent fraudulent

    submissions and to facilitate communication and assistance between the

    whistleblower and the Commission's staff. Any whistleblower may be

    represented by counsel--whether submitting information anonymously or

    not.\27\ The Commission emphasizes that anonymous whistleblowers have

    the same rights and responsibilities as other whistleblowers under

    Section 23 of the CEA and these

    [[Page 75737]]

    proposed rules, unless expressly exempted.

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

    \27\ See Section 23(d)(1), 7 U.S.C. 26(d)(1). Under the statute,

    however, an anonymous whistleblower seeking an award is required to

    be represented by counsel. Section 23(d)(2), 7 U.S.C. 26(d)(2).

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

    E. Proposed Rule 165.5--Prerequisites to the Consideration of an Award

    Proposed Rule 165.5 summarizes 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, 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.

    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, 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.

    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.

    The terms ``whistleblower,'' ``voluntarily,'' ``original

    information,'' ``led to successful enforcement,'' ``action,'' and

    ``monetary sanctions'' are defined in Proposed Rule 165.2.

    F. Proposed Rule 165.6--Whistleblowers Ineligible for an Award

    Subparagraph (a) of Proposed Rule 165.6 recites 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 Securities and Exchange Commission; the Department of

    Justice; a registered entity; a registered futures association; a self-

    regulatory organization; or a law enforcement organization. Further

    Proposed Rule 165.6(a)(2) makes 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)(3) of the proposed rule also provides that persons who acquire

    information from ineligible individuals are ineligible for an award.

    Consistent with Section 23(m) of the CEA, also ineligible for an award

    is any whistleblower that, in his submission of information or an

    application for an award, other dealings with the Commission, or his

    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 omits any material fact whose absence would make any other

    statement or representation made to the Commission or any other

    authority misleading.

    Subparagraph (b) of Proposed Rule 165.6 reiterates 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.

    The Commission requests comment on the ineligibility criteria set

    forth in Proposed Rule 165.6(a). Are there other statuses or activities

    that should render an individual ineligible for a whistleblower award?

    G. Proposed Rule 165.7--Procedures for Award Applications and

    Commission Award Determinations

    Proposed Rule 165.7 describes 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 describes 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 this Notice

    of a covered judicial or administrative action 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. If the monetary sanctions are obtained without a

    judgment or order, the Notice would be published within thirty (30)

    days of the issuance of the settlement order that causes total monetary

    sanctions in the action to exceed $1,000,000. The Commission's proposed

    rule requires 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 will be responsible for

    tracking the resolution of the related action. The Commission's

    proposed rule requires claimants to file their claim for an award in

    regard to a related action within sixty (60) days of the date of the

    monetary sanctions being imposed in the related action.

    A claimant's failure to file timely a request for a whistleblower

    award would bar that individual later seeking a recovery.\28\

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

    \28\ See, e.g., Yuen v. U.S., 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 describes 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, will elicit information concerning a

    whistleblower's eligibility to receive an

    [[Page 75738]]

    award at the time the whistleblower files his claim. The form will 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.\29\

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

    \29\ See discussion of Proposed 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 provides 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, depending upon which action the

    claimant is seeking an award, in order to be considered for an award.

    Subparagraph (c) includes award application procedures for a

    whistleblower who submitted original information to the Commission

    anonymously. Whistleblowers who submitted original information

    anonymously, but who are making 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 signed and completed Form WB-

    DEC. Whistleblowers who submitted information anonymously, and are

    making 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 your identity, has

    reviewed the whistleblower's Form WB-DEC form for completeness and

    accuracy, will retain the signed original of your 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) makes

    explicit that regardless of whether they make 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 describes the Commission's

    claims review process. The claims review process would begin upon the

    later of once the time for filing any appeals of the Commission's

    judicial or administrative action and the related action(s) has

    expired, 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.

    H. Proposed Rule 165.8--Amount of Award

    If all conditions are met, Proposed Rule 165.8 provides 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) 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 either in the Commission's action or the related

    action (but not both the Commission's action and the related action).

    The Commission requests comment on whether the provision stating

    that the percentage amount of an award in a Commission covered judicial

    or administrative action may differ from the percentage awarded in a

    related action is appropriate?

    I. Proposed Rule 165.9--Criteria for Determining Amount of Award

    Assuming that all of the conditions for making an award to a

    whistleblower have been satisfied, Proposed Rule 165.9 sets 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 recite 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 believes 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 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;

    [[Page 75739]]

    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 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; \30\ and

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

    \30\ 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.

    However, under subparagraph (a) of Proposed Rule 165.9, the fact

    that the 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 case, 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 reiterates the

    statutory prohibition in Section 23(c)(2) of the CEA from taking into

    consideration the balance of the Fund when making an award

    determination.

    J. Proposed 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 sets forth the contents of record for award

    determinations relating to covered judicial or administrative actions

    or related actions. The record shall consist of: 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; any other documents that appear on the docket of the

    proceeding. The record shall also include any 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; 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; and any facts relating to a determination of whether the

    whistleblower provided original information, conducted an independent

    analysis, or possessed independent knowledge.

    However, Proposed Rule 165.10(b) explicitly states 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 or its staff's

    determination: To file or settle the 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 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 requests comment on what other relevant items the

    Commission should consider as part of the record for its award

    determinations?

    K. Proposed Rule 165.11--Awards Based Upon Related Actions

    Proposed Rule 165.11 explains that the Commission, or its delegate,

    may grant an award based on amounts collected in certain related

    actions rather than the amount collected in a covered judicial or

    administrative action. Proposed Rule 165.11 sets forth the requirements

    for a related action or related actions to serve as the basis of a

    whistleblower award. Regardless of whether the Commission's award

    determination will be based upon the Commission's covered judicial or

    administrative action or a related action or actions, Proposed Rule

    165.7 sets forth the procedures for whistleblower award applications

    and Commission award determinations.

    L. Proposed Rule 165.12--Payment of Awards From the Fund, Financing

    Customer Education Initiatives, and Deposits and Credits to the Fund;

    and Proposed Rule 165.15--Delegations of Authority

    Proposed Rules 165.12 and 165.15 set forth certain internal

    Commission procedures. Specifically, paragraph (a) of Proposed Rule

    165.12, consistent with Section 23(g)(2) of the CEA, requires the

    Commission to pay whistleblower awards from the Fund. Importantly,

    Proposed Rule 165.12(b)(2) makes clear that if there is an insufficient

    amount in the Fund to satisfy a whistleblower award made pursuant to

    Proposed Rule 165.7, the Commission shall deposit into the Fund

    monetary sanctions that are actually collected by the Commission in an

    amount equal to the unsatisfied portion of the award from any judicial

    or administrative action based on the information provided by any

    whistleblower.

    Proposed Rule 165.15 includes 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(h) of CEA. Among the

    delegations to the Executive Director in Proposed Rule 165.15(a) is the

    authority to make deposits into the Fund.

    Proposed Rule 165.12 also includes the Commission's financing of

    customer education initiatives. 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

    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 shall budget on an

    annual basis the amount used to finance customer education initiatives,

    taking

    [[Page 75740]]

    into consideration the balance of the Fund.

    The Commission limited its 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.

    The Commission requests comment on whether this limitation is

    appropriate, or would other limitations better effectuate this purpose?

    Is the $10 million Fund balance trigger too high or too low, and, if

    so, what would be a better trigger amount?

    M. Proposed Rule 165.13--Appeals

    Section 23(f) of the CEA provides for rights of appeal of Final

    Orders of the Commission with respect to whistleblower award

    determinations.\31\ 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.

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

    \31\ 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. They include: The

    Contents of Record for Award Determination, as set forth in Proposed

    Rule 165.9; any Final Order of the Commission, as set forth in Rule

    165.7(e).

    N. Proposed Rule 165.14--Procedures Applicable to the Payment of Awards

    Proposed Rule 165.14 addresses 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.\32\ Subparagraph

    (a) provides 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,\33\ which provides that an

    award is based upon the monetary sanctions collected in the covered

    judicial or administrative action or related action.

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

    \32\ 7 U.S.C. 26(g).

    \33\ 7 U.S.C. 26(b)(1).

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

    Subparagraph (b) states 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 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, 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 describes how the

    Commission will address situations where there are insufficient amounts

    available in the Fund to pay an award to a whistleblower or

    whistleblowers within a reasonable period of time of 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, 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.

    O. Proposed Rule 165.16--No Immunity and Proposed Rule 165.17--Awards

    to Whistleblowers Who Engage in Culpable Conduct

    Proposed Rule 165.16 provides 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.

    Whistleblowers who have not participated in misconduct will of course

    not need immunity. However, 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.

    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,\34\

    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 or related

    action is ordered to pay monetary sanctions in a civil enforcement

    action, this proposed rule states 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

    [[Page 75741]]

    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 would exceed the $1,000,000 minimum

    threshold required for making an award, even though he personally was

    ordered to pay $750,000 of those monetary sanctions and, under similar

    circumstances, a non-culpable whistleblower would be deemed ineligible

    for an award if they reported a CEA or Commission regulation violation

    that resulted in monetary sanctions of less than $1,000,000. The

    proposed rule would prevent such inequitable treatment.

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

    \34\ 7 U.S.C. 26(c)(2)(B).

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

    P. Proposed Rule 165.18--Staff Communications With Whistleblowers From

    Represented Entities

    Proposed Rule 165.18 clarifies 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 CEA

    violation. The proposed rule makes 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.\35\ 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 us

    and who is a director, officer, member, agent, or employee of the

    entity. For this reason, Section 23 of the CEA authorizes the

    Commission to communicate directly with these individuals without first

    obtaining the consent of the entity's counsel.

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

    \35\ See Section 23 (b)-(d) & (h) of the CEA, 7 U.S.C 26(b)-(d)

    & (h).

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

    The Commission believes that expressly clarifying this authority in

    the proposed rule would 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 also believes that this

    proposed rule is appropriate to clarify that, in accordance with

    American Bar Association Model Rule 4.2, the staff is authorized by law

    to make these communications.\36\ 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.

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

    \36\ American Bar Association Model Rule 4.2 provides as

    follows: ``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).

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

    Q. Proposed 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 provides that 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.

    R. Proposed Appendix A--Guidance With Respect to the Protection of

    Whistleblowers Against Retaliation

    The Commission has included a Proposed Appendix A (``Guidance With

    Respect To The Protection of Whistleblowers Against Retaliation'') to

    better inform the public regarding the protections against retaliation

    from employers provided for whistleblowers in Section 23 of the CEA.

    Specifically, the Proposed Appendix A informs the public that Section

    23(h)(1) of CEA provides whistleblowers with certain protections

    against retaliation, including: A Federal cause of action against the

    employer, which must be filed in the appropriate United States district

    court 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. For ease of reference, the Proposed

    Appendix also includes a verbatim copy of the full Section 23(h)(1) of

    the CEA.

    III. Request for Comment

    The Commission requests comment on all aspects of the proposed

    rules.

    IV. Administrative Compliance

    A. Cost-Benefit Analysis

    Section 15(a) of the CEA \37\ requires the Commission to consider

    the costs and benefits of its actions before promulgating a regulation

    under the CEA. By its terms, section 15(a) does not require the

    Commission to quantify the costs and benefits of a rule or to determine

    whether the benefits of the regulation outweigh its costs; rather, it

    requires that the Commission ``consider'' the costs and benefits of its

    actions. Section 15(a) further specifies that the costs and benefits

    shall be evaluated in light of five broad areas of market and public

    concern: (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 and could

    in its discretion determine that, notwithstanding its costs, a

    particular rule is necessary or appropriate to protect the public

    interest or to effectuate any of the provisions or accomplish any of

    the purposes of the CEA.

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

    \37\ 7 U.S.C. 19(a).

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

    With respect to benefits, the proposed rules would enhance the

    Commission's capacity to ensure fair and equitable markets. The

    Commission has determined that market participants and the public will

    benefit substantially from prevention and deterrence of violations of

    the CEA and Commission regulations, which will be buttressed by the

    whistleblower incentives and protections under Section 23 of the CEA

    and Proposed Part 165 of the regulations.

    With respect to costs, the procedures set forth in the Proposed

    Rules may impose certain costs on prospective whistleblowers. As an

    initial matter, the procedures require potential whistleblowers to

    complete certain forms to establish eligibility for an award under the

    whistleblower program. As noted above, the Commission recognizes that

    it will take time and effort on the part of

    [[Page 75742]]

    whistleblowers to complete and submit the required forms. In addition,

    any whistleblower wishing to submit one of the required forms in hard

    copy will need to arrange for delivery and pay the postage or other

    delivery costs. In these Proposed Rules, the Commission has attempted

    to mitigate the potential for burden or confusion in the procedures,

    but such costs cannot be eliminated.

    The Commission invites public comment on its cost-benefit

    considerations. Commenters are also invited to submit any data or other

    information that they may have quantifying or qualifying the costs and

    benefits of the proposed rules with their comment letters.

    B. Anti-Trust Considerations

    Section 15(b) of the CEA, 7 U.S.C. 19(b), 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.

    C. Paperwork Reduction Act

    This regulation requires that a whistleblower seeking an award

    submit whistleblower information and file claims for an award

    determination. An agency may not conduct or sponsor, and a person is

    not required to respond to, a collection of information unless it

    displays a currently valid control number. The Office of Management and

    Budget (``OMB'') has not yet assigned a control number to the new

    collection. Proposed Commission Regulation 165 would result in new

    collection of information requirements within the meaning of the

    Paperwork Reduction Act (``PRA'').\38\ The Commission therefore is

    submitting this proposal to OMB for review in accordance with 44 U.S.C.

    3507(d) and 5 CFR 1320.11. The title for this collection of information

    is ``Regulation 165--Proposed Rules for Implementing Whistleblower

    Provisions of Section 23 of the Commodity Exchange Act.'' OMB control

    number 3038-NEW. If adopted, responses to this new collection of

    information would be mandatory.

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

    \38\ 44 U.S.C. 3501 et.seq.

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

    The Commission will protect proprietary information according to

    the Freedom of Information Act and 17 CFR part 145, ``Commission

    Records and Information.'' In addition, section 8(a)(1) of the Act

    strictly prohibits the Commission, unless specifically authorized by

    the Act, from making public ``data and information that would

    separately disclose the business transactions or market positions of

    any person and trade secrets or names of customers.'' The Commission is

    also required to protect certain information contained in a government

    system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.

    1. Information Provided by Reporting Persons

    The Proposed Rules 165.3 (Procedures for Submitting Original

    Information), 165.4 (Confidentiality), and 165.7 (Procedures for Award

    Applications and Commission Award Determinations) require that all

    individuals wishing to be eligible for an award under the Commission's

    whistleblower program must complete the following standard forms: Forms

    TCR (``Tip, Complaint or Referral''), WB-DEC (``Declaration Concerning

    Original Information Provided Pursuant to Section 23 of the Commodity

    Exchange Act,'' signed under penalty of perjury), and WB-APP

    (``Application for Award for Original Information Provided Pursuant to

    Section 23 of the Commodity Exchange Act''). The Commission estimates

    that there will be numerous individuals, approximately 160 per fiscal

    year, who may wish to file such forms. The Commission estimated the

    number of individuals based upon the current number of tips, complaints

    and referrals received by the Commission's Division of Enforcement and

    news articles regarding the whistleblower protections that indicate the

    SEC and Commission should expect to receive a high volume of claims.

    The proposed collection is estimated to involve approximately: 2 burden

    hours per Form TCR; 0.5 burden hours per Form WB-DEC; and 10 burden

    hours per Form WB-APP. The Commission expects that this will result in

    a total cost of 12.5 burden hours per individual seeking to be

    considered for an award under the Commission's whistleblower program,

    for an annual aggregate 2,000 burden hours per fiscal year. The

    Commission invites public comment on the accuracy of its estimate

    regarding the collection requirements that would result from the

    proposed regulations.

    2. Information Collection Comments

    The Commission invites the public and other federal agencies to

    comment on any aspect of the reporting and recordkeeping burdens

    discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission

    solicits comments in order to: (i) Evaluate whether the proposed

    collection of information is necessary for the proper performance of

    the functions of the Commission, including whether the information will

    have practical utility; (ii) evaluate the accuracy of the Commission's

    estimate of the burden of the proposed collection of information; (iii)

    determine whether there are ways to enhance the quality, utility, and

    clarity of the information to be collected; and (iv) minimize the

    burden of the collection of information on those who are to respond,

    including through the use of automated collection techniques or other

    forms of information technology.

    Comments may be submitted directly to the Office of Information and

    Regulatory Affairs, by fax at (202) 395-6566 or by e-mail at

    OIRAsubmissions@omb.eop.gov. Please provide the Commission with a copy

    of submitted comments so that they can be summarized and addressed in

    the final rule. Refer to the ``Addresses'' section of this notice of

    proposed rulemaking for comment submission instructions to the

    Commission. A copy of the supporting statements for the collections of

    information discussed above may be obtained by visiting RegInfo.gov.

    OMB is required to make a decision concerning the collection of

    information between 30 and 60 days after publication of this release.

    Consequently, a comment to OMB is most assured of being fully effective

    if received by OMB (and the Commission) within 30 days after

    publication of this notice of proposed rulemaking.

    D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \39\ 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.\40\ The rules proposed by the Commission will not have a

    significant economic impact on a substantial number of small entities.

    As explained above, because only individuals are eligible for

    participation in the Commission's whistleblower program under Section

    23 of the CEA and Proposed Part 165 of the regulations, the proposed

    rules will not have a significant impact on small entities.

    Accordingly, the Chairman, on behalf of the Commission, hereby

    certifies, pursuant to 5 U.S.C. 605(b), that the proposed rules will

    not have a

    [[Page 75743]]

    significant impact on a substantial number of small entities.

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

    \39\ 5 U.S.C. 601.

    \40\ Id.

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

    Section 603(a) of the Regulatory Flexibility Act \41\ requires the

    Commission to undertake an initial regulatory flexibility analysis of

    the proposed rule on small entities unless the Chairman certifies that

    the rule, if adopted, would not have a significant economic impact on a

    substantial number of small entities.\42\ The Proposed Rules apply only

    to an individual, or individuals acting jointly, who provide

    information to the Commission relating to the violation of the CEA or

    Commission regulations. Companies and other entities are not eligible

    to participate in the Program as whistleblowers. Consequently, the

    persons that would be subject to the proposed rule are not ``small

    entities'' for purposes of the Regulatory Flexibility Act. Accordingly,

    the Chairman, on behalf of the Commission, hereby certifies pursuant to

    5 U.S.C. 605(b) that the proposed rules will not have a significant

    economic impact on a substantial number of small entities. A copy of

    the certification is attached as an appendix to this document.

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

    \41\ 5 U.S.C. 603(a).

    \42\ 5 U.S.C. 605(b).

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

    List of Subjects in 17 CFR Part 165

    Whistleblower rules.

    In consideration of the foregoing and pursuant to the authority

    contained in the Commodity Exchange Act, in particular, Sections 2, 3,

    8a(5) and 26 thereof, the Commodity Futures Trading Commission proposes

    to add a new 17 CFR part 165 to read as follows:

    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, 3, 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 (June 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 explain the

    procedures you 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 serve as 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.

    (a) Action. The term ``action'' means a single captioned judicial

    or administrative proceeding.

    (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 your 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

    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 your possession that is not generally

    known or available to the public. You may gain independent knowledge

    from your experiences, communications and observations in your personal

    business or social interactions. The Commission will not consider your

    information to be derived from your independent knowledge if you

    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 otherwise permitted by the

    applicable federal or state attorney conduct rules;

    (3) As a result of the legal representation of a client on whose

    behalf your services, or the services of your employer or firm, have

    been retained, and you seek to use the information to make a

    whistleblower submission for your own benefit, unless disclosure is

    authorized by the applicable federal or state attorney conduct rules;

    (4) Because you were a person with legal, compliance, audit,

    supervisory, or governance responsibilities for an entity, and the

    information was communicated to you with the reasonable expectation

    that you would take appropriate steps to cause the entity to remedy the

    violation, unless the entity subsequently failed to disclose the

    information to the Commission within sixty (60) days or otherwise

    proceeded in bad faith;

    (5) Otherwise from or through an entity's legal, compliance, audit

    or other similar functions or processes for identifying, reporting and

    addressing potential non-compliance with law, unless the entity failed

    to disclose the information to the Commission within sixty (60) days or

    otherwise proceeded in bad faith; or

    (6) By a means or in a manner that violates applicable federal or

    state criminal law.

    (h) Independent Analysis. The phrase ``independent analysis'' means

    your own

    [[Page 75744]]

    analysis, whether done alone or in combination with others.

    (i) Information That Led to Successful Enforcement. The Commission

    will consider that you provided original information that led to the

    successful enforcement of a judicial or administrative action, or

    related action, in the following circumstances:

    (1) If you gave the Commission original information that caused the

    staff to open an investigation, reopen an investigation that the

    Commission had closed, or to inquire concerning new or different

    conduct as part of a current investigation, and your information

    significantly contributed to the success of the action; or

    (2) If you gave the Commission original information about conduct

    that was already under investigation by the Commission, Congress, any

    other federal, state, or local authority, any self-regulatory

    organization, or the Public Company Accounting Oversight Board (except

    in cases where you were an original source of this information as

    defined in paragraph (i)(1) of this section), and your information

    would not otherwise have been obtained and was essential to the success

    of the action.

    (j) Monetary Sanctions. The phrase ``monetary sanctions,'' when

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

    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. (1) The phrase ``original information''

    means information that--

    (i) Is derived from the independent knowledge or independent

    analysis of a whistleblower;

    (ii) Is not already known to the Commission from any other source,

    unless the whistleblower is the original source of the information;

    (iii) 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

    (iv) 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).

    (2) Original information shall not lose its status as original

    information solely because the whistleblower submitted such information

    prior to the [EFFECTIVE DATE OF THE FINAL RULE], 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

    [EFFECTIVE DATE OF THE FINAL RULE], must comply with the procedure set

    forth in Sec. 165.3(d).

    (l) Original Source. You must satisfy your status as the original

    source of information to the Commission's satisfaction.

    (1) Information obtained from another source. The Commission will

    consider you to be an ``original source'' of the same information that

    the Commission obtains from another source if the information you

    provide satisfies the definition of original information and the other

    source obtained the information from you or your 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, you must have

    voluntarily given such authorities the information within the meaning

    of this part In determining whether you are 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 you claim to be the original source of

    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

    you provide information to Congress, any other federal, state, or local

    authority, any self-regulatory organization, the Public Company

    Accounting Oversight Board, or to any of any of the persons described

    in paragraphs (g)(3) and (4) of this section, and you, within 90 days,

    make a submission to the Commission pursuant to Sec. 165.3, as you

    must do in order for you to be eligible to be considered for an award,

    then, for purposes of evaluating your claim to an award under Sec.

    165.7, the Commission will consider that you provided information as of

    the date of your original disclosure, report, or submission to one of

    these other authorities or persons. You must establish your 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 you make your submission, and you are not an original source of

    that information, as described above, the Commission will consider you

    an ``original source'' of any information you separately provide that

    otherwise satisfies the definition of original information and

    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. 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 you or anyone

    representing you (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 make a request, inquiry,

    or demand to you or your representative first, your submission will not

    be considered voluntary, and you will not be eligible for an award,

    even if your response is not compelled by subpoena or other applicable

    law. For purposes of this paragraph, you will be considered

    [[Page 75745]]

    to have received a request, inquiry or demand if documents or

    information from you are within the scope of a request, inquiry, or

    demand that your employer receives, unless, after receiving the

    documents or information from you, your employer fails to provide your

    documents or information to the requesting authority in a timely

    manner.

    In addition, your submission will not be considered voluntary if

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

    violations that are the subject of your 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.

    (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 a manner

    established by Sec. 165.3.

    (2) The retaliation protections afforded to whistleblowers by the

    provisions of Section 23(h) of the Commodity Exchange Act apply

    irrespective of whether a whistleblower satisfies the procedures and

    conditions to qualify for an award under this Part 165. Moreover, for

    purposes of the anti-retaliation provision of paragraph (h)(1)(A)(i) of

    Section 23, the requirement that a whistleblower provide ``information

    to the Commission in accordance'' with Section 23 is satisfied if an

    individual provides information to the Commission that relates to a

    potential violation of the Commodity Exchange Act.

    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, you will need to submit your information to the

    Commission. You may submit your information:

    (1) By completing and submitting a Form TCR online and submitting

    it electronically through the Commission's Web site at [insert link]

    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) XXX-XXXX.

    (b) In addition to submitting a Form TCR, you will also need to

    complete and provide to the Commission a Form WB-DEC, ``Declaration

    Concerning Original Information Provided Pursuant to Section 23 of the

    Commodity Exchange Act,'' signed under penalty of perjury. Your Form

    WB-DEC must be submitted as follows:

    (1) If you submit a Form TCR electronically, your Form WB-DEC must

    be submitted either:

    (i) Electronically (in accordance with the instructions set forth

    on the Commission's Web site); or

    (ii) By mailing or faxing the signed form to the Commission. Your

    Form WB-DEC must be received by the Commission within thirty (30) days

    of the Commission's receipt of your Form TCR.

    (2) If you submit a Form TCR either by mail or fax, your Form WB-

    DEC must be submitted by mail or fax at the same time as the Form TCR.

    (c) Notwithstanding paragraph (b), if you submitted your original

    information to the Commission anonymously, then your 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 the Commission's payment of any award.

    (d) If you 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 2010) but before the

    effective date of these rules, you will be eligible for an award only

    if:

    (1) In the event that you provided the original information to the

    Commission in a format or manner other than that described in paragraph

    (a) of this section, you submit a completed Form TCR and Form WB-DEC

    within one hundred twenty (120) days of [EFFECTIVE DATE OF THE FINAL

    RULE] and otherwise follow the procedures set forth above in paragraphs

    (a) and (b) of this section; or

    (2) In the event that you provided the original information to the

    Commission in a Form TCR in the manner described in paragraph (a) of

    this section, you submit a Form WB-DEC within one hundred twenty (120)

    days of the effective date of this section in the manner set forth

    above in paragraph (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, 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.

    (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 this part

    165, 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

    [[Page 75746]]

    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 who 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 this section;

    (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 you gave the

    Commission from any of the individuals described in paragraphs (a)(1),

    (2), or (3) of this section; or

    (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 use 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.

    (b) Notwithstanding a whistleblowers 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) 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 cause to be

    published 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 monetary

    sanctions. A whistleblower claimant will have sixty (60) calendar 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, you must file Form

    WB-APP, ``Application for Award for Original Information Provided

    Pursuant to Section 23 of the Commodity Exchange Act.'' You 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) XXX-XXXX.

    The Form WB-APP, including any attachments, must be received by the

    Commission within sixty (60) calendar days of the date of the Notice of

    Covered Action or sixty (60) calendar days following the date of a

    final judgment in a related action in order to be considered for an

    award.

    (c) If you provided your original information to the Commission

    anonymously pursuant to Sec. Sec. 165.3 and 165.4 and:

    (1) You are making your claim for a whistleblower award on a

    disclosed basis, you must disclose your identity on the Form WB-APP and

    include with your Form WB-APP a signed and completed Form WB-DEC. Your

    identity must be verified in a form and manner that is acceptable to

    the Commission prior to the payment of any award; or

    (2) You are making your claim for a whistleblower award on an

    anonymous basis, you must be represented by counsel. You must provide

    your counsel with a completed and signed Form WB-DEC by no later than

    the date upon which your counsel submits to the Commission the Form WB-

    APP. In addition, your counsel must submit with the Form WB-APP a

    separate Form WB-DEC completed and signed by counsel certifying that

    counsel has verified your identity, has reviewed the whistleblower's

    Form WB-DEC for completeness and accuracy, and will retain the signed

    original of whistleblower's Form WB-DEC in counsel's records. Upon

    request of the Commission staff, whistleblower's counsel must produce

    to the Commission the whistleblower's WB-DEC 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 been 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 you

    provide additional information relating to your 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 you a Determination 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 you

    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

    [[Page 75747]]

    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, 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; and

    (4) Whether the award otherwise enhances the Commission's ability

    to enforce the CEA, protect customers, and encourage the submission of

    high quality information from whistleblowers.

    (b) 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 determination.

    (a) The following items constitute the record upon which the award

    determination under Sec. 165.7 shall be made:

    (1) The whistleblower's Form TCR, ``Tip, Complaint or Referral,''

    and Form WB-DEC, ``Declaration Concerning Original Information Provided

    Pursuant to Section 23 of the Commodity Exchange Act,'' 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) Any statements by the Commission litigation staff, or the

    litigation staff involved in prosecuting the related action, 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/or 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.

    (b) The record upon which the award determination under Sec. 165.7

    shall be made shall not include any Commission pre-decisional 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 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, 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 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; or

    (4) A State criminal or appropriate civil agency; 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's

    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

    the Commissions 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 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 an

    ``covered judicial or administrative action''; provided, such judicial

    or administrative action is based on information provided by a

    whistleblower.

    (c) 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 Act, or the

    Commissions 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 shall

    budget on an annual basis the amount used to finance customer education

    initiatives, taking

    [[Page 75748]]

    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 thirty (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 Determination, as set forth in

    Sec. 165.9;

    (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:

    (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, 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 to deposit collected monetary sanctions

    into 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) [Reserved]

    (b) [Reserved]

    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 you may become a

    whistleblower and assist in Commission investigations and enforcement

    actions does not preclude the Commission from bringing an action

    against you based upon your 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 your 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 (this threshold is further explained in Sec. 165.7) 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 are 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 you are a whistleblower who is a director, officer, member,

    agent, or employee of an entity that has counsel, and you have

    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 you regarding the subject of

    your 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 the 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 United States

    district court 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. Specifically, Section 23(h)(1)

    of Commodity Exchange Act provides:

    (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--

    (i) In providing information to the Commission in accordance

    with subsection (b); or

    (ii) In assisting in any investigation or judicial or

    administrative action of the Commission based upon or related to

    such information.

    [[Page 75749]]

    (B) Enforcement. (i) Cause of Action.--An individual who alleges

    discharge or other discrimination in violation of subparagraph (A)

    may bring an action under this subsection in the appropriate

    district court of the United States for the relief provided in

    subparagraph (C), unless the individual who is alleging discharge or

    other discrimination in violation of subparagraph (A) 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.

    (ii) Subpoenas.--A subpoena requiring the attendance of a

    witness at a trial or hearing conducted under this subsection may be

    served at any place in the United States.

    (iii) Statute of Limitations.--An action under this subsection

    may not be brought more than 2 years after the date on which the

    violation reported in subparagraph (A) is committed.

    (C) Relief.--Relief for an individual prevailing in an action

    brought under subparagraph (B) shall include--

    (i) Reinstatement with the same seniority status that the

    individual would have had, but for the discrimination;

    (ii) The amount of back pay otherwise owed to the individual,

    with interest; and

    (iii) 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.

    BILLING CODE 6351-01-P

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    BILLING CODE 6351-01-C

    Privacy Act of Statement

    The Privacy Act requires that the Commodity Futures Trading

    Commission (CFTC) 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 you are 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 your

    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. Furnishing the

    information is voluntary, but a decision not to do so may result in

    you not being eligible for award consideration.

    Questions concerning this form may be directed to the Commodity

    Futures Trading Commission, Three Lafayette Centre, 1151 21st

    Street, NW., Washington, DC 20581.

    Submission Procedures

    After completing this From TCR, please send it to the

    Commission: electronically via the Commission's Web site; by mail to

    the Commodity Futures Trading Commission, Three Lafayette Centre,

    1151 21st Street, NW., Washington, DC 20581; or by facsimile to

    (202) XXX-XXXX.

    You have the right to submit information anonymously.

    If you are submitting information for the Commission's

    whistleblower award program, you must submit your information using

    this Form TCR. In addition to submitting your information by this

    method, you must also submit a declaration on From WB-DEC. The Form

    WB-DEC can be printed out from the Commission's Web site or obtained

    from the Commission, and it must be manually signed by you under

    penalty of perjury.

    Instructions for Completing Form TCR

    Section A: Information About You

    Questions 1-3: Please provide the following information about

    yourself:

    [cir] Last name, first name, and middle initial;

    [[Page 75752]]

    [cir] Complete address, including city, state and zip code;

    [cir] Telephone number and, if available, an alternative number

    where you can be reached;

    [cir] Your e-mail address (to facilitate communications, the

    Commission strongly encourages you to provide your e-mail address);

    and

    [cir] Your preferred method of communication.

    Question 4: Describes your occupation, for example which of the

    following provides the best description:

    [cir] Accountant, attorney, auditor, broker-dealer, compliance

    officer, financial representative, foreign officer, fund manager,

    investment advisor, commodity trading adviser, investor, customer,

    company officer or senior manager, trader, floor broker, government

    official (federal, state, or local), law enforcement personnel

    (federal, state, or local), or other (specific).

    Section B: Information About Your Attorney. Complete This Section

    Only If Your Are Represented By An Attorney In This Matter.

    Questions 1-4: Provide the following information about the

    attorney representing you in this matter:

    [cir] Attorney's name;

    [cir] Firm name;

    [cir] Complete address, including city, state and zip code;

    [cir] Telephone number and fax number; and

    [cir] E-mail address.

    Section C: Tell Us About The Individual And/Or Entity You Have A

    Complaint Against. If your complaint relates to more than two

    individuals and/or entities, you may attach additional sheets.

    Question 1: Choose the following that best describes the

    individual or entity to which your complaint relates:

    [cir] 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).

    [cir] 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 subject, provide the following

    information, if known:

    [cir] Full name;

    [cir] Complete address, including city, state and zip code;

    [cir] Telephone number;

    [cir] E-mail address; and

    [cir] Internet address, if applicable.

    Section C: Tell Us About Your Complaint.

    Question 1: State the date (mm/dd/yyyy) that the alleged conduct

    began.

    Question 2: Choose the option that you believe best describes

    the nature of your complaint. If you are alleging more than one

    violation, please list all that you believe may apply. Use

    additional sheets, if necessary.

    [cir] Theft/misappropriation;

    [cir] Misrepresentation/omission (false/misleading marketing/

    sales literature; inaccurate, misleading or non-disclosure by

    commodity pool operator, commodity trading advisor, futures

    commission merchant, introducing broker, retail foreign currency

    dealer, swap dealer, or their associated person(s); false/material

    misstatements in any report or statement;

    [cir] Ponzi/pyramid scheme;

    [cir] Off-exchange foreign currency, commodity, or precious

    metal fraud;

    [cir] Registration violations (including unregistered commodity

    pool operator, commodity trading advisor, futures commission

    merchant, introducing broker, retail foreign currency dealer, swap

    dealer, or their associated person(s));

    [cir] 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);

    [cir] 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);

    [cir] Sales and advisory practices (background information on

    past violations/integrity; breach of fiduciary duty/responsibility;

    churning/excessive trading; cold calling; conflict of interest; a

    bout 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 (non-cold calling, seminars);

    [cir] Customer accounts (unauthorized trading); identity theft

    affecting account; inaccurate valuation of Net Asset Value; or

    [cir] Other (analyst complaints; market maker activities;

    employer/employee disputes; specify other).

    Question 3: Indicate whether you were in the past, or are

    currently, an officer, director, employee, consultant, or contractor

    of the entity to which your complaint relates.

    Question 4a: Indicate whether you have taken any prior action

    regarding your complaint, including whether you reported the

    violation to the entity, including the compliance office,

    whistleblower hotline or ombudsman; 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 4b: If you answered ``yes'' to question 4a, provide

    details, including the date on which you took the action(s)

    described, the name of the person or entity to whom you directed any

    report or complaint and the contact information for the person or

    entity, if known, and the complete case name, case number, and forum

    of any legal action you have taken. Use additional sheets, if

    necessary.

    Question 5: State in detail all the facts pertinent to your

    complaint. Attach additional sheets, if necessary.

    Question 6: Describe all supporting materials in your

    possession, custody or control, and the availability and location of

    additional supporting materials not in your possession, custody or

    control. Attach additional sheets, if necessary.

    Question 7: Describe how you obtained the information that

    supports your allegation. If any information was obtained from a

    public source, identify the source with as much particularity as

    possible. Attach additional sheets, if necessary.

    Question 8: Please provide any additional information you think

    may be relevant.

    BILLING CODE 6351-01-P

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    BILLING CODE 6351-01-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)

    inform individuals of the following when asking for information. The

    information provided will enable the Commission to determine your

    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 rules, or

    regulations implicated buy the information consistent with the

    confidentiality requirements set forth in Section 23 of the

    Commodity Exchange Act and part 165 of the Commissions regulations

    hereunder. Furnishing the information is voluntary, but a decision

    not to do so may result in you not being eligible for award

    consideration.

    Questions concerning this form may be directed to the Commodity

    Futures Trading, Three Lafayette Centre, 1151 21st Street, NW.,

    Washington, DC 20581.

    General Information

    Submitting information for the CFTC's whistleblower award

    program is a two-step process. First, you must provide us with your

    information by competing a Form TCR (``Tip, Complaint, or

    Referral''), instructions set forth on the form, and sending it to

    the Commission: electronically via the Commission's website; by mail

    to the Commodity Futures Trading Commission, Three Lafayette Centre,

    1151 21st Street, NW., Washington, DC 20581; or by facsimile to

    (202) XXX-XXXX.

    Submitting your information to the Commission is the

    first step. If you want to be considered for a whistleblower award,

    you must also submit this Form WB-DEC and it must be manually signed

    under penalty of perjury.

    If you submitted your information electronically

    through the Commission's website, the Commission must receive your

    completed Form WB-DEC within 30 days of your submission. If you did

    not submit your information electronically but instead are

    submitting your information on Form TCR, you must submit your

    declaration on Form WB-DEC at the same time that you submit your

    Form TCR.

    Follow the instructions set forth below for submitting this Form

    WB-DEC.

    If you follow these steps, and the information you

    submit leads to the successful enforcement of a CFTC judicial or

    administrative action, or a related action, you will have an

    opportunity at a later date to submit a claim for an award. That is

    a separate process and is described in our whistleblower rules,

    which are available on the Commission's Web site [insert link].

    You have the right to submit information anonymously.

    If you are doing so, please skip Part I of these instructions and

    proceed directly to Part II. Otherwise, please begin by following

    the instructions in Part I.

    Part I: Instructions for Filers who are Disclosing Their Identity

    You are required to complete Sections A, C, D, and E of this

    form. If you are represented by an attorney in this matter, you must

    also complete Section B. Specific instructions for answering these

    questions can be found in Part IV below.

    If you previously submitted your complaint electronically

    through the Commission's website, you may submit this Form WB-DEC to

    us in any of the following 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-XXXX; or

    [cir] By faxing the signed form to (202) XXX-XXXX; or

    [cir] By scanning and emailing the form in PDF format to [insert

    e-mail address].

    Please note that the Commission must receive your Form WB-DEC

    within thirty (30) days of when you submitted your information to us

    through the Commission's website.

    If you did not previously submit your complaint electronically

    through the CFTC's website, but instead intend to send us a Form

    TCR, then you must submit your completed Form TCR and your

    declaration on this Form WB-DEC together. You may do so in one of

    two ways:

    By mailing or delivering the Form TCR and the signed

    Form WB-DEC to the Commodity Futures Trading Commission, Three

    Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581-XXXX;

    or

    By faxing the Form TCR and the signed Form WB-DEC form

    to (202) XXX-XXXX.

    Part II: Instructions for Anonymous Filers

    If you are submitting information anonymously, you may be

    represented by an attorney in this matter. If you are applying for a

    whistleblower award, you must be represented by an attorney in

    connection with such application.

    In order for you to be eligible for a whistleblower award, your

    attorney must retain your signed original of Form WB-DEC in his or

    her records, and submit both your Form WB-APP (if you filled one out

    instead of submitting your complaint to us electronically) and a

    Form WB-DEC completed by the attorney declaration to the Commission.

    You are encouraged to confirm that your attorney followed these

    steps.

    Part III: Instructions for Attorneys Representing Anonymous

    Whistleblowers

    Obtain a completed and signed original of Form WB-DEC from your

    client. You must retain this signed original in your records because

    it may be required at a later date upon request of CFTC staff and

    prior to the payment a whistleblower award.

    You must prepare your own Form WB-DEC, completing only Sections

    B, C and F. Specific instructions for answering these questions can

    be found in Part IV below.

    You must submit your client's application on Form WB-APP and

    your attorney declaration on this Form WB-DEC together. You may do

    so in one of two ways:

    [cir] By mailing or delivering the Form WB-APP and the signed

    Form WB-DEC to the Commodity Futures Trading Commission, Three

    Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581-XXXX;

    or

    [cir] By faxing the Form WB-APP and the signed Form WB-DEC to

    (202) XXX-XXXX.

    Part IV: Instructions for Completing Form WB-DEC

    Section A: Submitter's Information

    Questions 1-3: Provide the following information about yourself:

    First and last name, and middle initial;

    Complete address, including city, state and zip code;

    Telephone number and, if available, an alternate number

    where you can be reached; and

    E-mail address.

    Section B: Information about Your Attorney. Complete this section

    only if you are represented by an attorney in this matter. You must

    be represented by an attorney, and this section must be completed,

    if you intend to apply for a whistleblower award anonymously.

    Questions 1-4: Provide the following information about the attorney

    representing you 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 information was

    submitted to the Commission.

    Question 2a: Provide the date on which the TCR was submitted to the

    Commission.

    Question 2b: Provide the name of the individual or entity to which

    your complaint relates.

    Question 3a: Indicate whether the submitter or counsel have had any

    communication(s) with the Commission concerning this manner.

    Question 3b: If you answered ``yes'' to question 3a, provide the

    name of the SEC staff member with whom the submitter or counsel

    communicated.

    Question 4a: Indicate whether the submitted or counsel have provided

    the information being submitted to the CFTC to any other agency or

    organization.

    Question 4b: If you answered ``yes'' to question 4a, provide

    details, including the name of the agency or organization, the date

    on which you provided your information to the agency or organization

    and any other relevant details.

    Question 4c: Provide a name and contact information for your point

    of contact at the other agency or organization, if known.

    Section D: Eligibility Requirements

    Question 1: State whether you are currently, or were at the time you

    acquired the original information that you submitted to the CFTC a

    member, officer, or employee of the Department of Justice the

    Securities and Exchange Commission; the Comptroller of the

    [[Page 75756]]

    Currency, the Board of Governors of the Federal Reserve System, the

    Federal Deposit Insurance Corporation, the Office of Thrift

    Supervision; National Credit Union Administration Board, registered

    entity, a registered futures association, a self-regulatory

    organization or; any law enforcement organization.

    Question 2: State whether you provided the information submitted to

    the CFTC pursuant to a cooperation agreement with the Commission or

    with any other agency or organization.

    Question 3: State whether you are a spouse, parent, child or sibling

    of a member or employee of the Commission, or whether you reside in

    the same household as a member or employee of the Commission.

    Question 4: State whether you acquired the information you are

    providing to the CFTC from any individual described in Question 1

    through 3 of this Section.

    Question 5: If you answered ``yes'' to questions 1 though 4, please

    provide details.

    Question 5a: State whether you provided the information identified

    submitted to the CFTC before you (or anyone representing you)

    received any request, inquiry or demand from the CFTC, Congress, or

    any other federal, state or local authority, or any self regulatory

    organization about a matter to which the information your submission

    was relevant.

    Question 5b: If you answered ``no'' to questions 5a, please provide

    details. Use additional sheets if necessary.

    Question 6a: State whether you are the subject or target of a

    criminal investigation or have been convicted of a criminal

    violation in connection with the information upon which your

    application for award is based.

    Question 6b: If you answered ``yes'' to question 9a, please provide

    details, including the name of the agency or organization that

    conducted the investigation or initiated the action against you, the

    name and telephone number of your point of contact at the agency or

    organization, if available and the investigation/case name and

    number, if applicable. Use additional sheets, if necessary. If you

    previously provided this information on Form WB-DEC, you may leave

    this question blank, unless your response has changed since the time

    you submitted your Form WB-DEC.

    Section E: Declaration

    To be completed and signed by person submitting the information

    Section F: Counsel Certification

    To be completed and signed by attorney for an anonymous person

    submitting information

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    BILLING CODE 6351-01-P

    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 your 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 the 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 Commissions regulations

    thereunder. Furnishing the information is voluntary, but a decision

    not to do so may result in you not being eligible for award

    consideration.

    Questions concerning this form may be directed to the Commodity

    Futures Trading Commission, Three Lafayette Centre, 1151 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, you must meet all the requirements set forth

    in Section 23 of the Commodities Exchange Act and the rules

    hereunder.

    You must sign the Form WB-APP as the claimant. If you provided

    your information to the CFTC anonymously, you must now disclose your

    identity on this form and your identity must be verified in a form

    and manner that is acceptable to the CFTC prior to the payment of

    any award.

    If you are filing your claim in connection with

    information that you provided to the CFTC, then Form WB-APP and any

    attachments thereto, must be received by the CFTC within sixty (60)

    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.

    If you are filing your claim in connection with

    information you provided to another agency in a related action, then

    your Form WB-APP, and any attachments there to, must be received by

    the CFTC within sixty (60) days of the date of a final judgment in

    the related action to which the claim relates.

    You must submit your Form WB-APP to us in one of the following

    two ways:

    By mailing or delivering the signed form to the

    Commodity Futures Trading Commission, Three Lafayette Centre, 1155

    21st Street, NW., Washington, DC 20581; or

    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;

    Complete address, including city, state and zip code;

    Telephone number and, if available, an alternate number

    where you can be reached; and

    E-mail address

    Section B: Attorney's Information. If you are represented by an

    attorney in this matter, provide the information requested. If you

    are not representing an attorney in this matter, leave this Section

    blank.

    Questions 1-4: Provide the following information about the attorney

    representing you 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 your original information

    was submitted to the CFTC.

    Question 2a: Provide the date on which you submitted your TCR (Tip,

    Complaint or Referral) information to the CFTC.

    Question 2b: Provide the name of the individual(s) or entity(s) to

    which your complaint 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

    [[Page 75760]]

    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.

    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

    you provided your information.

    Question 2: Provide the name and contact information for your point

    of contact at the agency or organization, if known.

    Question 3a: Provide the date on which that you provided your

    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 you 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

    Question 1: State whether you are currently, or were at the time you

    acquired the original information that you submitted to the CFTC a

    member, officer, or employee of the Department of Justice, the

    Securities and Exchange 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,

    National Credit Union Administration Board, registered entity, a

    registered futures association, a self-regulatory organization or;

    any law enforcement organization.

    Question 2: State whether you provided the information submitted to

    the CFTC pursuant to a cooperation agreement with the Commission or

    with any other agency or organization.

    Question 3: State whether you are a spouse, parent, child or sibling

    of a member or employee of the Commission, or whether you reside in

    the same household as a member or employee of the Commission.

    Question 4: State whether you acquired the information you are

    providing to the CFTC from any individual described in Question 1

    through 3 of this Section.

    Question 5: If you answered ``yes'' to questions 1 though 4, please

    provide details.

    Question 5a: State whether you provided the information identified

    submitted to the CFTC before you (or anyone representing you)

    received any request, inquiry or demand from the CFTC, Congress, or

    any other federal, state or local authority, or any self regulatory

    organization about a matter to which the information your submission

    was relevant.

    Question 5b: If you answered ``no'' to questions 5a, please provide

    details. Use additional sheets if necessary.

    Question 6a: State whether you are the subject or target of a

    criminal investigation or have been convicted of a criminal

    violation in connection with the information upon which your

    application for award is based.

    Question 6b: If you answered ``yes'' to question 9a, please provide

    details, including the name of the agency or organization that

    conducted the investigation or initiated the action against you, the

    name and telephone number of your point of contact at the agency or

    organization, if available and the investigation/case name and

    number, if applicable. Use additional sheets, if necessary. If you

    previously provided this information on Form WB-DEC, you may leave

    this question blank, unless your response has changed since the time

    you submitted your Form WB-DEC.

    Section G: Entitlement to Award

    Use this section to explain the basis for your belief that you

    are entitled to an award in connection with your submission of

    information to us or to another agency in connection with a related

    action. Specifically address how you believe you 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

    this part for further information concerning the relevant award

    criteria. You may attach additional sheets, if necessary.

    Section 23(c)(1)(B) of the CEA requires the Commission to

    consider, and subparagraph (a)(1) through (4) provides that in

    determining the amount of an award, the Commission will evaluate 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 securities

    laws 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 your response as well.

    Section G: Declaration

    This section must be signed by the claimant.

    By the Commission.

    Dated: November 10, 2010.

    David Stawick,

    Secretary.

    Statement of Chairman Gary Gensler

    Proposed Rules for Implementing the Whistleblower Provisions of Section

    23 of the Commodity Exchange Act

    I support the proposed rulemaking to establish a program for

    whistleblowers as mandated by the Dodd-Frank Act. Congress enacted

    these provisions to incentivize whistleblowers to come forward with new

    information about potential fraud in the financial markets. The

    proposed rulemaking authorizes the Commission to provide a monetary

    award to whistleblowers when their original information results in a

    successful enforcement action. The rule also provides that moneys

    recovered will fund new customer education initiatives to protect the

    public. The proposed rules encourage persons with knowledge to come

    forward and assist the Commission in identifying, investigating and

    prosecuting potential violations of the Commodity Exchange Act.

    [FR Doc. 2010-29022 Filed 12-3-10; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: December 6, 2010



See Also:

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Follow the Status of Enforcement Actions