Introduction

Section 748 of the Dodd-Frank Act amended the CEA by adding Section 23, entitled "Commodity Whistleblower Incentives and Protections." Among other things, Section 23 establishes a whistleblower program that requires the Commission to pay awards, under regulations prescribed by the Commission and subject to certain limitations to eligible whistleblowers, who voluntarily provide the Commission with original information about violations of the CEA that lead to the successful enforcement of a covered judicial or administrative action, or a related action.  The Commission's whistleblower awards are equal, in the aggregate amount, to at least 10 percent but not more than 30 percent of the monetary sanctions actually collected in the Commission's action or a related action.

Section 748 of the Dodd-Frank Act also established the CFTC Customer Protection Fund (Fund) for the payment of awards to whistleblowers, through the whistleblower program, and the funding of customer education initiatives designed to help customers protect themselves against fraud or other violations of the CEA or the rules or regulations thereunder.  The Commission undertakes and maintains customer education initiatives through an Office of  Consumer Outreach.

Management of the Whistleblower Office

The Whistleblower Office (WBO) has three essential functions:

• Process Whistleblower Submissions—WBO receives, track, and handles whistleblower submissions and inquiries.
• Coordinate with Commission Divisions and Outside Agencies—WBO answers questions from Commission staff and others regarding the whistleblower program, and guides the handling of whistleblower matters as needed during examination, investigation and litigation.  WBO also approves referrals of whistleblower-identifying information to outside agencies.
• Administer Claims Process—WBO receives and tracks whistleblower award claims, gathers and prepares the adjudicatory records for the Whistleblower Award Determination Panel (Panel), advises the Panel as needed on the whistleblower provisions and rules, and memorializes the Panel's decisions.

Management of the Office of Consumer Outreach

The Office of Consumer Outreach administers the CFTC's customer and public education initiatives.  The Commission currently conducts outreach efforts towards consumers largely through its Web site.  This Web site is general in nature in regards to information about the commodity trading markets and ways to avoid fraud.  The Commission is also actively involved with ongoing Federal financial literacy efforts, including participating as a member of the Financial Literacy and Education Commission.  In addition, the Office of Consumer Outreach is finding areas of collaboration with entities such as state banking, insurance, securities and consumer protection regulators, as well as financial markets SROs, nonprofits and academia.

Due to the unprecedented number of Ponzi scams affecting the American public, as evidenced by the record number of cases brought in past years, the Commission is developing a long-term targeted outreach campaign to help consumers take the necessary steps to protect themselves against this fraudulent activity.  In the near-term, the Commission is undertaking initiatives, including but not limited to, creating educational publications that address scams and list red flags of fraud, and an investors' checklist for consumers to utilize prior to trading.  The Commission has made preventative efforts, based upon audience segmentation and social marketing principles, a top priority.

Operation of Fund in FY 2013

CFTC deposited $76.7 million into the Fund in FY 2012.

In FY 2013, the CFTC estimates that it will use $11.6 million of these funds:

• Approximately $1 million will be used for the Office of Consumer Outreach to fund customer education initiatives, administrative expenses, and two full-time equivalents.
• Whistleblower awards are estimated at $10 million¹.
• Approximately $500 thousand will be used for the Whistleblower Office to fund administrative expenses and three FTE.

Operation of Fund in FY 2014

• The Commission anticipates an increase of one staff-year for the Office Consumer Outreach in FY 2014.
• The Commission estimates that it will receive approximately 100 whistleblower tips per year, and that, out of those 100 tips, approximately nine will result in whistleblower claim applications.  Whistleblower awards are estimated at $10 million in FY 2014.
• The Commission does not anticipate an increase in staff for the Whistleblower Office in FY 2014.  The Commission will evaluate the level of effort necessary to support the whistleblower program in FY 2013, based on actual number of tips received, investigation time, and time incurred in handling and adjudicating award claims.

Customer Protection Fund
Dollars in Thousands

	FY 2012 Actual	FY 2013 Estimate	FY 2014 Estimate
Budget Authority – Prior Year	$23,755	$99,996	$88,450
Budget Authority – New Year	76,721	4	11,550
Total Budget Authority	100,476	100,000	100,000
Whistleblower Program	288	500	500
Whistleblower Awards	0	10,000	10,000
Customer Education Program	192	1,050	1,020
Total Planned Expenditures	480	11,550	11,520
Unobligated Balance	$99,996	$88,450	$88,480

¹ Because no historical data exists to substantiate the estimated amount of whistleblower awards, and because the whistleblower process depends upon many factors which cannot be estimated reliably—including the likelihood that a whistleblower will provide actionable information, the likelihood that the Commission will bring a successful enforcement action based on such information, the time it takes to investigate, litigate, and obtain and collect a judgment for which a whistleblower award can be paid, and the likelihood that a whistleblower award claimant will meet the Commission's eligibility and award criteria—the $10 million amount above is simply a conservative placeholder amount to account for the possibility of large judgments in the period that may be associated with information provided by whistleblowers. (back to text)

Appendix 1. The Commissioners