```

[Federal Register Volume 76, Number 165 (Thursday, August 25, 2011)]
[Rules and Regulations]
[Pages 53172-53222]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-20423]

[[Page 53171]]

Vol. 76

Thursday,

No. 165

August 25, 2011

Part II

Commodity Futures Trading Commission

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17 CFR Parts 165

Whistleblower Incentives and Protection; Final Rule

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

[[Page 53172]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 165

RIN 3038-AD04

Whistleblower Incentives and Protection

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

ACTION: Final rules.

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SUMMARY: The Commission is adopting Final Rules and new forms to 
implement Section 23 of the Commodity Exchange Act (``CEA'' or ``Act'') 
entitled ``Commodity Whistleblower Incentives and Protection.'' The 
Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on 
July 21, 2010 (``Dodd-Frank Act''), established a whistleblower program 
that requires the Commission to pay an award, under regulations 
prescribed by the Commission and subject to certain limitations, to 
eligible whistleblowers who voluntarily provide the Commission with 
original information about a violation of the CEA that leads to the 
successful enforcement of a covered judicial or administrative action, 
or a related action. The Dodd-Frank Act also prohibits retaliation by 
employers against individuals who provide the Commission with 
information about possible CEA violations.

DATES: Effective Date: These Final Rules will become effective upon 
October 24, 2011.

FOR FURTHER INFORMATION CONTACT: Edward Riccobene, Chief, Policy and 
Review, Division of Enforcement, 202-418-5327, ericcobene@cftc.gov, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st 
Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION: The Commission is adopting Final Rules 165.1 
through 165.19 and Appendix A, thereto, and new Forms TCR (``Tip, 
Complaint or Referral'') and WB-APP (``Application for Award for 
Original Information Provided Pursuant to Section 23 of the Commodity 
Exchange Act''), under the CEA.

I. Background and Summary

    Section 748 of the Dodd-Frank Act added new Section 23 to the 
CEA,\1\ entitled ``Commodity Whistleblower Incentives and Protection.'' 
\2\ Section 23 directs that the Commission pay awards, subject to 
certain limitations and conditions, to whistleblowers who voluntarily 
provide the Commission with original information about a violation of 
the CEA that leads to the successful enforcement of an action brought 
by the Commission that results in monetary sanctions exceeding 
$1,000,000, or the successful enforcement of a related action. Section 
23 also provides for the protection of whistleblowers against 
retaliation for reporting information to the Commission and assisting 
the Commission in its related investigations and enforcement actions.
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    \1\ 7 U.S.C. 1, et seq. (2006).
    \2\ Public Law 111-203, Sec.  748, 124 Stat. 1739 (2010).
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    On December 6, 2010, the Commission proposed Part 165 of the 
Commission's Regulations to implement new Section 23 (``the Proposed 
Rules'' or ``Proposing Release'').\3\ The rules contained in proposed 
Part 165 defined certain terms critical to the operation of the 
whistleblower program, outlined the procedures for applying for awards 
and the Commission's procedures for making decisions on claims, and 
generally explained the scope of the whistleblower program to the 
public and to potential whistleblowers.
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    \3\ Proposed Rules for Implementing the Whistleblower Provisions 
of Section 23 of the Commodity Exchange Act, Release No. 3038-AD04, 
75 FR 75728 (Dec. 6, 2010).
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    The Final Rules include the specific procedures and forms that a 
potential whistleblower must follow and file to make a claim. The Final 
Rules also detail the standards that the Commission will use in 
determining whether an award is appropriate and, if one is appropriate, 
what the amount of an award should be. The Commission may exercise 
discretion in granting an award based on the significance of the 
information, degree of assistance provided in support of a covered 
judicial or administrative action, programmatic interest, 
considerations of public policy, and other criteria (other than the 
balance of the Commodity Futures Trading Commission Customer Protection 
Fund (``Fund'')). An award shall be denied to certain government 
employees and others who, for certain stated reasons, are ineligible to 
be whistleblowers.
    The Final Rules also provide that a whistleblower may appeal to the 
appropriate U.S. Circuit Court of Appeals the Commission's award 
determination, including the determinations as to whom an award is 
made, the amount of an award, and the denial of an award. Finally, the 
Final Rules also provide guidance concerning anti-retaliation 
provisions of the Dodd-Frank Act.
    The Commission received more than 635 comment letters.\4\ Over 600 
of these comments, sent by or on behalf of different individuals and 
entities, were variations of the same form letter.\5\ The remaining 35 
comments were submitted by individuals, whistleblower advocacy groups, 
public companies, corporate compliance personnel, law firms and 
individual lawyers, professional associations, and nonprofit 
organizations. The comments addressed a wide range of issues, including 
the interplay of the proposed Commission whistleblower program and 
company internal compliance processes, the proposed exclusion from 
award eligibility of certain categories of individuals or types of 
information, the availability of awards to culpable whistleblowers, the 
procedures for submitting information and making a claim for an award, 
and the application of the statutory anti-retaliation provision.
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    \4\ The public comments the Commission received are available at 
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=916.
    \5\ The form letters provide no specific comments or requested 
revisions regarding the Proposed Rules. These letters: express 
concern that the ``corporate lobby will have undue influence on the 
final rules to protect whistleblowers;'' allege that ``[t]he SEC 
proposed rules completely undermine efforts to protect employees who 
risk their careers to expose fraud;'' and opine that ``the CTFC 
should not blindly follow any of the SEC's recommendations and 
should instead write rules will encourage whistleblowers to report 
commodities fraud.''
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    As discussed in more detail below, the Commission has carefully 
considered the comments received on the Proposed Rules in formulating 
the Final Rules the Commission adopts today. The Commission has also 
considered the Securities and Exchange Commission's (``SEC['s]'') 
rulemaking to implement Section 922 of the Dodd-Frank Act, which 
establishes whistleblower protections and incentives with respect to 
violations of the securities laws.\6\ Where appropriate and consistent 
with the underlying statutory mandate in Section 23 of the CEA, the 
Commission has endeavored to harmonize its whistleblower rules with 
those of the SEC. The Commission has made a number of revisions and 
refinements to the Proposed Rules in

[[Page 53173]]

order to achieve the goals of the statutory whistleblower program and 
advance effective enforcement of laws under the CEA. While the 
revisions of each Proposed Rule are described in more detail throughout 
this release, the four subjects highlighted below are among the most 
significant.
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    \6\ See Securities Whistleblower Incentives and Protections, 76 
FR 34300 (June 13, 2011) (to be codified at 17 CFR 240.21F-1 to 
240.21F-17). Commission staff has consulted with SEC staff regarding 
drafting of rules to implement the Commission's and SEC's respective 
Dodd-Frank Act whistleblower provisions, Section 748 (Commodity 
Whistleblower Incentives and Protection) and Section 922 
(Whistleblower Protection). To the extent that the Commission and 
SEC reached the same conclusions on common issues, the Commission 
endeavored harmonize its rule text with the SEC's final rule text.
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    Internal Compliance: A significant issue discussed in the Proposed 
Rules was the impact of the whistleblower program on company systems 
for internal reporting of potential misconduct.\7\ The Commission did 
not propose a requirement that a whistleblower must report his 
information internally to an entity to be eligible for an award, and 
commenters were sharply divided on the issues raised by this topic. 
Upon consideration of the comments, the Commission has determined that 
it is inappropriate to require whistleblowers to report violations 
internally to be eligible for an award. The Commission does, however, 
recognize that internal compliance and reporting systems ought to 
contribute to the goal of detecting, deterring and preventing 
misconduct, including CEA violations, and does not want to discourage 
employees from using such systems when they are in place. Accordingly, 
the Commission has tailored the Final Rules as follows:
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    \7\ See 75 FR at 75730.

    [cir] With respect to the criteria for determining the amount of 
an award, the Final Rules provide that while the amount of an award 
is within the Commission's discretion, the Commission will consider 
(i) a whistleblower's report of information internally to an 
entity's whistleblower, compliance or legal system as a factor that 
potentially can increase the amount of an award; and (ii) a 
whistleblower's interference with such internal systems is a factor 
that can potentially decrease the amount of an award. Rule 
165.9(b)(4), (c)(3).
    [cir] A whistleblower may be eligible for an award for reporting 
original information to an entity's internal compliance and 
reporting systems if the entity later reports information to the 
Commission that leads to a successful Commission action or related 
action. Under this provision, all of the information provided by the 
entity to the Commission will be attributed to the whistleblower, 
which means the whistleblower will get credit--and potentially a 
greater award--for any information provided by the entity to the 
Commission in addition to the original information reported by the 
whistleblower. Rule 165.2(i)(3).

    Procedures for Submitting Information and Claims: The Proposed 
Rules set forth a two-step process for submitting information, 
requiring the submission of two different forms. In response to 
comments that urged the Commission to streamline the procedures for 
submitting information, the Commission has adopted a simpler process by 
combining the two proposed forms into a single ``Form TCR'' to be 
submitted by a whistleblower, under penalty of perjury. With respect to 
the claims application process, the Commission has made one section of 
that form optional to make the process less burdensome.
    Aggregation of Smaller Actions to meet the $1,000,000 Threshold: 
The Proposed Rules stated that awards would be available only when the 
Commission has successfully brought a single judicial or administrative 
action in which it obtained monetary sanctions of more than $1,000,000. 
In response to comments, the Commission has provided in the Final Rules 
that, for purposes of making an award, the Commission will aggregate 
two or more smaller actions that arise from the same nucleus of 
operative facts. This will make whistleblower awards available in more 
cases.
    Exclusions from Award Eligibility for Certain Persons and 
Information: The Proposed Rules set forth a number of exclusions from 
eligibility for certain categories of persons and information. In 
response to comments suggesting that some of these exclusions were 
overly broad or unclear, the Commission has revised a number of these 
provisions. Most notably, the Final Rules provide greater clarity and 
specificity about the scope of the exclusions applicable to senior 
officials within an entity who learn information about misconduct in 
connection with the entity's processes for identifying, reporting, and 
addressing possible violations of law.
    Internal Procedural and Organizational Issues: In the Proposing 
Release, the Commission noted that it would address ``internal 
procedural and organizational issues'' related to implementation of 
Section 23 in a future rulemaking.\8\ The Final Rules include revisions 
to reflect the Commission's intent to delegate to a Whistleblower 
Office the authority to administer the Commission's whistleblower 
program and to undertake and maintain customer education initiatives 
through an Office of Consumer Outreach. The Final Rules also provide 
that the Commission will exercise its authority to make whistleblower 
award determinations through a delegation of authority to a panel that 
shall be composed of representatives from three of the Commission's 
Offices or Divisions.
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    \8\ See 75 FR at 75728.
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II. Description of the Rules

A. Rule 165.1--General

    Proposed Rule 165.1 provided a general, straightforward description 
of Section 23 of the CEA, setting forth the purposes of the rules and 
stating that the Commission administers the whistleblower program. In 
addition, the Final Rule states that, unless expressly provided for in 
the rules, no person is authorized to make any offer or promise, or 
otherwise to bind the Commission, with respect to the payment of an 
award or the amount thereof.

B. Rule 165.2--Definitions

1. Action
    The term ``action'' is relevant for purposes of calculating whether 
monetary sanctions in a Commission action exceed the $1,000,000 
threshold required for an award payment pursuant to Section 23 of the 
CEA, as well as determining the monetary sanctions on which awards are 
based.\9\ Proposed Rule 165.2(a) defined the term ``action'' to mean a 
single captioned judicial or administrative proceeding. The Commission 
proposed to interpret the term ``action'' to include all claims against 
all defendants or respondents that are brought within that proceeding 
without regard to which specific defendants or respondents, or which 
specific claims, were included in the action as a result of the 
information that the whistleblower provided. With respect to the 
definition of the term ``action,'' one commenter stated that only those 
claims in multiple claim enforcement matters that result directly or 
indirectly from the whistleblower's report should be included in an 
``action'' for which a whistleblower is eligible for an award.\10\ The 
commenter reasoned that the proposed definition would encourage the 
reporting of ``fairly minor violations'' which could cause the 
Commission to be ``inundated with far more complaints on insignificant 
matters, thereby clogging a process that is already expected to be 
cumbersome'' to the Commission.
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    \9\ See Rule 165.8.
    \10\ See letter from National Society of Compliance 
Professionals (``NSCP'').
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    The Commission has considered, but disagrees with the rationale in 
support of these comments. In general, any violation, even those that 
may appear relatively minor (e.g., failure to provide pool participants 
with timely account statements in violation of Commission Regulation 
4.22), may upon investigation be symptomatic of more significant 
violations (e.g., CPO fraud in violation of Sections 4b and 4o of the

[[Page 53174]]

CEA). It would therefore not be in the public interest to discourage 
the reporting of any violations. Further, to the extent that reporting 
of relatively minor violations is a potential concern, the Final Rules 
require that the whistleblower's information must have led to the 
successful enforcement of a covered judicial or administrative action 
(see Rules 165.2(e), (i), and 165.5(a)(3)). A minor violation by itself 
is unlikely to result in an enforcement action resulting in monetary 
sanctions exceeding $1,000,000.
    The Commission is making a slight amendment to Rule 165.2(a) as 
proposed. The Commission has discretion to bifurcate enforcement 
actions (e.g., one action against the entity and another against 
culpable individuals). Under the Proposed Rule, the bifurcation of a 
single enforcement action with aggregate sanctions in an amount greater 
than $1,000,000 could result in separate but related enforcement 
actions in which one or more of such actions had sanctions of less than 
$1,000,000. Under the Proposed Rule, therefore, the bifurcation of an 
enforcement action into two or more related actions could result in a 
reduced award for a whistleblower that provided the original 
information leading to the enforcement actions, or no reward at all. 
Consequently, the Commission is amending the definition of ``action'' 
in Rule 165.2(a) to include two or more proceedings that ``arise out of 
the same nucleus of operative facts.'' \11\
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    \11\ See SEC Rule 240.21F-4(d) (providing a similar definition 
of ``action'').
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2. Aggregate Amount
    Proposed Rule 165.2(b) defined the phrase ``aggregate amount'' to 
mean the total amount of an award granted to one or more whistleblowers 
pursuant to Proposed Rule 165.7 (Procedures for award applications and 
Commission award determinations). The term is relevant for purposes of 
determining the amount of an award pursuant to Proposed Rule 165.8 
(``Amount of award;'' providing the Commission's parameters for 
whistleblower awards). The Commission did not receive any comments on 
the definition of aggregate amount. The Commission is adopting Rule 
165.2(b) as proposed.
3. Analysis
    Under Section 23(a)(4) of the CEA, the ``original information'' 
provided by a whistleblower may include information that is derived 
from the ``independent knowledge'' or ``independent analysis'' of a 
whistleblower. Proposed Rule 165.2(c) defined the term ``analysis'' to 
mean the whistleblower's examination and evaluation of information that 
may be generally available, but which reveals information that is not 
generally known or available to the public. The Commission received no 
comment on the definition of ``analysis.'' However, the Commission did 
receive several comments on the definition of ``independent analysis,'' 
which are more fully discussed in section II.B.7.a below.
    Because it received no comments to the contrary, the Commission is 
adopting Rule 165.2(c) as proposed. This definition recognizes that 
there are circumstances where individuals might review publicly 
available information, and, through their additional evaluation and 
analysis, provide vital assistance to the Commission staff in 
understanding complex schemes and identifying potential violations of 
the CEA.
4. Collected by the Commission
    Proposed Rule 165.2(d) defined the phrase ``collected by the 
Commission,'' when used in the context of deposits and credits into the 
Fund, to refer to a monetary sanction that is both collected by the 
Commission and confirmed by the U.S. Department of the Treasury.\12\ 
Section 23(g)(3) of the CEA provides that the Fund will be financed 
through monetary sanctions ``collected by the Commission * * * that is 
not otherwise distributed to victims of a violation of this Act or the 
rules or regulations thereunder underlying such action,'' meaning that 
deposits into the Fund are based only upon what the Commission actually 
collects.\13\ The Commission generally collects civil monetary 
sanctions and disgorgement amounts in civil actions, or fines in 
administrative actions. A federal court or the Commission may award 
restitution to victims in civil and administrative actions, 
respectively, but the Commission does not ``collect'' restitution, 
i.e., restitution is not recorded as a receivable on the Commission's 
books and records. Consequently, restitution amounts collected in a 
covered action or related action, in normal course, will not be 
deposited into the Fund. The Commission did not receive comments 
regarding the definition of ``collected by the Commission.'' The 
Commission is therefore adopting Rule 165.2(d) as proposed.
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    \12\ See discussion regarding the Fund below in section II.B.6.
    \13\ See Section 23(g)(3) of the CEA, 7 U.S.C. 26(g)(3).
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5. Covered Judicial or Administrative Action
    Proposed Rule 165.2(e) defined the phrase ``covered judicial or 
administrative action'' to mean any judicial or administrative action 
brought by the Commission under the CEA, the successful resolution of 
which results in monetary sanctions exceeding $1,000,000. The 
Commission did not receive any comments on ``covered judicial or 
administrative action,'' and is adopting Rule 165.2(e) as proposed.
6. Fund
    Proposed Rule 165.2(f) defined the term ``Fund'' to mean the 
``Commodity Futures Trading Commission Customer Protection Fund'' 
established by Section 23(g) of the CEA. The Commission will use the 
Fund to pay whistleblower awards as provided in Final Rule 165.12 and 
to finance customer education initiatives designed to help customers 
protect themselves against fraud and other violations of the CEA or the 
Commission's Regulations. The Commission received no comments regarding 
the definition of ``Fund.'' The Commission is adopting Rule 165.2(f) as 
proposed.
7. Independent Knowledge and Independent Analysis
    The phrases ``independent knowledge'' and ``independent analysis'' 
are relevant to the definition of ``original information'' in Proposed 
Rule 165.2(k), which provides that ``original information'' may be 
derived from the ``independent knowledge'' or ``independent analysis'' 
of a whistleblower. Commenters generally agreed with the Commission's 
interpretation of independent knowledge and independent analysis.\14\ 
However, there were varied views as to what the Commission should or 
should not exclude from independent knowledge and independent analysis.
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    \14\ See letters from Securities Industry and Financial Markets 
Association and Futures Industry Association (``SIFMA/FIA''), 
American Institute of CPAs (``AICPA''), NSCP, American Bar 
Association--Business Law Section/Committee on Derivatives and 
Futures Law and the Committee on Federal Regulation of Securities 
(``ABA'') and Edison Electric Institute and National Rural Electric 
Cooperative Association (``EEI'').
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a. Independent Analysis
    The Commission received one comment that addressed the definition 
of ``independent analysis''--``the whistleblower's own analysis whether 
done alone or in combination with others.'' The commenter stated that 
the term ``independent analysis'' in Proposed Rule 165.2(h) should be

[[Page 53175]]

restricted to an analysis of the whistleblower's ``independent 
knowledge'' along with other objective facts such as commodity price or 
trading volume.\15\ The Commission has considered the comment in the 
context of ``independent analysis'' and has decided to adopt Rule 
165.2(h) as proposed. Section 23(a)(4) of the CEA specifically provides 
that original information can be derived from either ``the independent 
knowledge or analysis of a whistleblower.'' The Commission's Proposed 
Rule adheres to this statutory limitation.
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    \15\ See letter from ABA.
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b. Independent Knowledge
i. Proposed Rule
    Proposed Rule 165.2(g) defined ``independent knowledge'' as factual 
information in the whistleblower's possession that is not obtained from 
publicly available sources, which would include such sources as 
corporate filings, media, and the Internet. Importantly, the proposed 
definition of ``independent knowledge'' did not require that a 
whistleblower have direct, first-hand knowledge of potential 
violations.\16\ Instead, independent knowledge may be obtained from any 
of the whistleblower's experiences, observations, or communications 
(subject to the exclusion for knowledge obtained from public sources). 
Thus, for example, under Proposed Rule 165.2(g), a whistleblower would 
have ``independent knowledge'' of information even if that knowledge 
derives from facts or other information that has been conveyed to the 
whistleblower by third parties.
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    \16\ In addition, the distinction between ``independent 
knowledge'' (as knowledge not dependent upon publicly available 
sources) and direct, first-hand knowledge, is consistent with the 
approach courts have typically taken in interpreting similar 
terminology in the False Claims Act. Until this year, the ``public 
disclosure bar'' provisions of the False Claims Act defined an 
``original source'' of information, in part, as ``an individual who 
[had] direct and independent knowledge of the allegations of the 
information on which the allegations [were] based * * *.'' 31 U.S.C. 
3730(e)(4) (prior to 2010 amendments). Courts interpreting these 
terms generally defined ``independent knowledge'' to mean knowledge 
that was not dependent on public disclosures, and ``direct 
knowledge'' to mean first-hand knowledge from the relator's own work 
and experience, with no intervening agency. E.g., United States ex 
rel. Fried v. West Independent School District, 527 F.3d 439 (5th 
Cir. 2008); United States ex rel. Paranich v. Sorgnard, 396 F.3d 326 
(3d Cir. 2005). See generally John T. Boese, Civil False Claims and 
Qui Tam Actions Sec.  4.02[D][2] (Aspen Publishers) (2006) (citing 
cases). Earlier this year, Congress amended the ``public disclosure 
bar'' to, among other things, remove the requirement that a relator 
have ``direct knowledge'' of information. Sec. 10104(j)(2), Public 
Law 111-148 124 Stat. 901 (Mar. 23, 2010).
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    Proposed Rule 165.2(g) provided six circumstances in which an 
individual would not be considered to have ``independent knowledge.'' 
The effect of those provisions would be to exclude individuals who 
obtain information under those circumstances from being eligible for 
whistleblower awards.
    The first exclusion is for information generally available to the 
public, including corporate filings and internet based information. 
(Proposed Rule 165.2(g)(1).)
    The second and third exclusions address information that was 
obtained through a communication that is subject to the attorney-client 
privilege. (Proposed Rule 165.2(g)(2) and (3).) The second exclusion 
applies when a would-be whistleblower obtains the information in 
question through privileged attorney-client communications. The third 
exclusion applies when a would-be whistleblower obtains the information 
in question as a result of his or his firm's legal representation of a 
client. Neither the second nor the third exclusion would apply in 
circumstances in which the disclosure of the information is authorized 
by the applicable federal or state attorney conduct rules. These 
authorized disclosures could include, for example, situations where the 
privilege has been waived, or where the privilege is not applicable 
because of a recognized exception such as the crime-fraud exception to 
the attorney-client privilege.
    In regard to both the second and third exclusions, compliance with 
the CEA is promoted when individuals, corporate officers, Commission 
registrants and others consult with counsel about potential violations, 
and the attorney-client privilege furthers such consultation. This 
important benefit could be undermined if the whistleblower award 
program vitiated the public's perception of the scope of the attorney-
client privilege or created monetary incentives for counsel to disclose 
information about potential CEA violations that they learned of through 
privileged communications.
    The fourth exclusion to ``independent knowledge'' in the Proposed 
Rule applies when a person with legal, compliance, audit, supervisory, 
or governance responsibilities for an entity receives information about 
potential violations, and the information was communicated to the 
person with the reasonable expectation that the person would take 
appropriate steps to cause the entity to remedy the violation.\17\ 
(Proposed Rule 165.2(g)(4).) Accordingly, under the fourth exclusion, 
officers, directors, and employees who learn of wrongdoing and are 
expected as part of their official duties to address the violations 
would not be permitted to use that knowledge to obtain a personal 
benefit by becoming whistleblowers.
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    \17\ This exclusion has been adapted from case law holding that 
a disclosure to a supervisor who is in a position to remedy the 
wrongdoing is a protected disclosure for purposes of the federal 
Whistleblower Protection Act, 5 U.S.C. 2302(b)(8). E.g., Reid v. 
Merit Systems Protection Board, 508 F.3d 674 (Fed. Cir. 2007); 
Hooven-Lewis v. Caldera, 249 F.3d 259 (4th Cir. 2001).
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    The fifth exclusion is closely related to the fourth, and applies 
any other time that information is obtained from or through an entity's 
legal, compliance, internal audit, or similar functions or processes 
for identifying, reporting, and addressing potential non-compliance 
with applicable law. (Proposed Rule 165.2(g)(5).)
    Compliance with the CEA is promoted when companies implement 
effective legal, internal audit, compliance, and similar functions. 
Thus, Section 23 should not create incentives for persons involved in 
such roles, as well as other similarly positioned persons who learn of 
wrongdoing at a company, to circumvent or undermine the proper 
operation of an entity's internal processes for investigating and 
responding to violations of law. However, both of these exclusions 
cease to be applicable if the entity fails to disclose the information 
to the Commission within sixty (60) days of when it becomes aware of 
the violation or otherwise proceeds in bad faith, with the result that 
an individual may be deemed to have ``independent knowledge,'' and, 
therefore, depending on the other relevant factors, may qualify for a 
whistleblower award. The rationale for this provision is that if the 
entity fails to report information concerning the violation to the 
Commission within that time frame, it would be inconsistent with the 
purposes of Section 23 to deter individuals with knowledge of the 
potential violations from coming forward and providing the information 
to the Commission. Furthermore, this provision provides a reasonable 
period of time for entities to report potential violations, thereby 
minimizing the potential of circumventing or undermining existing 
compliance programs.
    The sixth and final exclusion to ``independent knowledge'' in the 
Proposed Rule applies if the would-be whistleblower obtains the 
information by means or in a manner that violates

[[Page 53176]]

applicable federal or state criminal law. (Section 165.2(g)(6).) This 
exclusion is necessary to avoid the unintended effect of incentivizing 
criminal misconduct.
ii. Comments and Final Rule
Rule 165.2(g)(1)--Exception Concerning Public Sources
    The Commission received comments from two commenters regarding the 
public source exception to ``independent knowledge.'' One commenter 
suggested that the public source exception (Section 165.2(g)(1)) is too 
broad and suggested that the Commission should restrict the definition 
of ``independent knowledge'' to first-hand knowledge. The commenter's 
rationale was that such a restriction would be premised on the notion 
that oral information obtained from third parties is unreliable because 
it may be insincere or subject to flaws in memory or perception. This 
commenter also suggested that the public source exception incentivizes 
whistleblower reports based on rumors or ill-informed sources.\18\ 
Taking a contrary position, another commenter recommended that an 
``independent analysis'' be allowed to draw on previously published 
sources.\19\ One commenter suggested that ``independent analysis'' 
should be restricted to an analysis of the whistleblower's own 
``independent knowledge'' along with other objective facts like 
commodity price or trading volume.\20\
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    \18\ See letter from ABA.
    \19\ See letter from Project on Government Oversight (``POGO'') 
at 5-6 (noting the Bernard Madoff whistleblower, Harry Markopolos, 
as an example of whistleblowers who ``perform original analysis 
based on publicly available sources.'').
    \20\ See letter from ABA.
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    After considering comments received, the Commission has decided to 
adopt Rule 165.2(g)(1) as proposed.
Rule 165.2(g)(2)--Exception Concerning Attorney-Client Privilege and 
Rule 165.2(g)(3)--Outside Counsel
    One commenter asked the Commission to clarify that all of the 
exceptions contained in Proposed Rules 165.2(g)(2) and (3) continue to 
apply after an individual has resigned from his or her law firm, that 
the provisions apply equally to in-house and outside counsel; and that 
the rules treat the duties of lawyers differently from those of non-
lawyer experts, such as paralegals and others who work under the 
direction of lawyers.\21\ This commenter noted that lawyers gain 
knowledge about an entity that is protected by the attorney-client 
privilege and the work product doctrine,\22\ which the lawyers are not 
permitted to waive, and that lawyers have state-law ethical obligations 
to maintain client confidentiality that extend beyond privileged 
information. The commenter reasoned that if the Commission does not 
specify that the exceptions in Rules 165.2(g)(2) and (3) continue after 
a lawyer has left his or her firm, the lawyer is incentivized to quit. 
Another commenter recommended that Rule 165.2(g)(2) be amended to 
explicitly apply to both attorneys and clients.\23\ Similarly, another 
commenter suggested that the definitions of ``independent knowledge'' 
and ``independent analysis'' should exclude information obtained 
through a communication that is protected by the attorney-client 
privilege.\24\ The same commenter recommended that the exclusions for 
information obtained by a person with legal, compliance, audit, 
supervisory, or governance responsibilities should apply to any 
information obtained by such persons and not be limited to information 
being communicated ``with a reasonable expectation that the [recipient] 
would take appropriate steps to cause the entity to remedy the 
violation. * * *'' \25\
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    \21\ See letter from SIFMA/FIA.
    \22\ See letter from ABA.
    \23\ See letter from The Financial Services Roundtable 
(``FSR'').
    \24\ See letter from NSCP.
    \25\ Id.
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    After considering comments received, the Commission has decided to 
adopt Rule 165.2(g)(2) as proposed and Rule 165.2(g)(3) with some 
modifications. The Commission has changed ``[A]s a result of the legal 
representation of a client on whose behalf the whistleblower's 
services, or the services of the whistleblower's employer or firm, have 
been retained * * *'' to ``[I]n connection with the legal 
representation of a client on whose behalf the whistleblower, or the 
whistleblower's employer or firm, have been providing services. * * *'' 
\26\ The Commission believes that these changes will prevent the use of 
confidential information not only by attorneys, but by secretaries, 
paralegals, consultants and others who work under the direction of 
attorneys and who may have access to confidential client information.
---------------------------------------------------------------------------

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

Rule 165.2(g)(4), (5)--Exception Concerning Internal Legal, Compliance, 
Audit, and Supervisory Responsibilities
    Several commenters sought to expand the exclusions in Proposed Rule 
165.2(g)(4). One commenter suggested that the exclusions for 
information obtained by a person with legal, compliance, audit, 
supervisory, or governance responsibilities should apply to any 
information obtained by such persons, and not be limited to information 
that was communicated to the recipient ``with a reasonable expectation 
that the [recipient] would take appropriate steps to cause the entity 
to remedy the violation * * *.'' \27\ Two other commenters said that 
the 60-day deadline for an entity to report information to the 
Commission, which if missed allows a whistleblower in this category to 
avoid the exclusions under Proposed Rules 165.2(g)(4) and (5), did not 
give the entity enough time to report. One suggested the deadline 
should be a `reasonable time',\28\, and the other suggested that 
whistleblowers in this category should have to wait until an entity's 
internal investigation is completed before reporting to the 
Commission.\29\ Another commenter requested that the exclusion apply to 
external auditors (accounting firms) who obtain information about an 
entity while performing a CEA-required engagement and that the 
exclusion applies to any engagement performed for an entity subject to 
the jurisdiction of the Commission whether or not the engagement is an 
audit.\30\ A commenter also suggested that lawyers should not be 
subject to the ``good faith'' or ``prompt reporting'' exceptions in 
Proposed Rule 165.2(g)(4), and that the reference to lawyers in 
Proposed Rule165.2(g)(4) should therefore be deleted and treated 
separately in Proposed Rules 165.2(g)(2) and (3).\31\
---------------------------------------------------------------------------

    \27\ See letter from ABA.
    \28\ See letter from NSCP, ``as long as the firm is moving 
toward appropriate resolution in light of the totality of the 
circumstances, a subjective definition of `reasonable time' is 
appropriate.''
    \29\ See letter from EEI.
    \30\ See letter from AICPA.
    \31\ See letter from SIFMA/FIA.
---------------------------------------------------------------------------

    The Commission also received a comment that stated that the 
exception should be broadened to include internal control functions 
more generally, including risk management, product management and 
personnel functions. This commenter reasoned that all internal control 
functions should be treated equally because all internal control 
functions play an important role in maintaining an entity's control 
environment.\32\
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    \32\ See letter from SIFMA/FIA. The Commission does not agree 
with this commenter. To exclude all persons somehow involved in an 
undefined ``internal control'' function would create too broad an 
exclusion, thereby making an unnecessarily large number of employees 
ineligible to be whistleblowers. It was not the intent of Section 23 
to unreasonably limit the potential pool of whistleblowers.
---------------------------------------------------------------------------

    The Commission has considered the comments received and revised the 
rule

[[Page 53177]]

such that those recommendations that have been accepted, in whole or in 
part, are now reflected in Rule 165.2(g)(4), (5). The recommended 
exclusions have been revised and focused to promote the goal of 
ensuring that the persons most responsible for an entity's conduct and 
compliance with law are not incentivized to promote their own self-
interest at the possible expense of the entity's ability to detect, 
address, and self-report violations. Further, pursuant to the rules as 
adopted, such individuals would be permitted to become whistleblowers 
under certain circumstances, including when the whistleblower has a 
``reasonable basis to believe'' that: (1) Reporting to the Commission 
is necessary to prevent conduct likely to cause substantial injury; (2) 
the entity is engaging in conduct that will impede an investigation of 
the misconduct; or (3) at least 120 days have elapsed since the 
whistleblower reported the information internally.\33\
---------------------------------------------------------------------------

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

    The Commission declined to revise the rule to extend the exclusion 
to an employee of a public accounting firm. While the SEC includes such 
an exclusion in its rules,\34\ the SEC's Dodd-Frank Act whistleblower 
provisions specifically requires this exclusion \35\ and external 
auditors are under an existing obligation to report violations to the 
SEC under the Securities Exchange Act of 1934.\36\ Neither the 
Commission's Dodd-Frank Act whistleblower provisions nor the CEA have 
similar exclusions or requirements.
---------------------------------------------------------------------------

    \34\ See SEC Rule 240.21F-4(b)(4)(iii)(D).
    \35\ See 15 U.S.C. 78u-6(c)(2)(C).
    \36\ See 15 U.S.C. 78j-1(b)(3); see also SEC Rule 240.10A-1.
---------------------------------------------------------------------------

Rule 165.2(g)(6)--Exception Concerning Information Obtained in 
Violation of Law
    Commenters support the notion that a whistleblower who reports 
information he obtained in violation of the law should be ineligible 
for an award.\37\ One commenter, however, recommended that an award 
exclusion should be limited.\38\ This commenter reasoned that Rule 
165.2(g)(6), as proposed, would have the effect of making the 
Commission ``responsible for adjudicating--without any real due process 
afforded to the whistleblower--whether or not evidence-gathering 
techniques violated a law, and if so, whether or not the whistleblower 
was in fact guilty of violating said law (i.e. whether the state could 
prove, beyond [a] reasonable doubt, that the employee in fact violated 
each and every element of the criminal claim).'' In addition, this 
commenter suggested that the Commission should revise the rule to more 
closely reflect the underlying statutory language. Another commenter 
proposed that the exclusion for information obtained in violation of 
the law should be extended to civil violations of laws or rules, and 
violations of a self-regulatory organization (``SRO'') rules.\39\
---------------------------------------------------------------------------

    \37\ See letter from SIFMA/FIA (``The rules should also not 
allow for an award based on information provided in violations of 
judicial or administrative orders.'').
    \38\ See letter from Taxpayers Against Fraud (``TAF'').
    \39\ See letter from SIFMA/FIA.
---------------------------------------------------------------------------

    After considering the comments on Proposed Rule 165.2(g)(6), the 
Commission has decided to adopt the rule, as proposed, with one 
modification. Under the Final Rule, Rule 165.2(g)(5), whether a 
criminal violation occurred for purposes of the exclusion is now 
subject to the determination of a United States court. This revision is 
consistent with Section 23(c)(2) of the CEA, which renders ineligible 
``any whistleblower who is convicted of a criminal violation related to 
the judicial or administrative action for which the whistleblower 
otherwise could receive'' a whistleblower award. Expanding this 
exclusion beyond criminal violations and without the requirement for a 
United States court determination would be inconsistent with the 
statute and discourage whistleblowers through the creation of legal 
uncertainty.
8. Information That Led to Successful Enforcement Action
a. Proposed Rule
    As proposed, Rule 165.2(i) explained when the Commission would 
consider original information to have led to a successful enforcement 
action. The Proposed Rule distinguished between information regarding 
conduct not previously under investigation or examination and 
information regarding conduct already under investigation or 
examination.
    For information regarding conduct not previously under 
investigation or examination, the Proposed Rule established a two-part 
test for determining whether the information led to successful 
enforcement. First, the information must have caused the Commission 
staff to commence an investigation or examination, reopen an 
investigation that had been closed, or to inquire into new and 
different conduct as part of an existing examination or investigation. 
Second, the information must have ``significantly contributed'' to the 
success of an enforcement action filed by the Commission.
    For information regarding conduct already under investigation or 
examination, the Proposed Rule established a higher hurdle. To 
establish that information led to a successful enforcement action, a 
whistleblower would need to demonstrate that the information: (1) Would 
not have otherwise been obtained; and (2) was essential to the success 
of the action.
b. Comments
    The Commission received two comments regarding Proposed Rule 
165.2(i). Both commenters suggested revising Proposed Rule 165.2(i) to 
lower the hurdles to proving that a whistleblower's information led to 
a successful enforcement action.\40\ One commenter opined that the 
Commission imposes additional, non-statutory hurdles to the meaning of 
``led to the successful enforcement.'' This commenter also asserted 
that the ``significantly contributed to the success of the action'' 
element of the definition improperly broadens the Commission's 
discretion to deny awards beyond congressional intent and suggested 
that the ``significantly contributed'' element be stricken from the 
rule.\41\
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    \40\ See letters from The National Whistleblowers Center 
(``NWC'') and TAF.
    \41\ See letter from TAF.
---------------------------------------------------------------------------

c. Final Rule
    The Commission has considered the comments received regarding the 
definition of ``information that led to successful enforcement'' and 
has decided to adopt Rule 165.2(i) with some changes. Although the 
Commission has retained the ``significantly contributed'' element of 
the rule, the Commission has added alternative standards to evaluate 
whether a whistleblower has provided original information that led to a 
successful enforcement action. The Commission continues to believe that 
it is not the intent of Section 23 to authorize whistleblower awards 
for any and all tips. Instead, implicit in the requirement contained in 
Section 23(b) that a whistleblower's information ``led to successful 
enforcement'' is the additional expectation that the information, 
because of its high quality, reliability, and specificity, has a 
meaningful nexus to the Commission's ability to successfully complete 
its investigation, and to either obtain a settlement or prevail in a 
litigated proceeding.

[[Page 53178]]

    In addition, to further incentivize internal reporting of 
violations, the Commission has added a new paragraph (3) to this rule, 
which states that original information reported through an entity's 
internal processes that leads to a successful enforcement action will 
be treated as information provided by the whistleblower instead of 
provided by the entity.\42\
---------------------------------------------------------------------------

    \42\ The SEC final rules take a similar approach to their 
comparable definitional provision. See SEC Rule 240.21F-4(c) 
(``information that leads to successful enforcement'').
---------------------------------------------------------------------------

9. Monetary Sanctions
    Proposed Rule 165.2(j) defined the phrase ``monetary sanctions'' 
when used with respect to any judicial or administrative action, or 
related action, to mean: (1) Any monies, including penalties, 
disgorgement, restitution and interest ordered to be paid; and (2) any 
monies deposited into a disgorgement fund or other fund pursuant to 
section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246(b)), 
as a result of such action or any settlement of such action. This 
phrase is relevant to the definition of a ``covered judicial or 
administrative action'' in Proposed Rule 165.2(e) and to the amount of 
a whistleblower award under Proposed Rule 165.8. The Commission 
received no comments on the definition of ``monetary sanctions.'' The 
Commission is adopting the rule as proposed.
10. Original Information and Original Source
a. Proposed Rules
    Proposed Rule 165.2(k) tracked the definition of ``original 
information'' set forth in Section 23(a)(4) of the CEA.\43\ ``Original 
information'' means information that is derived from the 
whistleblower's independent knowledge or analysis; is not already known 
to the Commission from any other source, unless the whistleblower is 
the original source of the information; and is not exclusively derived 
from an allegation made in a judicial or administrative hearing, in a 
governmental report, hearing, audit, or investigation, or from the news 
media, unless the whistleblower is a source of the information. 
Consistent with Section 23(l) of the CEA, the Dodd-Frank Act authorizes 
the Commission to pay whistleblower awards on the basis of original 
information that is submitted prior to the effective date of the Final 
Rules implementing Section 23 (assuming that all of the other 
requirements for an award are met). The Dodd-Frank Act does not 
authorize the Commission to apply Section 23 retroactively to pay 
awards based upon information submitted prior to the enactment date of 
the statute.\44\ Consistent with Congress's intent, Proposed Rule 
165.2(k)(4) also required that ``original information'' be provided to 
the Commission for the first time after July 21, 2010 (the date of 
enactment of the Dodd-Frank Act).
---------------------------------------------------------------------------

    \43\ 7 U.S.C. 26(a)(4).
    \44\ Section 23(k) of the CEA directs that: ``Information 
submitted to the Commission by a whistleblower in accordance with 
rules or regulations implementing this section shall not lose its 
status as original information solely because the whistleblower 
submitted such information prior to the effective date of such rules 
or regulations, provided that such information was submitted after 
the date of enactment of the [Dodd-Frank Act].''
---------------------------------------------------------------------------

    Proposed Rule 165.2(l) defined the term ``original source,'' a term 
found in the definition of ``original information.'' Under the Proposed 
Rule, a whistleblower is an ``original source'' of the same information 
that the Commission obtains from another source if the other source 
obtained the information from the whistleblower or his representative. 
The whistleblower bears the burden of establishing that he is the 
original source of information.
    In Commission investigations, a whistleblower would be an original 
source if he first provided information to another authority, such as 
the Department of Justice, an SRO, or another organization that is 
identified in the Proposed Rule, which then referred the information to 
the Commission. In these circumstances, the Proposed Rule would credit 
a whistleblower as being the ``original source'' of information on 
which the referral was based as long as the whistleblower 
``voluntarily'' provided the information to the other authority within 
the meaning of these rules (i.e., the whistleblower or his 
representative must have come forward and given the other authority the 
information before receiving any request, inquiry, or demand to which 
the information was relevant, or was the individual who originally 
possessed either the independent knowledge or conducted the independent 
analysis). Similarly, a whistleblower would not lose original source 
status solely because he shared his information with another person who 
filed a whistleblower claim with the Commission prior to the original 
source filing a claim for whistleblower status, as long as the other 
applicable factors are satisfied.
    Proposed Rule 165.3 (``Procedures for submitting original 
information'') required a whistleblower to submit two forms, a Form TCR 
(``Tip, Complaint or Referral'') and a Form WB-APP (``Application for 
Award for Original Information Provided Pursuant to Section 23 of the 
Commodity Exchange Act''), which included the ``Declaration Concerning 
Original Information Provided Pursuant to Section 23 of the Commodity 
Exchange Act'' in order to start the process and establish the 
whistleblower's eligibility for award consideration.\45\ A 
whistleblower who either provides information to another authority 
first, or who shares his independent knowledge or analysis with another 
who is also claiming to be a whistleblower, would have followed these 
same procedures and submitted the necessary forms to the Commission in 
order to perfect his status as a whistleblower under the Commission's 
whistleblower program. However, under Proposed Rule 165.2(l)(2), the 
whistleblower must have submitted the necessary forms to the Commission 
within 90 days after he provided the information to the other 
authority, or 90 days after the other person claiming to be a 
whistleblower submitted his claim to the Commission.
---------------------------------------------------------------------------

    \45\ See Rule 165.3.
---------------------------------------------------------------------------

    As noted above, the whistleblower must establish that he is the 
original source of the information provided to the other authority as 
well as the date of his submission, but the Commission may seek 
confirmation from the other authority, or any other source, in making 
this determination. The objective of this procedure is to provide 
further incentive for persons with knowledge of CEA violations to come 
forward (consistent with the purposes of Section 23) by assuring 
potential whistleblowers that they can provide information to 
appropriate Government or regulatory authorities, and their ``place in 
line'' will be protected in the event that other whistleblowers later 
provide the same information directly to the Commission.
    For similar reasons, the Proposed Rule extended the same protection 
to whistleblowers who provide information about potential violations to 
the persons specified in Proposed Rule 165.2(g)(3) and (4) (i.e., 
personnel involved in legal, compliance, audit, supervisory and similar 
functions, or who were informed about potential violations with the 
expectation that they would take steps to address them), and who, 
within 90 days, submit the necessary whistleblower forms to the 
Commission. Compliance with the CEA is promoted when entities have 
effective programs for identifying, correcting, and self-reporting 
unlawful conduct by their officers or employees. The objective of this 
provision is to support, not

[[Page 53179]]

undermine, the effective functioning of entity compliance and related 
systems by allowing employees to take their concerns about potential 
violations to appropriate entity officials while still preserving their 
rights under the Commission's whistleblower program.
    Proposed Rule 165.2(l)(3) addressed circumstances where the 
Commission already possesses some information about a matter at the 
time that a whistleblower provides additional information about the 
same matter. The whistleblower will be considered the ``original 
source'' of any information that is derived from his independent 
knowledge or independent analysis, and that materially adds to the 
information that the Commission already possesses. The standard is 
modeled on the definition of ``original source'' that Congress included 
in the False Claims Act through amendments.\46\
---------------------------------------------------------------------------

    \46\ 31 U.S.C. 3730(e)(4)(B), Public Law 111-148 Sec.  
10104(j)(2), 124 Stat. 901 (Mar. 23. 2010).
---------------------------------------------------------------------------

b. Comments
    The Commission received three comments regarding the definition of 
``original information'' in Proposed Rule 165.2(k). One commenter 
believes that the enumerated exclusions from the definition of 
``original information'' are not sufficiently broad. As an example, 
this commenter posits that the definition would not clearly exclude 
information a whistleblower receives as a result of an investigation by 
an exchange, SRO, or a foreign regulator, or information received in 
connection with internal investigations or civil or criminal 
proceedings in which the information has already been made known to the 
entity. Therefore, this commenter suggests broadly excluding from the 
definition all information deriving from an allegation made in any 
investigative or enforcement activity or proceeding, and all 
information elicited during, or deriving from, any such proceeding or 
other matter.\47\
---------------------------------------------------------------------------

    \47\ See letter from ABA.
---------------------------------------------------------------------------

    Another commenter had two concerns about the definition. The first 
concern was that a whistleblower could be rewarded for reporting 
something that an entity has already corrected. Therefore, the 
commenter proposed that for information to be considered original 
information, it should be ``information relating to a violation that 
has not been addressed by the entity that is alleged to have violated 
the CEA.'' The other concern was that the Proposed Rules do not 
specifically address original information involving violations that are 
time-barred by the applicable statute of limitations, or situations in 
which there is uncertainty regarding the applicable statute of 
limitations.\48\
---------------------------------------------------------------------------

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

    Another commenter focused on the definition of ``original source'' 
and suggested that it often takes longer than 90 days for a 
whistleblower to realize that an entity intends to ignore the 
whistleblower's efforts to report under an internal compliance program. 
Therefore that commenter posited that the time for a whistleblower to 
report internally should be extended.\49\
---------------------------------------------------------------------------

    \49\ See letter from TAF.
---------------------------------------------------------------------------

c. Final Rules
    The Commission has considered the comments received regarding the 
definition of ``original information'' and has decided to adopt Rule 
165.2(k) as proposed. The Commission does not agree with the commenter 
who suggested that it would be improper for a whistleblower to receive 
an award for a violation that an entity has corrected. A whistleblower 
is entitled to an award of not less than 10 percent and not more than 
30 percent of monetary sanctions collected, regardless of whether the 
violation was self-corrected. In addition, the Commission does not 
believe it is necessary or appropriate to limit the definition of 
original information based upon the age of the information.
    The Commission has considered the comments received regarding 
``original source'' and has decided to adopt Rule 165.2(l) with a 
change. The change is that the Commission has extended the time that an 
otherwise excluded whistleblower has to report information to the 
Commission after he reported to an entity that did not self report. 
Paragraph (2) of Rule 165.2(l) now gives such whistleblower 120 days 
instead of 90 days to regain ``original source'' status, which will 
provide whistleblowers with additional time to recognize whether an 
entity has reported the violation to the Commission.
    The Commission believes that several provisions in the Final Rules 
will ordinarily operate to exclude whistleblowers whose only source of 
original information is an existing investigation or proceeding. 
Information that is exclusively derived from a governmental 
investigation is expressly excluded from the definition of ``original 
information'' under Rule 165.2(k)(3). A whistleblower who learns about 
possible violations only through a company's internal investigation 
will ordinarily be excluded from claiming ``independent knowledge'' by 
operation of either the exclusions from ``independent knowledge'' set 
forth in Rule 165.2(g)(2), (3), (4), (5) (relating to attorneys and 
other persons who may be involved in the conduct of internal 
investigations). To the extent that information about an investigation 
or proceeding is publicly available, it is excluded from consideration 
as ``independent knowledge'' under Rule 165.2(g)(1).
11. Related Action
    The phrase ``related action'' in Proposed Rule 165.2(m), when used 
with respect to any judicial or administrative action brought by the 
Commission under the CEA, means any judicial or administrative action 
brought by an entity listed in Proposed Rule 165.11(a) (i.e., the 
Department of Justice, an appropriate department/agency of the Federal 
Government, a registered entity, registered futures association or SRO, 
or a State criminal or appropriate civil agency) that is based upon the 
original information voluntarily submitted by a whistleblower to the 
Commission pursuant to Proposed Rule 165.3 that led to the successful 
resolution of the Commission action. This phrase is relevant to the 
Commission's determination of the amount of a whistleblower award under 
Proposed Rules 165.8 and 165.11. The Commission received one comment 
regarding ``related action.'' The commenter expressed concern that a 
whistleblower could potentially receive an award from both the 
Commission and the SEC by providing the same information to each 
agency. This same commenter noted that the SEC will not make an award 
for a related action and these rules should contain similar 
provisions.\50\ After consideration of the comment, the Commission has 
decided to adopt the rule as proposed. There are statutory differences 
between Section 23(h)(2)(C) of the CEA and Section 21F(h)(2)(D)(i) of 
the Securities Exchange Act of 1934 that prevent complete harmonization 
between the two agencies with regard to the term ``related action.'' 
For example, the list entities whose actions can qualify as ``related 
actions'' do not match under the Commission and SEC Dodd-Frank Act 
provisions. Compare 7 U.S.C. 26(a)(5) (designating the Department of 
Justice, an appropriate department/agency of the Federal Government, a 
registered entity, registered futures association or SRO, a State 
criminal or appropriate civil agency, and a foreign futures authority); 
with 15 U.S.C. 78u-6(a)(5) (designating) the Attorney General of the 
United States, an

[[Page 53180]]

appropriate regulatory agency, an SRO, or a state attorney general in a 
criminal case).
---------------------------------------------------------------------------

    \50\ See letter from FSR.
---------------------------------------------------------------------------

12. Successful Resolution or Successful Enforcement
    Proposed Rule 165.2(n) defined the phrase ``successful 
resolution,'' when used with respect to any judicial or administrative 
action brought by the Commission under the CEA, to include any 
settlement of such action or final judgment in favor of the Commission. 
The phrase shall also have the same meaning as ``successful 
enforcement.'' This phrase is relevant to the definition of the term 
``covered judicial or administrative action'' as set forth in Rule 
165.2(e). The Commission received no comments on the term ``successful 
resolution'' or ``successful enforcement'' and is adopting the rule as 
proposed.
13. Voluntary Submission or Voluntarily Submitted
a. Proposed Rule
    Under Section 23(b)(1) of the CEA,\51\ whistleblowers are eligible 
for awards only when they ``voluntarily'' provide original information 
about CEA violations to the Commission. Proposed Rule 165.2(o) defined 
a submission as made ``voluntarily'' if a whistleblower provided the 
Commission with information before receiving any request, inquiry, or 
demand from the Commission, Congress, any other federal, state or local 
authority, the Department of Justice, a registered entity, a registered 
futures association or any SRO about a matter to which the information 
in the whistleblower's submission was relevant. The Proposed Rule 
covered both formal and informal requests. Thus, under the Proposed 
Rule, a whistleblower's submission would not be considered 
``voluntary'' if the whistleblower was contacted by the Commission or 
one of the other authorities first, whether or not the whistleblower's 
response was compelled by subpoena or other applicable law.
---------------------------------------------------------------------------

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

    As the Commission's Proposing Release explained, this approach was 
intended to create a strong incentive for whistleblowers to come 
forward early with information about possible violations of the CEA, 
rather than wait to be approached by investigators. For the same 
reasons, Proposed Rule 165.2(o) provided that a whistleblower's 
submission of documents or information would not be deemed 
``voluntary'' if the documents or information were within the scope of 
a prior request, inquiry, or demand to the whistleblower's employer, 
unless the employer failed to make production to the requesting 
authority in a timely manner.
    Proposed Rule 165.2(o) also provided that a submission would not be 
considered ``voluntary'' if the whistleblower was under a pre-existing 
legal or contractual duty to report the violations of the CEA to the 
Commission or to one of the other designated authorities.
b. Comments
    Commenters had diverse perspectives on the Commission's proposal to 
require that whistleblowers come forward before they receive either a 
formal or informal request or demand from the Commission, or one of the 
other designated authorities, about any matter relevant to their 
submission. Some commenters asserted that the Commission's Proposed 
Rule was too restrictive. For example, one commenter urged that all 
information provided by a whistleblower should be treated as 
``voluntary'' until the whistleblower is testifying under compulsion of 
a subpoena.\52\ Another commenter expressed concern that the 
Commission's Proposed Rule could have the effect of barring 
whistleblowers in cases in which a whistleblower's information is 
arguably ``relevant'' to a general informational request from an 
authority, even though the authority is not pursuing the issue that the 
whistleblower might report.\53\ This commenter also suggested that 
rather than create an exclusion based on whether the information is 
``relevant'' to a request, Rule 165.2(o) should be revised to bar 
individuals whose allegations are the subject of investigation by the 
public entities identified in the rule.\54\
---------------------------------------------------------------------------

    \52\ See letter from NWC.
    \53\ See letter from TAF. As an example, this commenter posits 
that:
    [A] request by a public employee pension fund for basic 
information concerning Forex currency trades on its account could 
preclude a ``voluntary'' submission of whistleblower allegations 
that the Forex currency broker engaged in large-scale mischarging, 
even if those allegations were not publicly known. In this instance 
the information requested is ``relevant'' to the whistleblower's 
allegations, even if the requesting agency is completely unaware of 
those allegations.
    \54\ Id.
---------------------------------------------------------------------------

    Other commenters posited that the Commission's Proposed Rule did 
not go far enough in precluding whistleblower submissions from being 
treated as ``voluntary.'' A commenter urged that the Commission's rules 
should preclude an individual from making a ``voluntary'' submission 
after an individual has been contacted for information during the 
course of an entity's internal investigation or internal review.\55\ In 
response to one specific request for comment, other commenters 
advocated that the Commission not treat a submission as ``voluntary'' 
if the whistleblower was aware of a governmental or internal 
investigation at the time of the submission, whether or not the 
whistleblower received a request from the Commission or one of the 
other authorities.\56\
---------------------------------------------------------------------------

    \55\ See letter from SIFMA/FIA.
    \56\ See letters from ABA and NSCP.
---------------------------------------------------------------------------

    The Commission also requested comment regarding whether a 
whistleblower's submission should be deemed to be ``voluntary'' if the 
information submitted was within the scope of a previous request to the 
whistleblower's employer. Some commenters responded that they supported 
the exclusion and suggested that it be expanded in various ways.\57\
---------------------------------------------------------------------------

    \57\ See letters from SIFMA/FIA (urging elimination of the 
exception that would permit an employee to make a voluntary 
submission if the employer did not produce the documents or 
information in a timely manner) and NSCP (employee should be 
regarded as having received a request to an employer if there is a 
reasonable likelihood that the employee would have been contacted by 
the employer in responding to the request).
---------------------------------------------------------------------------

    The Commission received varying comments regarding its Proposed 
Rule to exclude whistleblowers from the definition of ``voluntarily'' 
if they are under a pre-existing legal or contractual duty to report 
the violations to the Commission or another authority. Some commenters 
opposed the exclusion on the ground that Section 23(c)(2) of the CEA 
sets forth a specific list of persons whom Congress deemed to be 
ineligible for awards, some as a result of their pre-existing 
duties.\58\ These commenters suggested that the Commission was 
expanding these exclusions in a manner that was inconsistent with 
Congressional intent and the purposes of Section 23.\59\
---------------------------------------------------------------------------

    \58\ Section 23(c)(2) of the CEA sets forth four categories of 
individuals who are ineligible for whistleblower awards. These 
include: employees of the Commission and of certain other 
authorities; persons who were convicted of a criminal violation in 
relation to the action for which they would otherwise be eligible 
for an award; persons who submit information to the Commission that 
is based on the facts underlying the covered action submitted 
previously by another whistleblower; and any whistleblower who fails 
to submit information to the Commission in such form as the 
Commission may require by rule or regulation.
    \59\ See letters from NWC; Stuart D. Meissner, LLC; National 
Coordinating Committee for Multiemployer Plans (``NCCMP''); DC Bar; 
and Daniel J. Hurson.
---------------------------------------------------------------------------

    Other commenters favored the ``legal duty'' exclusion and 
recommended that it be clarified and extended. In particular, these 
commenters suggested that the exclusion should be applied to

[[Page 53181]]

various categories of individuals in the corporate context. Several 
commenters urged that the Commission should not consider submissions to 
be ``voluntary'' in circumstances in which an employee or an outside 
service provider has a duty to report misconduct to an entity.\60\
---------------------------------------------------------------------------

    \60\ See letters from NSCP and FSR.
---------------------------------------------------------------------------

c. Final Rule
    After considering the comments, the Commission has decided to adopt 
Rule 165.2(o) without modifications. The Commission believes that a 
requirement that a whistleblower come forward before being contacted by 
Government investigations is both good policy and consistent with 
existing case law.\61\
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    \61\ Cf. Barth v. Ridgedale Electric, Inc., 44 F.3d 699 (8th 
Cir. 1994); United States ex rel. Paranich v. Sorgnard, 396 F.3d 326 
(3d Cir. 2005) (rejecting argument that information provided beyond 
that required by subpoena is voluntary for purposes of False Claims 
Act); United States ex rel. Fine v. Chevron, USA, Inc., 72 F.3d 740 
(9th Cir. 1995), cert. denied, 517 U.S. 1233 (1996) (rejecting 
argument that provision of information to the Government is always 
voluntary unless compelled by subpoena).
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    As adopted, Final Rule 165.2(o) provides that a submission of 
original information is deemed to have been made ``voluntarily'' if the 
whistleblower makes his or her submission before a request, inquiry, or 
demand that relates to the subject matter of the submission is directed 
to the whistleblower or anyone representing the whistleblower (such as 
an attorney): (i) By the Commission; (ii) Congress; (iii) any other 
federal or state authority; (iv) the Department of Justice; (v) a 
registered entity; (vi) a registered futures association; or (vii) an 
SRO.
    The Commission believes that a whistleblower award should not be 
available to an individual who makes a submission after first being 
questioned about a matter (or otherwise requested to provide 
information) by Commission staff acting pursuant to any of its 
investigative or regulatory authorities. Only an investigative request 
made by one of the other designated authorities will trigger 
application of the rule, except that a request made in connection with 
an examination or inspection, as well as an investigative request, by 
an SRO will also render a whistleblower's subsequent submission 
relating to the same subject matter not ``voluntary.'' In the context 
of a request made to an employer, an employee-whistleblower will be 
considered to have received a request if the documents or information 
the whistleblower provides to the Commission are within the scope of 
the request to the employer. This provision recognizes the important 
relationship that frequently exists between examinations and 
enforcement investigations, as well as the Commission's regulatory 
oversight of SROs. For example, if an entity's employee were 
interviewed by examiners, the employee could not later make a 
``voluntary'' submission related to the subject matter of the 
interview.\62\
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    \62\ As is further discussed below, individuals who wait to make 
their submission until after a request is directed to their employer 
will not face an easy path to an award. The Commission expects to 
scrutinize all of the attendant circumstances carefully in 
determining whether such submissions ``significantly contributed'' 
to a successful enforcement action under Rule 165.2(n) in view of 
the previous request to the employer on the same or related subject 
matter.
---------------------------------------------------------------------------

    As adopted, the Commission's rule retains the provision that a 
submission will not be considered ``voluntary'' if the whistleblower is 
under a pre-existing legal or contractual duty to report the 
information to the Commission or to any of the other authorities 
designated in the rule. As adopted, Rule 165.2(o) provides that a 
whistleblower cannot ``voluntarily'' submit information if the 
whistleblower is required to report his ``original information'' to the 
Commission pursuant to a pre-existing legal duty, a contractual duty 
that is owed to the Commission or to one of the other authorities set 
forth above, or a duty that arises out of a judicial or administrative 
order.
    For similar reasons, the Commission declines to accept the 
suggestion of some commenters that a whistleblower report should not be 
treated as ``voluntary'' if it was made after the whistleblower had 
been contacted for information in the course of an internal 
investigation. Elsewhere in the Commission's final Rules, the 
Commission has attempted to create strong incentives for employees to 
continue to utilize their employers' internal compliance and other 
processes for receiving and addressing reports of possible violations 
of law.\63\ If a whistleblower took any steps to undermine the 
integrity of such systems or processes, the Commission will consider 
that conduct as a factor that may decrease the amount of any award.\64\ 
However, a principal purpose of Section 23 is to promote effective 
enforcement of the commodity laws by providing incentives for persons 
with knowledge of misconduct to come forward and share their 
information with the Commission. Although the Commission acknowledges 
that internal investigations can be an important component of corporate 
compliance, and although there are existing incentives for companies to 
self-report violations, providing information to persons conducting an 
internal investigation, or simply being contacted by them, may not, 
without more, achieve the statutory purpose of getting high-quality, 
original information about violations of the CEA directly to Commission 
staff.
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    \63\ See discussion below in Part II.I.
    \64\ See Rule 165.9.
---------------------------------------------------------------------------

14. Whistleblower(s)
a. Proposed Rule
    The term ``whistleblower'' is defined in Section 23(a)(7) of the 
CEA.\65\ Consistent with this language, Proposed Rule 165.2(p) defined 
a whistleblower as an individual who, alone or jointly with others, 
provides information to the Commission relating to a potential 
violation of the CEA. An entity or other non-natural person is not 
eligible to receive a whistleblower award. This definition tracks the 
statutory definition of a ``whistleblower,'' except that the Proposed 
Rule uses the term ``potential violation'' in order to make clear that 
the whistleblower anti-retaliation protections set forth in Section 
23(h) of the CEA do not depend on an ultimate adjudication, finding or 
conclusion that conduct identified by the whistleblower constituted a 
violation of the CEA.
---------------------------------------------------------------------------

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

    Further, Proposed Rule 165.2(p) (and Proposed Rule 165.6(b)) would 
make clear that the anti-retaliation protections set forth in Section 
23(h) of the CEA apply irrespective of whether a whistleblower 
satisfies all the procedures and conditions to qualify for an award 
under the Commission's whistleblower program. Section 23(h)(1)(A) of 
the CEA prohibits employment retaliation against a whistleblower who 
provides information to the Commission (i) ``in accordance with this 
section,'' or (ii) ``in assisting in any investigation or judicial or 
administrative action of the Commission based upon or related to such 
information.'' The Commission interprets the statute as designed to 
extend the protections against employment retaliation delineated in 
Section 23(h)(1) to any individual who provides information to the 
Commission about potential violations of the CEA regardless of whether 
the person satisfies procedures and conditions necessary to qualify for 
an award under the Commission's whistleblower program.
b. Comments
    The Commission received several comments regarding the definition 
of whistleblower. Two commenters urged

[[Page 53182]]

that the term whistleblower should include only individuals who provide 
information about potential violations of the commodities laws ``by 
another person.'' \66\ The Commission also received several comments 
regarding the anti-retaliation provision of the definition. One 
commenter asserted that the anti-retaliation provisions of Proposed 
Rules 165.2(p) and 165.6(b) could be interpreted to protect individuals 
who have violated criminal laws, and urged that the Commission clarify 
that companies are permitted ``to take adverse personnel actions 
against whistleblowers for any appropriate reason other than their 
whistleblower status.'' This same commenter suggested that the rules 
also should be clarified to state that filing a whistleblower report 
does not protect an individual from discipline or termination if the 
individual was involved in, was responsible for, or lied about the 
misconduct described in the report.\67\
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    \66\ See letters from SIFMA/FIA and ABA.
    \67\ See letter from SIFMA/FIA.
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    Another commenter was concerned about the potential for abuse by 
employees who might make frivolous whistleblower claims solely to avail 
themselves of the anti-retaliation provisions of Part 165 or to seek a 
chance to receive a potentially large award. This commenter believed 
that the Commission should impose additional requirements on persons 
entitled to whistleblower status and suggested that Proposed Rule 
165.2(p) be revised to specify that the anti-retaliation provision 
apply to a person who provides information: That is material to the 
claimed violation of the CEA; that has a basis in fact or knowledge 
(which must be articulated) rather than speculation; that is not based 
on information that is either publicly disseminated or which the 
employee should reasonably know is already known to the entity's board 
of directors or chief compliance officer, or to a court or the 
Commission or another governmental entity; and the provision of which 
does not result in the violation of a professional obligation, 
including the obligation to maintain such information in confidence. 
This commenter also suggested that the Commission deliver to an 
employee who has met the requisite criteria of a ``whistleblower'' a 
letter or statement indicating such status by reason of the information 
the employee provided.\68\ This commenter also contended that the 
information regarding ``a potential violation'' language in Proposed 
Rule 165.2(p) could be read to refer to future acts or omissions. As a 
result, the commenter encouraged the Commission to use ``another phrase 
(such as `claimed violation') and to add a definition of the term to 
further minimize the ambiguity.'' The commenter posited that the 
definition of the term should be further clarified to indicate that it 
does not include matters that are clearly stale (e.g., an alleged 
violation that occurred ten years ago). Two other commenters 
recommended that the rule exclude any individuals who engaged in the 
underlying misconduct from eligibility as a whistleblower.\69\ One 
commenter supported anti-retaliation protection of whistleblowers even 
if they do not qualify for an award.\70\ Another commenter suggested 
that the Commission should find that any entity that retaliates against 
a whistleblower commits ``a separate and independent violation'' of the 
commodity futures laws subjecting the entity to the maximum penalties 
for such violation provided for under the law, up to and including a 
delisting of the entity.\71\
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    \68\ See letter from ABA.
    \69\ See letters from Association of Corporate Counsel (``ACC'') 
and FSR.
    \70\ See letter from POGO.
    \71\ See letter from NCCMP.
---------------------------------------------------------------------------

c. Final Rule
    Upon consideration of the comments received, the Commission has 
decided to adopt Rule 165.2(p) as proposed. The anti-retaliation 
provisions reflect Congress's intent to implement anti-retaliation 
protections for whistleblowers who provide original information to the 
Commission. These anti-retaliation protections do not provide blanket 
immunity to whistleblowers from adverse employment actions by their 
employers; whistleblowers are protected only to the extent that the 
employer took the adverse employment action because ``of any lawful act 
done by the whistleblower'' in providing information to the Commission 
or in assisting the Commission in any related investigation or 
enforcement action.\72\ With respect to the commenter concern regarding 
potential bad faith reporting, Congress placed a procedural safeguard 
in the statute that advises whistleblowers that they can be prosecuted 
for making false statements to the Commission under 18 U.S.C. 1001.\73\ 
This procedural safeguard will reduce the risk of meritless referrals. 
Moreover, whistleblowers are incentivized to provide referrals only if 
they believe those referrals have merit since they can only get an 
award if their referral leads to a successful enforcement action (see 
Rules 165.2(i) and 165.9.). Also as indicated above, several commenters 
addressed issues relating to eligibility and culpability of a 
whistleblower. Those issues are addressed in Rules 165.6 and 165.17, 
respectively.
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    \72\ 7 U.S.C. 26(h)(1)(A).
    \73\ See Section 23(m) of the CEA, 7 U.S.C. 26(m). Such false 
statements also could be a violation of Section 9(a)(3) of the CEA, 
7 U.S.C. 13(a)(3), and could potentially be a violation of Section 
6(c)(2) of the CEA, 7 U.S.C. 9, 15. Therefore, a whistleblower who 
provides information to the Commission in violation of these 
sections would not be entitled to retaliation protection because his 
provision of information to the Commission would be in violation of 
law. See 7 U.S.C. 26(h)(1)(A).
---------------------------------------------------------------------------

    The Commission does not have the statutory authority to conclude 
that any entity that retaliates against a whistleblower commits a 
separate and independent violation of the CEA. Section 23(h)(1)(B)(i) 
clearly states that only an individual who alleges retaliation in 
violation of being a whistleblower may bring such a cause of action.
    Regarding Rule 165.2(p)(2), the Commission has made a slight 
modification. Pursuant to the change, in order to be considered a 
whistleblower for purposes of the anti-retaliation protections afforded 
by Section 23(h)(1)(A)(i) of the CEA, the whistleblower must possess a 
reasonable belief that the information the whistleblower provides 
relates to a possible violation of the CEA.

C. Rule 165.3--Procedures for Submitting Original Information

1. Proposed Rule
    The Commission proposed a two-step process for the submission of 
original information under the whistleblower award program. In general, 
the first step would require the submission of the standard form on 
which the information concerning potential violations of the CEA are 
reported. The second step would require the whistleblower to complete a 
unique form, signed under penalties of perjury (consistent with Section 
23(m) of the CEA), in which the whistleblower would be required to make 
certain representations concerning the veracity of the information 
provided and the whistleblower's eligibility for a potential award. The 
use of standardized forms will greatly assist the Commission in 
managing and tracking numerous tips from potential whistleblowers. 
Forms will also better enable the Commission to find common threads 
among tips and otherwise make better use of the information provided, 
and assist with the review of requests for payment under the 
whistleblower provisions. The purpose of requiring a sworn declaration 
is to help deter the

[[Page 53183]]

submission of false and misleading tips and the resulting inefficient 
use of the Commission's resources. The requirement would also mitigate 
the potential harm to companies and individuals resulting from false or 
spurious allegations of wrongdoing.
    As set forth in Proposed Rule 165.5, Commission staff may also 
request testimony and additional information from a whistleblower 
relating to the whistleblower's eligibility for an award.
a. Form TCR and Instructions
    Subparagraph (a) of Proposed Rule 165.3 required the submission of 
information to the Commission on proposed Form TCR. The Form TCR, 
``Tip, Complaint or Referral,'' and the instructions thereto, were 
designed to capture basic identifying information about a complainant 
and to elicit sufficient information to determine whether the conduct 
alleged suggests a violation of the CEA.
b. Form WB-DEC and Instructions
    In addition to Form TCR, the Commission proposed in subparagraph 
(b) of Proposed Rule 165.3 to require that whistleblowers who wish to 
be considered for an award in connection with the information they 
provide to the Commission also complete and provide the Commission with 
proposed Form WB-DEC, ``Declaration Concerning Original Information 
Provided Pursuant to Section 23 of the Commodity Exchange Act.'' 
Proposed Form WB-DEC would require a whistleblower to answer certain 
threshold questions concerning the whistleblower's eligibility to 
receive an award. The form also would contain a statement from the 
whistleblower acknowledging that the information contained in the Form 
WB-DEC, as well as all information contained in the whistleblower's 
Form TCR, is true, correct and complete to the best of the 
whistleblower's knowledge, information and belief. Moreover, the 
statement would acknowledge the whistleblower's understanding that the 
whistleblower may be subject to prosecution and ineligible for an award 
if, in the whistleblower's submission of information, other dealings 
with the Commission, or dealings with another authority in connection 
with a related action, the whistleblower knowingly and willfully made 
any false, fictitious, or fraudulent statements or representations, or 
used any false writing or document knowing that the writing or document 
contained any false, fictitious, or fraudulent statement or entry.
    In instances where information is provided by an anonymous 
whistleblower, proposed subparagraph (c) of Proposed Rule 165.3 
required that the whistleblower's identity must be disclosed to the 
Commission and verified in a form and manner acceptable to the 
Commission consistent with the procedure set forth in Proposed Rule 
165.7(c) prior to the Commission's payment of any award.
    The Commission proposed to allow two alternative methods of 
submission of Form TCRs and WB-DEC. A whistleblower would have the 
option of submitting a Form TCR electronically through the Commission's 
Web site, or by mailing or faxing the form to the Commission. 
Similarly, a Form WB-DEC could be submitted electronically, in 
accordance with instructions set forth on the Commission's Web site or, 
alternatively, by mailing or faxing the form to the Commission.
c. Perfecting Whistleblower Status for Submissions Made Before 
Effectiveness of the Rules
    As previously discussed, Section 748(k) of the Dodd-Frank Act 
stated that information submitted to the Commission by a whistleblower 
after the date of enactment, but before the effective date of the 
Proposed Rules, retained the status of original information. The 
Commission has already received tips from potential whistleblowers 
after the date of enactment of the Dodd-Frank Act. Proposed Rule 
165.3(d) provided a mechanism by which whistleblowers who fall into 
this category could perfect their status as whistleblowers once the 
Final Rules are adopted. Subparagraph (d)(1) required a whistleblower 
who provided original information to the Commission in a format or 
manner other than a Form TCR to submit a completed Form TCR within one 
hundred twenty (120) days of the effective date of the Final Rules and 
to otherwise follow the procedures set forth in subparagraphs (a) and 
(b) of Proposed Rule 165.3. If a whistleblower provided the original 
information to the Commission in a Form TCR, subparagraph (d)(2) would 
require the whistleblower to submit Form WB-DEC within one hundred 
twenty (120) days of the effective date of the Final Rules in the 
manner set forth in subparagraph (b) of Proposed Rule 165.3.
2. Comments
    The Commission received several comments regarding Proposed Rule 
165.3. A commenter advised the Commission that the rules as currently 
proposed are not ``user friendly'' and modifications must be made to 
both procedures and forms to facilitate disclosures, and to do so would 
minimize the risks that otherwise qualified applicants will be denied 
based on a technicality.\74\ Several commenters referenced Proposed 
Rule 165.3 while advocating internal reporting.\75\ They suggested that 
a whistleblower who reports internally prior to reporting to the 
Commission should be given one year to file an application; and that 90 
days to file Forms TCR and WB-DEC may not be sufficient time for a firm 
to assess a complex situation, and, therefore, the deadline should be a 
minimum of 90 days or such longer time as is reasonable.
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    \74\ See letter from NWC.
    \75\ See letters from NSCP, ABA, and NCCMP.
---------------------------------------------------------------------------

    Another commenter suggested that, if documents are delivered 
directly to the Commission, then the representations on a Form TCR 
should be subject to penalty of perjury, similar to Form WB-DEC. This 
commenter also suggested that attorneys who assist clients in 
submitting anonymous claims should be required to review the client's 
information and certify to the Commission that the client can show 
``particularized facts suggesting a reasonable probability that a 
violation has actually occurred or is occurring.'' This Commenter also 
stated that the 90-day deadline should be eliminated, but that if it is 
not eliminated the deadline should be at least 180 days.\76\
---------------------------------------------------------------------------

    \76\ See letter from ABA.
---------------------------------------------------------------------------

3. Final Rule
    After consideration of the comments received on Proposed Rule 
165.3, the Commission has decided to adopt the rule with changes. In 
response to comments calling for the streamlining of process, and in 
the interest of harmonization with the SEC, the Commission has 
incorporated the substance of Form WB-DEC into both the Form TCR and 
WB-APP.\77\ The forms will be changed to advise potential 
whistleblowers (and their attorneys) that the forms must be completed 
under oath and subject to the penalty of perjury. Also, changes have 
been made to Rule 165.3 regarding the incorporation of the WB-DEC form 
into both the Form-TCR and Form WB-APP.
---------------------------------------------------------------------------

    \77\ Form WB-APP and the award application process are discussed 
below in section II.G.
---------------------------------------------------------------------------

D. Rule 165.4--Confidentiality

1. Proposed Rule
    Proposed Rule 165.4 summarized the confidentiality requirements set 
forth in Section 23(h)(2) of the CEA \78\ with

[[Page 53184]]

respect to information that could reasonably be expected to reveal the 
identity of a whistleblower. As a general matter, it is the 
Commission's policy and practice to treat all information obtained 
during its investigations as confidential and nonpublic. Disclosures of 
enforcement-related information to any person outside the Commission 
may only be made as authorized by the Commission and in accordance with 
applicable laws and regulations. Consistent with Section 23(h)(2), the 
Proposed Rule explains that the Commission will not reveal the identity 
of a whistleblower or disclose other information that could reasonably 
be expected to reveal the identity of a whistleblower, except under 
circumstances described in the statute and the rule.\79\ As is further 
explained below, there may be circumstances in which disclosure of 
information that identifies a whistleblower will be legally required or 
will be necessary for the protection of market participants.
---------------------------------------------------------------------------

    \78\ 7 U.S.C. 26(h)(2).
    \79\ Section 23(h)(2)(A) provides that the Commission shall not 
disclose any information, including that provided by the 
whistleblower to the Commission, which could reasonably be expected 
to reveal the identity of the whistleblower, except in accordance 
with the provisions of Section 552a of title 5, United States Code, 
unless and until required to be disclosed to a defendant or 
respondent in connection with a public proceeding instituted by the 
Commission or governmental organizations described in subparagraph 
(C).
---------------------------------------------------------------------------

    Subparagraph (a)(1) of the Proposed Rule authorized disclosure of 
information that could reasonably be expected to reveal the identity of 
a whistleblower when disclosure is required to a defendant or 
respondent in a public proceeding that the Commission files, or in 
another public action or proceeding filed by an authority to which the 
Commission is authorized to provide the information. For example, in a 
related action brought as a criminal prosecution by the Department of 
Justice, disclosure of a whistleblower's identity may be required in 
light of a criminal defendant's constitutional right to be confronted 
by the witnesses against him.\80\ Subparagraph (a)(2) would authorize 
disclosure to: The Department of Justice; another appropriate 
department or agency of the Federal Government acting within the scope 
of its jurisdiction; a registered entity, registered futures 
association, or SRO; a state attorney general in connection with a 
criminal investigation; any appropriate state department or agency 
acting within the scope of its jurisdiction; or a foreign futures 
authority.
---------------------------------------------------------------------------

    \80\ See U.S. Const. Amend. VI.
---------------------------------------------------------------------------

    Because many whistleblowers may wish to provide information 
anonymously, subparagraph (b) of the Proposed Rule, consistent with 
Section 23(d) of the CEA, states that anonymous submissions are 
permitted with certain specified conditions. Subparagraph (b) would 
require that anonymous whistleblowers who submit information to the 
Commission must follow the procedure in Proposed Rule 165.3(c) for 
submitting original information anonymously. Further, anonymous 
whistleblowers would be required to follow the procedures set forth in 
Proposed Rule 165.7(c) requiring that the whistleblower's identity be 
disclosed to the Commission and verified in a form and manner 
acceptable to the Commission prior to the Commission's payment of any 
award.
    The purpose of this requirement is to prevent fraudulent 
submissions and facilitate communication and assistance between the 
whistleblower and the Commission's staff. A whistleblower may be 
represented by counsel--whether submitting information anonymously or 
not.\81\ The Commission emphasizes that anonymous whistleblowers have 
the same rights and responsibilities as other whistleblowers under 
Section 23 of the CEA and the Final Rules, unless expressly exempted.
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    \81\ See 7 U.S.C. 26(d)(1). Under the statute, however, an 
anonymous whistleblower seeking an award is required to be 
represented by counsel. 7 U.S.C. 26(d)(2).
---------------------------------------------------------------------------

2. Comments
    The Commission received one comment regarding Proposed Rule 165.4. 
The commenter stated that the Commission has no authority to compel an 
attorney to reveal the identity of an anonymous whistleblower, and 
that, in cases where the Commission knows the whistleblower's identity, 
the rules should require the Commission to notify the whistleblower, 
and provide the whistleblower an opportunity to seek a protective 
order, whenever the whistleblower's identity may be subject to 
disclosure.\82\
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    \82\ See letter from NWC.
---------------------------------------------------------------------------

3. Final Rule
    The Commission is adopting Rule 165.4 as proposed. The rule tracks 
the provisions of the statute and identifies those instances where the 
Commission, in furtherance of its regulatory responsibilities, may 
provide information to certain delineated recipients.
    The Commission plans to work closely with whistleblowers, and their 
attorneys if they are represented, in an effort to take appropriate 
steps to maintain their confidentiality, consistent with the 
requirements of Section 23(h)(2).\83\ At the same time, however, 
Congress expressly authorized the Commission to disclose whistleblower-
identifying information subject to the limitations and conditions set 
forth in Section 23(h)(2)(C) of the CEA. Accordingly, the Commission 
does not believe it would be consistent with either Congress's intent 
or the proper exercise of the Commission's enforcement responsibilities 
to require by rule that Commission staff notify a whistleblower prior 
to any authorized disclosure, and provide the whistleblower with an 
opportunity to seek a protective order.
---------------------------------------------------------------------------

    \83\ For example, the Commission is adding a question to our 
whistleblower submission form that asks whistleblowers to tell us if 
they are giving us any particular documents or other information in 
their submission that they believe could reasonably be expected to 
reveal their identity.
---------------------------------------------------------------------------

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

1. Proposed Rule
    Proposed Rule 165.5 summarized the general prerequisites for 
whistleblowers to be considered for the payment of awards set forth in 
Section 23(b)(1) of the CEA. As set forth in the statute, subparagraph 
(a) states that, subject to the eligibility requirements in the 
Regulations, the Commission will pay an award or awards to one or more 
whistleblowers who voluntarily provide the Commission with original 
information that led to the successful resolution of a covered 
Commission judicial or administrative action or the successful 
enforcement of a related action by: the Department of Justice; an 
appropriate department or agency of the Federal Government acting 
within the scope of its jurisdiction; a registered entity, registered 
futures association or SRO; a state attorney general in connection with 
a criminal investigation; any appropriate state department or agency 
acting within the scope of its jurisdiction; or a foreign futures 
authority.
    Subparagraph (b) of Proposed Rule 165.5 emphasizes that, in order 
to be eligible, the whistleblower must have submitted to the Commission 
original information in the form and manner required by Proposed Rule 
165.3. The whistleblower must also provide the Commission, upon its 
staff's request, certain additional information, including: 
explanations and other assistance, in the manner and form that staff 
may request, so that the staff may evaluate the use of the information

[[Page 53185]]

submitted; all additional information in the whistleblower's possession 
that is related to the subject matter of the whistleblower's 
submission; and testimony or other evidence acceptable to the staff 
relating to the whistleblower's eligibility for an award. Subparagraph 
(b) of Proposed Rule 165.5 further requires that, to be eligible for an 
award, a whistleblower must, if requested by Commission staff, enter 
into a confidentiality agreement in a form acceptable to the 
Commission, including a provision that a violation of the 
confidentiality agreement may lead to the whistleblower's ineligibility 
to receive an award.
2. Comments
    The Commission received comment on Proposed Rule 165.5 from one 
commenter.\84\ This commenter argued that the Dodd-Frank Act does not 
require or authorize a rule that requires a whistleblower to sign a 
confidentiality or non-disclosure agreement. This commenter reasoned 
that if a whistleblower files a claim and refuses to sign such an 
agreement it could impact the Commission's willingness to share 
information with the whistleblower during the investigation, or even to 
go forward with an enforcement action. Also, this commenter suggested 
that a whistleblower should be able to object to the actions of the 
Commission if the whistleblower believes the Commission is improperly 
handling an investigation, without fear of being disqualified from an 
award. Finally, this commenter argued that a whistleblower should not 
be required to sign a confidentiality agreement in case the 
whistleblower has clients who need to know about the whistleblower's 
underlying concerns. For example, if a whistleblower had clients that 
had funds in a company operating a Ponzi scheme, it would not be 
beneficial to the clients for the whistleblower to not tell the clients 
about the scheme.
---------------------------------------------------------------------------

    \84\ See letter from NWC.
---------------------------------------------------------------------------

3. Final Rule
    After considering these comments, the Commission is adopting the 
rule as proposed. The rule tracks and summarizes the general 
prerequisites for a whistleblower to be considered for an award under 
Section 23(b)(1) of the CEA. In addition, the Commission does not share 
information regarding investigations or enforcement actions with 
individuals who provide tips.\85\ Requiring a whistleblower to sign a 
confidentiality agreement will serve to ensure that the entity being 
investigated is not made aware of the investigation prematurely. The 
Commission also has discretion in how it handles investigations and 
enforcement actions.\86\
---------------------------------------------------------------------------

    \85\ See, e.g., Rule 11.3, 17 CFR 11.3 (2011) (providing, in 
general, that ``[a]ll information and documents obtained during the 
course of an investigation, whether or not obtained pursuant to 
subpoena, and all investigative proceedings shall be treated as non-
public by the Commission and its staff * * *.'').
    \86\ See, e.g., Appendix A to Part 11 of the Commission's Rules 
(``Informal Procedure Relating to the Recommendation of Enforcement 
Proceedings;'' providing that the Commission's Division of 
Enforcement, ``in its discretion, may inform persons who may be 
named in a proposed enforcement proceeding of the nature of the 
allegations pertaining to them.'').
---------------------------------------------------------------------------

F. Rule 165.6--Whistleblowers Ineligible for an Award

1. Proposed Rule
    Subparagraph (a) of Proposed Rule 165.6 specified the categories of 
individuals who are statutorily ineligible for an award under Section 
23 of the CEA. These include persons who are, or were at the time they 
acquired the original information, a member, officer, or employee of: 
The Commission; the Board of Governors of the Federal Reserve System; 
the Office of the Comptroller of the Currency; the Board of Directors 
of the Federal Deposit Insurance Corporation; the Director of the 
Office of Thrift Supervision; the National Credit Union Administration 
Board; the SEC; the Department of Justice; a registered entity; a 
registered futures association; an SRO; or a law enforcement 
organization. Further, Proposed Rule 165.6(a)(2) made clear that no 
award will be made to any whistleblower who is convicted of a criminal 
violation related to the judicial or administrative action for which 
the whistleblower otherwise could receive an award under Proposed Rule 
165.7.
    In order to prevent evasion of these exclusions, subparagraph 
(a)(4) of the Proposed Rule also provided that persons who acquire 
information from ineligible individuals are ineligible for an award. 
Consistent with Section 23(m) of the CEA, a whistleblower is ineligible 
if in his submission of information or application for an award, in his 
other dealings with the Commission, or in his dealings with another 
authority in connection with a related action he: Knowingly and 
willfully makes any false, fictitious, or fraudulent statement or 
representation, or uses any false writing or document, knowing that it 
contains any false, fictitious, or fraudulent statement or entry; or 
omits any material fact the absence of which would make any other 
statement or representation made to the Commission or any other 
authority misleading.
    Subparagraph (b) of Proposed Rule 165.6 reiterated that a 
determination that a whistleblower is ineligible to receive an award 
for any reason does not deprive the individual of the anti-retaliation 
protections set forth in Section 23(h)(1) of the CEA.
2. Comments
    The Commission has received comments recommending that the 
Commission expand the list of persons ineligible to receive an award to 
individuals who fail to first report violations internally before 
reporting violations to the Commission.\87\ Some commenters have 
suggested that the only exception to a requirement of mandatory 
internal reporting for award eligibility should be when the 
whistleblower can prove that the employer's internal compliance system 
is inadequate.\88\ One commenter proposed that for an employer's 
internal compliance system to be effective it would have to provide 
for: (1) A complaint-reporting hotline; (2) a designated officer (such 
as the chief compliance officer), who is responsible for overseeing 
investigations of complaints, and who has access to senior executive 
officers with authority to respond to well-founded complaints; and (3) 
protection to an individual against retaliation for submitting a 
complaint.\89\ Another commenter similarly suggests that a 
whistleblower who fails to report internally should only be eligible to 
receive an award if he can demonstrate that the company's internal 
reporting program fails to comply with a federal standard (if 
applicable) or is inadequate (if there is no Federal standard).\90\ 
This commenter further suggests that the Commission should afford an 
entity a reasonable opportunity (of at least 180 days) to address the 
alleged violation.\91\
---------------------------------------------------------------------------

    \87\ See letters from NSCP, EEI, ICI, ABA, and FSR.
    \88\ See letter from SIFMA/FIA.
    \89\ See letter from SIFMA/FIA.
    \90\ See letter from U.S. Chamber of Commerce.
    \91\ See letter from U.S. Chamber of Commerce.
---------------------------------------------------------------------------

    Commenters also suggest that a whistleblower who prematurely 
reports to the Commission be eligible for an award, but only at the 
lower end of the permissible range.\92\ Commenters also urge the 
Commission to deem ineligible for a whistleblower award individuals 
who: (1) Violate entity rules requiring that misconduct be reported 
internally; (2) falsely certify that they are not aware

[[Page 53186]]

of any misconduct; (3) refuse to cooperate with an entity's internal 
investigation; and (4) provide inaccurate or incomplete information or 
otherwise hinder an internal investigation.\93\ This commenter further 
suggests that a whistleblower who reports violations to an SRO should 
have the same eligibility for an award as a whistleblower who reports 
to the Commission.\94\ Another commenter commented that persons who 
have engaged in culpable conduct should not be eligible for awards.\95\ 
This commenter suggested that Rule 165.6(a)(2) provide that a person 
will not be eligible for an award ``if he or she (or an entity whose 
liability is based substantially on conduct that the whistleblower 
directed, planned or initiated) has been convicted of a criminal 
violation (including entering into a plea agreement or entering a plea 
of nolo contendere), or enters into a cooperation, deferred 
prosecution, or non-prosecution agreement in connection with, a 
proceeding brought by the Commission, an SRO, or other regulator or 
government entity, which proceeding is related to a Commission action 
or a related action for which the whistleblower could otherwise receive 
an award.'' One commenter also suggested that the Commission should 
exclude wrong-doers who have participated in or facilitated the 
violation of the CEA from award eligibility.\96\ Another commenter 
suggested that culpable individuals, including in-house lawyers, and 
other compliance personnel should not be eligible for whistleblower 
awards.\97\ The Commission also received comment that the Commission 
follow the SEC's approach and exclude the spouses, parents, children or 
siblings of members of the agency to avoid the appearance of 
impropriety.\98\
---------------------------------------------------------------------------

    \92\ See letter from SIFMA/FIA.
    \93\ See letter from SIFMA/FIA.
    \94\ See letter from SIFMA/FIA.
    \95\ See letter from ABA.
    \96\ See letter from U.S. Chamber of Commerce.
    \97\ See letter from Hunton & Williams LLP on behalf of Working 
Group of Commercial Energy Firms (``Working Group'') at 2.
    \98\ See letter from FSR.
---------------------------------------------------------------------------

    The Commission also received a number of other miscellaneous 
comments. One commenter suggested that the exclusion should apply to 
the information, and not just persons, by suggesting the Commission 
exclude from award eligibility information reported after an employer 
has initiated an investigation.\99\ The Commission also received a 
comment suggesting that the Rule require use of internal procedures as 
a condition for receiving an award, because such a condition would not 
impinge on a whistleblower's right to contact the Commission or affect 
the anti-retaliation provisions.\100\ This commenter also suggested 
that the Commission revise the rule to include potential exclusions of 
foreign persons.
---------------------------------------------------------------------------

    \99\ See letter from U.S. Chamber of Commerce.
    \100\ See letter from FSR.
---------------------------------------------------------------------------

3. Final Rule
    The Commission has considered each of the comments received, and 
has decided to adopt the rule with minor changes. With respect to the 
specific internal reporting issue, after considering the comments 
received, the Commission has concluded not to amend the rule to make 
ineligible any whistleblowers who do not participate in internal 
corporate compliance programs.\101\ The Commission will, however, 
provide whistleblowers with incentives to report internally. The 
Commission has decided to adopt Rule 165.6 with a minor change to make 
ineligible members or officers of any foreign regulatory authority or 
law enforcement organization, extrapolating from Section 23(c)(2)(i) 
and (vi) of the Dodd-Frank Act the category making appropriate 
regulatory agencies and law enforcement organizations ineligible.\102\ 
The Commission has also made explicit in Rule 165.6(a)(8) the 
ineligibility of any whistleblower who acquired the original 
information the whistleblower gave the Commission from any other person 
with the intent to evade any provision of the Final Rules.
---------------------------------------------------------------------------

    \101\ See also discussion below in Part II.S.
    \102\ See Rule 165.6(a)(6), (7).
---------------------------------------------------------------------------

G. Rule 165.7--Procedures for Award Applications and Commission Award 
Determinations

1. Proposed Rule
    Proposed Rule 165.7 described the steps a whistleblower would be 
required to follow in order to make an application for an award in 
relation to a Commission covered judicial or administrative action or 
related action. In addition, the rule described the Commission's 
proposed claims review process.
    In regard to covered actions, the proposed process would begin with 
the publication of a ``Notice of a Covered Action'' (``Notice'') on the 
Commission's Web site. Whenever a covered judicial or administrative 
action brought by the Commission results in the imposition of monetary 
sanctions exceeding $1,000,000, the Commission will cause a Notice to 
be published on the Commission's Web site subsequent to the entry of a 
final judgment or order in the action that by itself, or collectively 
with other judgments or orders previously entered in the action, 
exceeds the $1,000,000 threshold. The Commission's Proposed Rule 
required claimants to file their claim for an award within sixty (60) 
days of the date of the Notice.
    In regard to related actions, a claimant would be responsible for 
tracking the resolution of the related action. The Commission's 
Proposed Rule required claimants to file their claim for an award in 
regard to a related action within sixty (60) days after monetary 
sanctions were imposed in the related action. A claimant's failure to 
timely file a request for a whistleblower award would bar that 
individual from later seeking a recovery.\103\
---------------------------------------------------------------------------

    \103\ See, e.g., Yuen v. United States, 825 F.2d 244 (9th Cir. 
1987) (taxpayer barred from recovery due to failure to timely file a 
written request for refund).
---------------------------------------------------------------------------

    Subparagraph (b) of Proposed Rule 165.7 described the procedure for 
making a claim for an award. Specifically, a claimant would be required 
to submit a claim for an award on proposed Form WB-APP (``Application 
for Award for Original Information Provided Pursuant to Section 23 of 
the Commodity Exchange Act''). Proposed Form WB-APP, and the 
instructions thereto, would elicit information concerning a 
whistleblower's eligibility to receive an award at the time the 
whistleblower filed his claim. The form would also provide an 
opportunity for the whistleblower to ``make his case'' for why he is 
entitled to an award by describing the information and assistance he 
has provided and its significance to the Commission's successful 
action.\104\
---------------------------------------------------------------------------

    \104\ See discussion of Proposed Rule 165.9 for a non-exhaustive 
list of factors the Commission preliminarily believes it will 
consider in determining award amounts.
---------------------------------------------------------------------------

    Subparagraph (b) of Proposed Rule 165.7 provided that a claim on 
Form WB-APP, including any attachments, must be received by the 
Commission within sixty (60) calendar days of the date of the Notice or 
sixty (60) calendar days of the date of the imposition of the monetary 
sanctions in the related action, the trigger date depending upon which 
action is the basis for the claimant's award request.
    Subparagraph (c) included award application procedures for a 
whistleblower who submitted original information to the Commission 
anonymously. Whistleblowers who submitted original information 
anonymously, but who make a claim for a whistleblower award on a 
disclosed basis, are required to disclose their identity on the Form 
WB-APP and include with the Form WB-APP a

[[Page 53187]]

signed and completed Form WB-DEC. Whistleblowers who submitted 
information anonymously, and make a claim for a whistleblower award on 
an anonymous basis, must be represented by counsel and must provide 
their counsel with a completed and signed Form WB-DEC by no later than 
the date upon which the counsel submits to the Commission the 
whistleblower's Form WB-APP. In addition, whistleblower's counsel must 
submit with the Form WB-APP a separate Form WB-DEC certifying that the 
counsel has verified the whistleblower's identity, has reviewed the 
whistleblower's Form WB-DEC for completeness and accuracy, will retain 
the signed original of the whistleblower's Form WB-DEC in counsel's 
records, and will produce the whistleblower's Form WB-DEC upon request 
of the Commission's staff. Proposed Rule 165.7(c) made explicit that 
regardless of whether the whistleblower made an award application on a 
disclosed or anonymous basis, the whistleblower's identity must be 
verified in a form and manner that is acceptable to the Commission 
prior to the payment of any award.
    Subparagraph (d) of Proposed Rule 165.7 described the Commission's 
claims review process. The claims review process would begin upon the 
expiration of the time for filing any appeals of the Commission's 
judicial or administrative action and the related action(s), or, where 
an appeal has been filed, after all appeals in the action or related 
action(s) have been concluded.
    Under the proposed process, the Commission would evaluate all 
timely whistleblower award claims submitted on Form WB-APP. In 
connection with this process, the Commission could require that 
claimants provide additional information relating to their eligibility 
for an award or satisfaction of any of the conditions for an award, as 
set forth in Proposed Rule 165.5(b). Following that evaluation, the 
Commission would send any claimant a determination setting forth 
whether the claim is allowed or denied and, if allowed, setting forth 
the proposed award percentage amount.
2. Comments
    One commenter stated that Proposed Rule 165.7 is unworkable, and 
that whistleblowers cannot be expected to follow the Commission's Web 
site and understand that a published sanction on the web site is 
related to the information provided by the whistleblower.\105\ This 
commenter also suggested that when the Commission believes it will 
obtain a sanction, discussions should be initiated with the 
whistleblower to negotiate the proper percentage of award because to do 
so would reduce administrative costs, facilitate cooperation between 
the Commission and the whistleblower, and expedite the payment of 
awards.\106\ This commenter supported this assertion by referencing the 
qui tam procedure under the False Claims Act.\107\ Commenters suggested 
that the Commission add or revise rules to incorporate recommendations 
made by the SEC Office of the Inspector General (``OIG'') in its audit 
of the SEC's previous whistleblower award program.\108\ One commenter 
suggested that the Commission examine ways to notify whistleblowers of 
the status of their award without releasing confidential information 
during the course of an investigation.\109\ Another commenter stated 
that Proposed Rule 165.7 unduly burdens and creates hurdles for 
whistleblowers by requiring that they notify the Commission of their 
claim for an award. This commenter argued that because the Commission 
handles enforcement actions and knows which individuals made 
submissions, the Commission should notify potential claimants that 
their claim to an award, if any, has ripened.\110\
---------------------------------------------------------------------------

    \105\ See letter from NWC.
    \106\ See letter from NWC.
    \107\ See letter from NWC.
    \108\ See letters from NWC, POGO; see also SEC OIG ``Assessment 
of the SEC's Bounty Program,'' Mar. 29, 2010, Report No. 474.
    \109\ See letter from POGO.
    \110\ See letter from TAF.
---------------------------------------------------------------------------

    Similarly, another commenter suggested that the Commission should 
streamline the whistleblower application process by adopting a process 
similar to the whistleblower process adopted by the IRS, which another 
commenter claims is more user-friendly and efficient. This commenter 
contended that it is an onerous condition to require a whistleblower to 
track on the Commission's Web site the disposition of the covered 
action and that the 60-day period is too narrow a window to allow a 
whistleblower to complete an application for an award.\111\
---------------------------------------------------------------------------

    \111\ See letter from NCCMP.
---------------------------------------------------------------------------

3. Final Rule
    After considering the comments received, the Commission has decided 
to adopt Rule 165.7 with changes. First, the Commission has decided to 
increase the period for claimants to file their claim for an award from 
sixty (60) days to ninety (90) days. This additional time should 
provide claimants with a better opportunity to review the Commission's 
Web site and file an application following the publication of a Notice. 
In the Commission's view, this 90-day period strikes an appropriate 
balance between competing whistleblower interests--allowing all 
potential whistleblowers a reasonable opportunity to periodically 
review the Commission's Web site and to file an application, on the one 
hand, while providing finality to the application period so that the 
Commission can begin the process of assessing any applications and 
making a timely award to any qualifying whistleblowers, on the other 
hand.
    Second, in light of comments that the Commission simplify the WB-
APP form, the Commission has made optional Section G (``Entitlement to 
Award) of the form, which provides whistleblowers with the opportunity 
to ``[e]xplain the basis for the whistleblower's belief that the 
whistleblower is entitled to an award'' and to ``[p]rovide any 
additional information the whistleblower think may be relevant in light 
of the criteria for determining the amount of an award.'' As commenters 
stated, when a whistleblower has worked closely with the staff on a 
matter, requiring that whistleblower to furnish a submission explaining 
the degree and value of his or her assistance may be unnecessary. At 
the same time, such a whistleblower--or other claimants who have not 
worked as closely with the staff and wish to advocate the value of 
their assistance--should have the opportunity to do so. The Commission 
has determined not to make any further modifications to the form, 
however, because the remaining information that the Commission requests 
is in its view necessary to provide a sufficient record for a full and 
fair consideration of the claimant's application (and, if a petition 
for review is filed, so that the court of appeals has a sufficient 
record to conduct a review).
    The Commission has decided not to eliminate the Notice or to 
otherwise model the procedures after those employed in the qui tam 
context. The qui tam context is substantially different from the 
Commission's situation because qui tam actions necessarily involve one 
or more known individuals with whom the Department of Justice will have 
worked. By contrast, in enforcement actions that the Commission 
institutes and litigates (based in part on information and assistance 
from one or more whistleblowers), there may be one whistleblower with 
whom the Commission has worked closely, but there may be other 
claimants who have

[[Page 53188]]

a potential basis for award eligibility as well. The Commission's 
procedures must provide due process to all potential claimants and 
accordingly cannot be restricted by the happenstance that some 
claimants worked more closely with staff. For that reason, the 
Commission believes the ``Notice of Covered Action'' procedure provides 
the best mechanism to provide notice to all whistleblower claimants who 
may have contributed to the action's success.\112\
---------------------------------------------------------------------------

    \112\ The SEC takes the same approach to this issue. See SEC 
Rule 240.21F-10(a).
---------------------------------------------------------------------------

H. Rule 165.8--Amount of Award

1. Proposed Rule
    If all conditions are met, Proposed Rule 165.8 provided that the 
whistleblower awards shall be in an aggregate amount equal to between 
10 and 30 percent, in total, of what has been collected of the monetary 
sanctions imposed in the Commission's action or related actions. This 
range is specified in Section 23(b)(1) of the CEA. Where multiple 
whistleblowers are entitled to an award, subparagraph (b) stated that 
the Commission will independently determine the appropriate award 
percentage for each whistleblower, but total award payments, in the 
aggregate, will equal between 10 and 30 percent of the monetary 
sanctions collected either in the Commission's action or a related 
action (but not both the Commission's action and the related action).
2. Comments
    The Commission received one comment on this Proposed Rule. The 
commenter, a United States Senator, suggested that the Commission place 
reasonable monetary limits on awards to protect against inappropriate 
monetary incentives while still encouraging potential whistleblowers to 
come forward. This commenter also suggested that the Commission place 
reasonable limits on amounts of funds that can be awarded to any single 
whistleblower in any one matter.\113\ This commenter further suggested 
that the Commission provide financial incentives to whistleblowers who 
report to their employers' internal compliance programs, which will 
give the company an earlier opportunity to address potential problems 
and prevent further harm.\114\
---------------------------------------------------------------------------

    \113\ See letter from Senator Carl Levin.
    \114\ See letter from Senator Carl Levin.
---------------------------------------------------------------------------

3. Final Rule
    After considering the comment received, the Commission is adopting 
Rule 165.8 as proposed because it follows the statutory requirements. 
Paragraph (b) of Section 23 of the CEA states that the Commission will 
independently determine the appropriate award percentage for each 
whistleblower, but total award payments, in the aggregate, will equal 
between 10 and 30 percent of the monetary sanctions collected in the 
Commission's action or any related action. The Commission's Final Rule 
tracks this provision. Thus, for example, one whistleblower could 
receive an award of 25 percent of the collected sanctions, and another 
could receive an award of 5 percent, but they could not each receive an 
award of 30 percent. As the Commission noted in the Proposed Rule, 
because the Commission anticipates that the timing of award 
determinations and the value of a whistleblower's contribution could be 
different for the Commission's action and for related actions, the Rule 
would provide that the percentage awarded in connection with a 
Commission action may differ from the percentage awarded in related 
actions. But, in any case, the amounts would, in total, fall within the 
statutory range of 10 to 30 percent. As to the suggestion that the 
Commission use its discretion to avoid giving excessive awards, the 
Commission notes that the statute requires that the Commission give an 
award of a minimum of 10 percent of the amount collected regardless of 
the overall size of the resultant award, and the Commission does not 
have discretion to reduce that statutory minimum.\115\
---------------------------------------------------------------------------

    \115\ See discussion below, in Part II.S., regarding Internal 
Reporting and Harmonization.
---------------------------------------------------------------------------

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

1. Proposed Rule
    Assuming that all of the conditions for making an award to a 
whistleblower have been satisfied, Proposed Rule 165.9 set forth the 
criteria that the Commission would take into consideration in 
determining the amount of the award. Subparagraphs (a)(1) through (3) 
of the Proposed Rule recited three criteria that Section 23(c)(1)(B) of 
the CEA requires the Commission to consider, and subparagraph (a)(4) 
adds a fourth criterion based upon the discretion given to the 
Commission to consider ``additional relevant factors'' in determining 
the amount of an award.
    Subparagraph (a)(1) requires the Commission to consider the 
significance of the information provided by a whistleblower to the 
success of the Commission action or related action. Subparagraph (a)(2) 
requires the Commission to consider the degree of assistance provided 
by the whistleblower and any legal representative of the whistleblower 
in the Commission action or related action. Subparagraph (a)(3) 
requires the Commission to consider the programmatic interest of the 
Commission in deterring violations of the CEA by making awards to 
whistleblowers that provide information that led to successful 
enforcement of covered judicial or administrative actions or related 
actions. Subparagraph (a)(4) would permit the Commission to consider 
whether an award otherwise enhances the Commission's ability to enforce 
the CEA, protect customers, and encourage the submission of high 
quality information from whistleblowers.
    The Commission anticipates that the determination of award amounts 
pursuant to subparagraphs (a)(1)-(4) will involve highly individualized 
review of the circumstances surrounding each award. To allow for this, 
the Commission preliminarily believed that the four criteria afford the 
Commission broad discretion to weigh a multitude of considerations in 
determining the amount of any particular award. Depending upon the 
facts and circumstances of each case, some of the considerations may 
not be applicable or may deserve greater weight than others.
    The permissible Commission considerations include, but are not 
limited to:
     The character of the enforcement action including whether 
its subject matter is a Commission priority, whether the reported 
misconduct involves regulated entities or fiduciaries, the type of CEA 
violations, the age and duration of misconduct, the number of 
violations, and the isolated, repetitive, or ongoing nature of the 
violations;
     The dangers to customers or others presented by the 
underlying violations involved in the enforcement action including the 
amount of harm or potential harm caused by the underlying violations, 
the type of harm resulting from or threatened by the underlying 
violations, and the number of individuals or entities harmed;
     The timeliness, degree, reliability, and effectiveness of 
the whistleblower's assistance;
     The time and resources conserved as a result of the 
whistleblower's assistance;
     Whether the whistleblower encouraged or authorized others 
to

[[Page 53189]]

assist the staff who might not have otherwise participated in the 
investigation or related action;
     Any unique hardships experienced by the whistleblower as a 
result of his or her reporting and assisting in the enforcement action;
     The degree to which the whistleblower took steps to 
prevent the violations from occurring or continuing;
     The efforts undertaken by the whistleblower to remediate 
the harm caused by the violations including assisting the authorities 
in the recovery of the fruits and instrumentalities of the violations;
     Whether the information provided by the whistleblower 
related to only a portion of the successful claims brought in the 
covered judicial or administrative action or related action; \116\ and
---------------------------------------------------------------------------

    \116\ As described elsewhere in these rules, if the information 
provided by a whistleblower relates to only a portion of a 
successful covered judicial or administrative action or related 
action, the Commission proposes to look to the entirety of the 
action (including all defendants or respondents, all claims, and all 
monetary sanctions obtained) in determining whether the 
whistleblower is eligible for an award and the total dollar amount 
of sanctions on which the whistleblower's award will be based. Under 
subparagraph (a) of Proposed Rule 165.9, the fact that a 
whistleblower's information related to only a portion of the overall 
action would be a factor in determining the amount of the 
whistleblower's award. Thus, if the whistleblower's information 
supported only a small part of a larger action, that would be a 
reason for making an award based upon a smaller percentage amount 
than otherwise would have been awarded.
---------------------------------------------------------------------------

     The culpability of the whistleblower, including whether 
the whistleblower acted with scienter, both generally and in relation 
to others who participated in the misconduct.
    These considerations are not listed in order of importance nor are 
they intended to be all-inclusive or to require a specific 
determination in any particular case.
    Finally, subparagraph (b) to Proposed Rule 165.9 reiterated the 
statutory prohibition in Section 23(c)(1)(B)(ii) of the CEA from taking 
into consideration the balance of the Fund when making an award 
determination.
2. Comments
    The Commission received comment that the Rule should expressly 
permit the Commission to deny an award when it determines that payment 
of an award would be against public policy.\117\ One commenter, a 
Senator, also expressed concern that excessive monetary incentives may 
lead to misreporting causing investigative waste.\118\ The Senator also 
suggested that the Commission should exercise discretion afforded the 
Commission in Section 23(c)(1)(A) to reasonably limit the amount that 
may be awarded to a single whistleblower in any one matter.
---------------------------------------------------------------------------

    \117\ See letter from ABA.
    \118\ See letter from Senator Carl Levin.
---------------------------------------------------------------------------

3. Final Rule
    The Commission notes that the SEC, in promulgating its own final 
whistleblower rules, added two additional discretionary factors to 
consider in making award amount decisions: (1) ``whether the 
whistleblower unreasonably delayed reporting the securities violations 
(SEC Rule 240.21F-6(b)(2))''; and (2) whether the whistleblower 
interfered or hindered internal compliance and reporting systems (SEC 
Rule 240.21F-6(b)(3)). The Commission has amended the Rule to add such 
factors in the interest of increasing transparency regarding the 
Commission's award determination process, and to be consistent with the 
statutory mandate in Section 23(c)(1)(B)(IV) of the CEA that the 
Commission establish additional relevant factors per rule or 
regulation. In addition, with respect to the Senator's comment, the 
Rule now affords the Commission discretion regarding award 
determinations to take into consideration ``[p]otential adverse 
incentives from oversize awards''.\119\
---------------------------------------------------------------------------

    \119\ Rule 165.9(a)(5).
---------------------------------------------------------------------------

J. Rule 165.10--Contents of Record for Award Determinations

    In order to promote transparency and consistency, and also to 
preserve a clear record for appellate review (under Proposed Rule 
165.13) of Commission award determinations (under Proposed Rule 165.7), 
Proposed Rule 165.10 set forth the contents of record for award 
determinations relating to covered judicial or administrative actions 
or related actions. Under the Proposed Rule, the record shall include: 
required forms the whistleblower submits to the Commission, including 
related attachments; other documentation provided by the whistleblower 
to the Commission; the complaint, notice of hearing, answers and any 
amendments thereto; the final judgment, consent order, or 
administrative speaking order; the transcript of the related 
administrative hearing or civil injunctive proceeding, including any 
exhibits entered at the hearing or proceeding; and any other documents 
that appear on the docket of the proceeding. Under the Proposed Rule, 
the record shall also include statements by litigation staff to the 
Commission regarding the significance of the information provided by 
the whistleblower to the success of the covered judicial or 
administrative action or related action; and the degree of assistance 
provided by the whistleblower and any legal representative of the 
whistleblower in a covered judicial or administrative action or related 
action.
    However, Proposed Rule 165.10(b) explicitly stated that the record 
upon which the award determination under Proposed Rule 165.7 shall be 
made shall not include any Commission pre-decisional or internal 
deliberative process materials related to the Commission's or its 
staff's determinations: (1) To file or settle the covered judicial or 
administrative action; and/or (2) whether, to whom and in what amount 
to make a whistleblower award. Further, the record upon which the award 
determination under Proposed Rule 165.7 shall be made shall not include 
any other entity's pre-decisional or internal deliberative process 
materials related to its or its staff's determination to file or settle 
a related action.
    The Commission did not receive any comments on the contents of 
record for award determinations. The Commission has considered the 
issue and has decided to adopt Rule 165.10 as proposed, with two 
modifications intended to improve clarity. First, the Final Rule 
clarifies that the record shall not include documents protected under 
the attorney-client privilege or the attorney work-product privilege. 
Second, the ``statements by litigation staff'' provision has been 
simplified to include ``[s]worn declarations (including attachments) 
from the Commission's Division of Enforcement staff regarding any 
matters relevant to the award determination.''

K. Rule 165.11--Awards Based Upon Related Actions

    Proposed Rule 165.11 provided that the Commission, or its delegate, 
may determine an award based on amounts collected in related actions 
brought by appropriate Federal or state agencies, registered entities, 
or SROs rather than on the amount collected in a covered judicial or 
administrative action. Regardless of whether the Commission's award 
determination is based on the Commission's covered judicial or 
administrative action or a related action or actions, Rule 165.7 sets 
forth the procedures for whistleblower award applications and 
Commission award determinations.
    The Commission received one comment regarding awards based upon 
related actions. The commenter suggested that the Commission should 
remove the potential for a whistleblower to recover from both the 
Commission

[[Page 53190]]

and the SEC for providing each agency with the same information. This 
commenter noted that the SEC will not make an award for a related 
action, and that the Commission's provisions should be similar.\120\
---------------------------------------------------------------------------

    \120\ See letter from FSR.
---------------------------------------------------------------------------

    The Commission has considered the comment and has decided to adopt 
Rule 165.11 as proposed, with one modification. Rule 165.11 tracks 
Section 23(a)(5) of the CEA, and the payment of awards on related 
actions is not within in the discretion of the Commission. Rule 
165.11(a)(5) adds ``[a] foreign futures authority'' to the list of 
authorities whose judicial or administrative actions could potentially 
qualify as a ``related action.'' \121\
---------------------------------------------------------------------------

    \121\ See 7 U.S.C. 26(a)(5), 26(h)(2)(C)(i)(VI).
---------------------------------------------------------------------------

L. Rule 165.12--Payment of Awards From the Fund, Financing Customer 
Education Initiatives, and Deposits and Credits to the Fund

1. Proposed Rule
    Proposed Rule 165.12 sets forth Commission procedures with respect 
to the Fund to pay whistleblower awards, fund customer education 
initiatives, and maintain appropriate amounts in the Fund.
    Proposed Rule 165.12(c) provides that the Commission shall 
undertake and maintain customer education initiatives. The initiatives 
shall be designed to help customers protect themselves against fraud or 
other violations of the CEA, or the rules or regulations thereunder. 
The Commission shall fund the customer education initiatives, and may 
utilize funds deposited into the Fund during any fiscal year in which 
the beginning (October 1) balance of the Fund is greater than 
$10,000,000.
    The Commission limits discretion to finance customer education 
initiatives to fiscal years in which the beginning (October 1) balance 
of the Fund is greater than $10,000,000 in order to limit the 
possibility that spending on customer education initiatives may 
inadvertently result in the Commission operating the Fund in a deficit 
and thereby delay award payments to whistleblowers.
2. Comments
    The Commission received one comment that suggested Fund amounts be 
used to educate the public about the rights of whistleblowers. The 
comment suggests that the Commission publish materials that companies 
can distribute to their employees that are simple and easy to 
understand informing them of their rights as a potential 
whistleblower.\122\ The Commission did not receive any comments 
regarding the Commission's delegation of authority to the Office of the 
Executive Director.
---------------------------------------------------------------------------

    \122\ See letter from NCCMP.
---------------------------------------------------------------------------

3. Final Rule
    The Commission has considered the comment received regarding the 
use of the Fund. The Commission has established a working group to make 
suggestions regarding customer education initiatives. The Commission 
has decided to adopt Rule 165.12 with revisions. Specifically, the 
Final Rule includes revisions to reflect the Commission's intent to 
undertake and maintain customer education initiatives through an Office 
of Consumer Outreach. Because Rule 165.12 is a rule of the Commission's 
``organization, procedure, or practice,'' the Commission is not 
presenting these revisions for notice and comment.\123\
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    \123\ See 5 U.S.C. 553.
---------------------------------------------------------------------------

M. 165.13--Appeals

1. Proposed Rule
    Section 23(f) of the CEA provided for rights of appeal of Final 
Orders of the Commission with respect to whistleblower award 
determinations.\124\ Subparagraph (a) of Proposed Rule 165.13 tracks 
this provision and describes claimants' rights to appeal. Claimants may 
appeal any Commission final award determination, including whether, to 
whom, or in what amount to make whistleblower awards, to an appropriate 
court of appeals within thirty (30) days after the Commission's final 
order of determination.
---------------------------------------------------------------------------

    \124\ See Section 23(f) of the CEA, 7 U.S.C. 26(f).
---------------------------------------------------------------------------

    Subparagraph (b) of Proposed Rule 165.13 designates the materials 
that shall be included in the record on any appeal. Those materials 
include: The Contents of Record for Award Determinations, as set forth 
in Proposed Rule 165.10, and any Final Order of the Commission, as set 
forth in Rule 165.7(e).
2. Comments
    The Commission received one comment regarding appeals.\125\ This 
commenter suggested that a whistleblower who provides information to 
the Commission that the Commission subsequently decides not to pursue 
should have the right to appeal to the Commission's Office of the 
Inspector General the decision not to pursue. This commenter reasons 
that otherwise legitimate claims that could expose violations could be 
dismissed without appropriate investigation.
---------------------------------------------------------------------------

    \125\ See letter from NCCMP.
---------------------------------------------------------------------------

3. Final Rule
    After considering the comment received, the Commission has decided 
to adopt Rule 165.13 as proposed. The Final Rule tracks Section 23(f) 
of the CEA, which states that appeals of Commission decisions regarding 
whistleblower awards may be made to the appropriate U.S. Circuit Court 
of Appeals. However, although Section 23(f) provides for appeals of 
Commission determinations of whether, to whom, or in what amount to 
make an award, it does not grant any right to appeal the Commission's 
prosecutorial discretion, including the Commission's decisions to: open 
or close an investigation; file an enforcement action, including the 
Commission's determination of the violations charged; and settling an 
enforcement action.

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

1. Proposed Rule
    Proposed Rule 165.14 addressed the timing for payment of an award 
to a whistleblower. Any award made pursuant to the rules would be paid 
from the Fund established by Section 23(g) of the CEA.\126\ 
Subparagraph (a) provided that a recipient of a whistleblower award 
will be entitled to payment on the award only to the extent that a 
monetary sanction is collected in the covered judicial or 
administrative action or in a related action upon which the award is 
based. This requirement is derived from Section 23(b)(1) of the 
CEA,\127\ which provides that an award is based upon the monetary 
sanctions collected in the covered judicial or administrative action or 
related action.
---------------------------------------------------------------------------

    \126\ 7 U.S.C. 26(g).
    \127\ 7 U.S.C. 26(b)(1).
---------------------------------------------------------------------------

    Subparagraph (b) stated that any payment of an award for a monetary 
sanction collected in a covered judicial or administrative action shall 
be made within a reasonable period of time following the later of 
either the completion of the appeals process for all whistleblower 
award claims arising from the covered judicial or administrative 
action, or the date on which the monetary sanction is collected. 
Likewise, the payment of an award for a monetary sanction collected in 
a related action shall be made within a reasonable period of time 
following the later of either the completion of the appeals process for 
all whistleblower award claims arising from the related action, or the 
date on which the monetary sanction is collected. This

[[Page 53191]]

provision is intended to cover situations where a single action results 
in multiple whistleblowers claims. Under this scenario, if one 
whistleblower appeals a Final Order of the Commission relating to a 
whistleblower award determination, then the Commission would not pay 
any awards in the action until that whistleblower's appeal has been 
concluded, because the disposition of that appeal could require the 
Commission to reconsider its determination and thereby affect all 
payments for that covered judicial or administrative action or related 
action.
    Subparagraph (c) of Proposed Rule 165.14 described how the 
Commission will address situations where there are insufficient amounts 
available in the Fund to pay the entire amount of an award to a 
whistleblower or whistleblowers within a reasonable period of time from 
when payment should otherwise be made. In this situation, the 
whistleblower or whistleblowers will be paid when amounts become 
available in the Fund, subject to the terms set forth in proposed 
subparagraph (c). Under proposed subparagraph (c), where multiple 
whistleblowers are owed payments from the Fund based on awards that do 
not arise from the same Notice or resolution of a related action, 
priority in making payment on these awards would be determined based 
upon the date that the Final Order of the Commission is made. If two or 
more of these Final Orders of the Commission are entered on the same 
date, then those whistleblowers owed payments will be paid on a pro 
rata basis until sufficient amounts become available in the Fund to pay 
their entire payments. Under proposed subparagraph (c)(2), where 
multiple whistleblowers are owed payments from the Fund based on awards 
that arise from the same Notice or resolution of a related action, they 
would share the same payment priority and would be paid on a pro rata 
basis until sufficient amounts become available in the Fund to pay 
their entire payments.
2. Comments and Final Rule
    The Commission did not receive any comments regarding procedures 
applicable to the payment of awards. The Commission is adopting Rule 
165.14 as proposed. The Final Rule tracks the relevant provisions of 
Section 23 of the CEA.

O. Rule 165.15--Delegations of Authority

    Proposed Rule 165.15 included the Commission's delegations to the 
Executive Director to take certain actions to carry out this Part 165 
of the Rules and the requirements of Section 23(g) of CEA. 
Specifically, Proposed Rule 165.15 delegated authority to the Executive 
Director, or a designee, upon the concurrence of the General Counsel 
and the Director of the Commission's Division of Enforcement, to make 
both deposits into and award payments out of the Fund.
    The Commission did not receive any comments regarding delegations 
of authority. The Commission is adopting Rule 165.15 with revisions to 
address internal Commission organizational and procedural issues. 
Specifically, the Final Rule includes revisions to reflect the 
Commission's delegation to a Whistleblower Office the authority to 
administer the Commission's whistleblower program. The Final Rule also 
provides that the Commission will exercise its authority to make 
whistleblower award determinations through a delegation of authority to 
a panel that shall be composed of three of the Commission's Offices or 
Divisions. Under Rule 165.15, the Commission's Executive Director will 
select the members of the ``Whistleblower Award Determination Panel.'' 
Because Rule 165.15 is a rule of the Commission's ``organization, 
procedure, or practice,'' the Commission is not presenting these 
revisions for notice and comment.\128\
---------------------------------------------------------------------------

    \128\ See 5 U.S.C. 553.
---------------------------------------------------------------------------

P. Rule 165.16--No Immunity and Rule 165.17--Awards to Whistleblowers 
Who Engage in Culpable Conduct

1. Proposed Rules
    Proposed Rule 165.16 provided notice that the provisions of Section 
23 of the CEA do not provide immunity to individuals who provide 
information to the Commission relating to a violation of the CEA. Some 
whistleblowers who provide original information that significantly aids 
in detecting and prosecuting sophisticated manipulation or fraud 
schemes may themselves be participants in the scheme who would be 
subject to Commission enforcement actions. While these individuals, if 
they provide valuable assistance to a successful action, will remain 
eligible for a whistleblower award, they will not be immune from 
prosecution. Rather, the Commission will analyze the unique facts and 
circumstances of each case in accordance with its Enforcement Advisory, 
``Cooperation Factors in Enforcement Division Sanction 
Recommendations'' to determine whether, how much, and in what manner to 
credit cooperation by whistleblowers who have participated in 
misconduct.\129\
---------------------------------------------------------------------------

    \129\ See http://www.cftc.gov/ucm/groups/public/@cpdisciplinaryhistory/documents/file/enfcooperation-advisory.pdf.
---------------------------------------------------------------------------

    The options available to the Commission and its staff for 
facilitating and rewarding cooperation ranges from taking no 
enforcement action to pursuing charges and sanctions in connection with 
enforcement actions.
    Whistleblowers with potential civil liability or criminal liability 
for CEA violations that they report to the Commission remain eligible 
for an award. However, pursuant to Section 23(c)(2)(B) of the CEA,\130\ 
if a whistleblower is convicted of a criminal violation related to the 
judicial or administrative action, they are not eligible for an award. 
Furthermore, if a defendant or respondent in a Commission action or a 
related action is ordered to pay monetary sanctions in a civil 
enforcement action, Proposed Rule 165.17 stated that the Commission 
will not count the amount of such monetary sanctions toward the 
$1,000,000 threshold in considering an award payment to such a 
defendant or respondent in relation to a covered judicial or 
administrative action, and will not add that amount to the total 
monetary sanctions collected in the action for purposes of calculating 
any payment to the culpable individual. The rationale for this 
limitation is to prevent wrongdoers from financially benefiting from 
their own misconduct, and ensures equitable treatment of culpable and 
non-culpable whistleblowers. For example, without such a prohibition, a 
whistleblower that was the leader or organizer of a fraudulent scheme 
involving multiple defendants that resulted in total monetary sanctions 
of $1,250,000, which would exceed the $1,000,000 minimum threshold 
required for making an award, could potentially be eligible for an 
award even though he personally was ordered to pay $750,000 of those 
monetary sanctions. Under similar circumstances, a non-culpable 
whistleblower would be deemed ineligible for an award if they reported 
a CEA violation that resulted in monetary sanctions of less than 
$1,000,000. The Proposed Rule would prevent such inequitable treatment.
---------------------------------------------------------------------------

    \130\ 7 U.S.C. 26(c)(2)(B).
---------------------------------------------------------------------------

2. Comments
    Many commenters suggested that the Commission should not allow 
whistleblowers with varying degrees of culpability to be eligible for 
an

[[Page 53192]]

award.\131\ These comments are discussed under Rule 165.6 in the 
context of discussing whistleblowers ineligible for an award.\132\
---------------------------------------------------------------------------

    \131\ See letters from SIFMA/FIA, and U.S. Chamber of Commerce.
    \132\ See above, Section II.F.
---------------------------------------------------------------------------

3. Final Rule
    Upon consideration of the comments, the Commission has decided to 
adopt Rules 165.16 and 165.17 as proposed. These rules track the 
Commission's authority to deny whistleblower awards to individuals who 
are criminally culpable as stated in Section 23(c)(2)(B). As discussed 
above with respect to Rule 165.9, the Commission will consider ``the 
culpability or involvement of the whistleblower in matters associated 
with the Commission's action or related actions'' in determining the 
amount of a whistleblower award.\133\
---------------------------------------------------------------------------

    \133\ See Section II.I, above, discussing Rule 165.9(c)(1).
---------------------------------------------------------------------------

Q. Rule 165.18--Staff Communications With Whistleblowers From 
Represented Entities

1. Proposed Rule
    Proposed Rule 165.18 clarified the staff's authority to communicate 
directly with whistleblowers who are directors, officers, members, 
agents, or employees of an entity that has counsel, and who have 
initiated communication with the Commission relating to a potential 
violation of the CEA. The Proposed Rule made clear that the staff is 
authorized to communicate directly with these individuals without first 
seeking the consent of the entity's counsel.
    Section 23 of the CEA evinces a strong Congressional policy to 
facilitate the disclosure of information to the Commission relating to 
potential CEA violations and to preserve the confidentiality of those 
who do so.\134\ This Congressional policy would be significantly 
impaired were the Commission required to seek the consent of an 
entity's counsel before speaking with a whistleblower who contacts the 
Commission and who is a director, officer, member, agent, or employee 
of the entity. For this reason, Section 23 of the CEA implicitly 
authorizes the Commission to communicate directly with these 
individuals without first obtaining the consent of the entity's 
counsel.
---------------------------------------------------------------------------

    \134\ See Section 23(b)-(d) and (h) of the CEA, 7 U.S.C 26(b)-
(d), (h).
---------------------------------------------------------------------------

    The Commission included this authority in the Proposed Rule to 
promote whistleblowers' willingness to disclose potential CEA 
violations to the Commission by reducing or eliminating any concerns 
that whistleblowers might have that the Commission is required to 
request consent of the entity's counsel and, in doing so, might 
disclose their identity. The Commission intended the Proposed Rule to 
clarify that, in accordance with American Bar Association Model Rule 
4.2, the staff is authorized by law to make these communications.\135\ 
American Bar Association Model Rule 4.2 provides as follows:

    \135\

    In representing a client, a lawyer shall not communicate about 
the subject of the representation with a person the lawyer knows to 
be represented by another lawyer in the matter, unless the lawyer 
has the consent of the other lawyer or is authorized to do so by law 
---------------------------------------------------------------------------
or a court order.

Model Rules of Prof'l Conduct R. 4.2 (emphasis added). Under this 
provision, for example, the Commission could meet or otherwise 
communicate with the whistleblower privately, without the knowledge or 
presence of counsel or other representative of the entity.
2. Comments
    The ABA strongly disagreed with the Commission's view that Part 165 
authorized the Commission to bypass state bar ethics rules.\136\ The 
ABA also expressed concern that Proposed Rule 165.18 may have profound 
implications with respect to the preservation of an entity's attorney-
client privilege and information protected by the work-product 
doctrine.\137\ The ABA stated:

    \136\ See letter from ABA.
    \137\ See letter from ABA.

    [W]e strongly disagree with the Commission's view that Part 165 
authorized the Commission to bypass state bar ethics rules. In our 
view, Proposed Rule 165.18 may have profound implications with 
respect to the preservation of an entity's attorney-client privilege 
and information protected by the work-product doctrine * * *. The 
Commission would justify this position by viewing the discussions 
with such a person as having been `authorized by law.' However, it 
is not clear to us as to whether a Commission Rule (as opposed to a 
statute) can supersede the State Bar provisions governing attorney 
conduct * * *. Proposed Rule 165.18 deals not with the initial 
communication by the employee, but instead with responsive 
communications by the staff. Having had the benefit of a 
whistleblower's initial communication, we see no reasonable basis 
not to require the staff to communicate with entity counsel prior to 
---------------------------------------------------------------------------
any further communications.

The ABA also advised, in the alternative, that if the Commission 
retains Proposed Rule 165.18, it should be revised to include 
procedures governing staff communications to ensure that attorney-
client privileges and the information protected by attorney work-
product doctrine are not jeopardized.\138\ The ABA elaborated that, 
``information the CFTC might seek from an employee, and which the 
employee might disclose, might have derived from privileged 
communications the employee or others within the organization might 
have had with the entity's counsel.'' It was also suggested that the 
right to waive the privilege in such circumstances would belong to the 
entity, not to any single employee, and that the ability of Commission 
staff to communicate with an employee without first seeking the consent 
of the entity's counsel may affect the entity's ability to claim 
privilege with respect to such matters.'' Finally, the ABA suggested 
that ``[h]aving had the benefit of a whistleblower's initial 
communication, we see no reasonable basis not to require the [CFTC] 
staff to communicate with entity counsel prior to any further 
communications,'' because in many cases CFTC communications with entity 
counsel preceding further discussions with a whistleblower could assist 
the CFTC's investigative efforts. Another commenter recommended that 
Proposed Rule 165.18 be clarified to provide that ``if the commission 
remains in contact with a whistleblower during the course of an 
entity's internal investigation, it cannot seek from the whistleblower 
information about counsel's views and advice (or the privileged 
information and discussions) that the whistleblower obtains during that 
investigation.'' \139\ Another commenter warned that ``[t]he 
communications contemplated by Section 165.18 of the Proposed Rules run 
afoul of ABA Model Rule 4.2 * * *'' and recommended that the Commission 
``should withdraw Section 165.18 of the Proposed Rules.'' \140\
---------------------------------------------------------------------------

    \138\ See letter from ABA.
    \139\ See letter from SIFMA/FIA.
    \140\ See letter from FSR.
---------------------------------------------------------------------------

3. Final Rule
    After considering the comments received, the Commission has decided 
to adopt Rule 165.18, with modifications. The Final Rule authorizes the 
staff to directly communicate with directors, officers, members, 
agents, or employees of an entity that has counsel where the individual 
first initiates communication with the Commission as a whistleblower; 
the staff is authorized to have such direct communication without the 
consent of the entity's counsel. The Commission believes that the Rule 
implements congressional

[[Page 53193]]

intent and meets the ``authorized by law'' exception to ABA Model Rule 
of Professional Conduct 4.2 and similar state bar rules that might 
otherwise prohibit direct communication.
    With respect to the ABA's comment that ``it is not clear to [the 
ABA] as to whether a Commission Rule (as opposed to a statute) can 
supersede the State Bar provisions governing attorney conduct'', the 
Commission does not believe that Final Rule 165.18 ``supersedes'' state 
bar provisions. Rather, the Commission believes that by granting the 
Commission rulemaking authority pursuant to Section 23(i) of the CEA to 
implement an effective whistleblower program, Congress conferred upon 
the Commission the authority to permit its staff to have direct 
communications with whistleblowers without seeking consent of an 
entity's counsel. Final Rule 165.18, therefore, is intended to and does 
satisfy the ``authorized by law'' exception to the rule that would 
otherwise prohibit an attorney from communicating directly with an 
individual about a matter when the individual is represented by counsel 
in the matter.\141\
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    \141\ The Commission is mindful that the SEC has reached the 
same conclusion with respect to the SEC's Dodd-Frank Act 
whistleblower provision. See SEC Rule 240.21F-17(b) (''If you are a 
director, officer, member, agent, or employee of an entity that has 
counsel, and you have initiated communication with the Commission 
relating to a possible securities law violation, the staff is 
authorized to communicate directly with you regarding the possible 
securities law violation without seeking the consent of the entity's 
counsel.'').
---------------------------------------------------------------------------

    The Commission disagrees with any suggestion that the Commission 
does not have the authority to give such permission. The authority is 
derived from Congress's direction in Section 23(i) of the CEA to 
promulgate rules to create an effective and robust whistleblower 
program, and to preserve the confidentiality of whistleblowers.\142\ 
The Commission believes that it would undermine Congressional intent if 
staff were prohibited from communicating directly with a whistleblower 
merely because the whistleblower was employed by an entity that was 
represented by counsel. Not only would such a prohibition allow a state 
bar rule to trump a federal statute and an independent federal agency's 
rule, but such a blanket prohibition would have the perverse result of 
giving an entity the option to decide whether a whistleblower should be 
allowed to report the entity's misconduct to the Commission. Giving an 
entity the right to stifle a whistleblower plainly is not what Congress 
intended. Nor would it be consistent with congressional intent to 
require staff to identify a whistleblower to an entity, which would be 
necessary if the staff were required to seek the entity's counsel 
consent to speak to the whistleblower. Such a requirement could deter 
whistleblowers from coming forward, which would frustrate congressional 
purpose.
---------------------------------------------------------------------------

    \142\ Cf. ABA Formal Ethics Opinion 95-396 (1995) (Rule 4.2's 
exception permitting communication ``authorized by law'' is 
satisfied by ``a constitutional provision, statute or court rule, 
having the force and effect of law, that expressly allows a 
particular communication to occur in the absence of counsel.''); 
see, e.g., Wilkerson v. Brown, 995 P.2d 393 (Kan. Ct. App. 1999) 
(statutes allowing for service of demands and offers of judgment on 
opposing party trigger ``authorized by law'' exception to anti-
contact rule); Lewis v. Bayer A.G., No. 2353 Aug. Term 2001, 2002 WL 
1472339 (Pa. C.P. June 12, 2002) (drug company's mailings to 
putative members of plaintiff class of patients who experienced 
adverse drug reactions were sent pursuant to FDA regulations and 
thus were ``authorized by law'').
---------------------------------------------------------------------------

    Moreover, any state bar prohibition on attorney contact with an 
employee ultimately is premised on the notion that an entity-employer's 
counsel is by extension the employee's counsel. However, a lawyer for 
an entity cannot ethically also represent a whistleblower-employee on 
the same matter when the whistleblower's interests and the entity's 
interests are in conflict, such as when a whistleblower wants to report 
an entity's misconduct to the Commission.\143\ Based on the same 
reasoning, Rule 165.18 does not authorize Commission staff to have 
direct communication with a whistleblower who is personally represented 
by an attorney without the consent of that attorney.
---------------------------------------------------------------------------

    \143\ See, e.g., ABA Model Rule 1.7(a) (providing, in general, 
that ``a lawyer shall not represent a client if the representation 
involves a concurrent conflict of interest. A concurrent conflict of 
interest exists if * * * the representation of one client will be 
directly adverse to another client'').
---------------------------------------------------------------------------

    Authorizing the staff to have direct communication with a 
whistleblower employed by a represented entity does not mean that the 
staff should be the first to initiate such contact. For the sake of 
clarity, the Commission is explicitly modifying the proposed rule to 
grant authority only when the whistleblower first initiates contact 
with the staff. Thereafter, all direct communications are ``authorized 
by law.''
    In addition, the Commission acknowledges some commenters' concern 
that direct communication with whistleblowers raises the possibility of 
the staff's inadvertent receipt of information covered by an entity's 
attorney-client privilege or the attorney work product protection. 
These concerns are valid. This Rule does not authorize staff to access 
information protected by the attorney-client privilege or attorney work 
product protection. Accordingly, when invoking Rule 165.18, the staff 
shall undertake reasonable best efforts to avoid receiving such 
information.

R. Rule 165.19--Nonenforceability of Certain Provisions Waiving Rights 
and Remedies or Requiring Arbitration of Disputes

    Consistent with Congressional intent to protect whistleblowers from 
retaliation as reflected in Section 23(h) of the CEA, Proposed Rule 
165.19 provided that the rights and remedies provided for in Part 165 
of the Commission's Regulations may not be waived by any agreement, 
policy, form, or condition of employment including by a predispute 
arbitration agreement. No pre-dispute arbitration agreement shall be 
valid or enforceable, if the agreement requires arbitration of a 
dispute arising under this Part.
    The Commission did not receive any comments on Proposed Rule 
165.19. The Commission is adopting Rule 165.19 as proposed. This rule 
tracks Section 23(n) of the CEA and is in keeping with congressional 
intent to make waiver of certain rights and remedies of whistleblowers 
nonenforceable, as well as any predispute arbitration agreement if the 
agreement requires arbitration of a dispute arising under Part 165.

S. Internal Reporting and Harmonization

    The Proposed Rules did not require individuals to report potential 
CEA violations to their employers. However, the Proposed Rules did 
include provisions that would allow employees to claim an award from 
the Commission if they reported the information to their employer and 
the employer reported that information to the Commission.\144\ Numerous 
commenters requested that the Commission either make internal reporting 
mandatory for whistleblowers, or at least provide individuals with 
incentives to make internal reports.
---------------------------------------------------------------------------

    \144\ See Proposed Rule 165.2(l).
---------------------------------------------------------------------------

    Several commenters recommended that the Commission adopt a 
``provision requiring internal reporting by all employees as a 
condition of eligibility for a whistleblower award.'' \145\ Some 
commentators suggest that the only exception to internal reporting 
should be when the whistleblower can prove that the employer's internal 
system is

[[Page 53194]]

inadequate.\146\ One commenter suggested that ``[t]he rules should 
provide that an internal reporting requirement prior to going to the 
CFTC would not apply where it would be futile, for example where 
individuals responsible for investigating complaints were themselves 
involved in the alleged violations,'' and ``if the entity has an 
effective internal compliance reporting system and internal reporting 
would not be futile, the entity should be allowed at least 180 days to 
complete its own internal investigation before the whistleblower can 
report the matter to the CFTC.'' \147\
---------------------------------------------------------------------------

    \145\ See letter from NSCP; see also letters from EEI, ICI, ACC, 
Equal Employment Advisory Council (``EEAC''), U.S. Chamber of 
Commerce, ABA, and FSR.
    \146\ See letter from U.S. Chamber of Commerce.
    \147\ See letter from SIFMA/FIA.
---------------------------------------------------------------------------

    Other commentators cautioned against making internal reporting 
mandatory. One commenter stated ``[r]equiring that a whistleblower 
first advance his allegations internally to officials who may be the 
architects of the scheme places that individual's livelihood in peril. 
* * * In addition, requiring that whistleblowers report internally 
first in all situations can imperil law enforcement ends, by providing 
opportunities to destroy or conceal evidence, or otherwise thwarting 
the CFTC's investigation of alleged wrongdoing.'' \148\ This commenter 
also expressed belief that ``the Commission's approach of encouraging 
whistleblowers to first report violations internally * * * without 
penalizing those who do not report, strikes an appropriate balance.'' 
\149\
---------------------------------------------------------------------------

    \148\ See letter from TAF.
    \149\ See letter from TAF.
---------------------------------------------------------------------------

    Another commenter advised that whistleblowers should be given the 
option to report problems directly to the Commission, ``especially if 
they have reason to believe that their entity's internal compliance 
program will not do an adequate job of investigating the wrongdoing and 
taking corrective action.'' \150\ This commenter also stated that to 
require internal reporting would be contrary to the meaning and intent 
of Section 23 of the CEA, would have a chilling effect on the 
whistleblower program and would put whistleblowers in harm's way.\151\
---------------------------------------------------------------------------

    \150\ See letter from POGO.
    \151\ See letter from POGO.
---------------------------------------------------------------------------

    In the alternative to mandatory internal reporting, several 
commenters suggested that the Commission make internal reporting a 
positive criterion in an award determination.\152\ For example, one 
commenter stated that the Commission ``[s]hould make explicit that a 
whistleblower will receive credit in the calculation of award amount 
when the [whistleblower] uses a entity's internal reporting 
mechanism.'' \153\ In addition, this commenter suggested that the Final 
Rule ``should provide strong financial disincentives against 
individuals who violate entity rules requiring them to report 
misconduct internally.'' \154\ Taking another tack, this commenter 
suggested that the Commission deem ineligible for an award any 
individual who refuses to cooperate with the entity's internal 
investigation, or who provides inaccurate or incomplete information or 
otherwise hinders such an investigation.\155\
---------------------------------------------------------------------------

    \152\ See letter from FSR at 8; see also letters from NSCP at 3-
7, 10, Senator Carl Levin at 3, U.S. Chamber of Commerce at 14, 
SIFMA/FIA at 2-3, 6; cf. letter from FSR at 9 (suggesting that 
whistleblowers who fail to report internally ``without clear, 
appropriate justification'' be limited, in general, to the 
``statutory minimum of 10 percent of the total monetary sanctions 
collected in the action.'').
    \153\ See letter from SIFMA/FIA.
    \154\ See letter from SIFMA/FIA.
    \155\ See letter from SIFMA/FIA.
---------------------------------------------------------------------------

    Also, several commenters pointed out that the SEC's whistleblower 
rules incentivize internal reporting through positive consideration of 
internal reporting in award determinations,\156\ and suggested that the 
Commission's whistleblower program be harmonized with that of the SEC 
(harmonization to be discussed below). The SEC's final whistleblower 
rules include factors that may increase a whistleblower's award.\157\
---------------------------------------------------------------------------

    \156\ See, e.g., letter from SIFMA/FIA.
    \157\ See SEC Rule 240.21F-6(a)(4) (``Criteria For Determining 
Amount of Award'').
---------------------------------------------------------------------------

    The Commission declines to mandate that whistleblowers report 
potential violations internally either before or concurrent to 
reporting to the Commission. The Commission believes that to require 
internal reporting could raise the risk of retaliation, and have a 
chilling effect on whistleblowers who are inclined to come forward and 
bring information to the attention of the Commission.\158\ For these 
same reasons, the Commission has decided not to deem lack of 
cooperation with an internal investigation a basis to render a person 
ineligible for an award.
---------------------------------------------------------------------------

    \158\ See letter from POGO.
---------------------------------------------------------------------------

    Nonetheless, the Commission recognizes that internal whistleblower, 
compliance and legal systems can contribute to detecting, deterring and 
preventing misconduct including violations of the CEA, goals that are 
consistent with the Commission's mission. Many entities properly 
encourage their employees to use such functions to report misconduct 
internally. By establishing financial incentives to report misconduct 
to the Commission, the Commission does not want to discourage employees 
from making internal reports when appropriate. The Commission 
recognizes that internal compliance and reporting systems ought to 
contribute to the goal of detecting, deterring and preventing 
misconduct, including CEA violations, and does not want to discourage 
employees from using such systems when they are in place.
    The Commission is striking an appropriate balance between the 
interests of maintaining strong internal reporting functions and the 
interests of the Commission's whistleblower program by tailoring the 
Final Rules in two respects. First, the Final Rules state that the 
Commission will consider the whistleblower's decision to report 
internally as a potentially positive factor in the Commission's award 
determination. Whether the decision to report internally increases the 
amount of the award will depend on the facts and circumstances. If the 
whistleblower chooses not to report internally, his award determination 
will be unaffected by that decision. Indeed, the Commission recognizes 
that a whistleblower may reasonably believe that reporting internally 
could risk retaliation or be counterproductive to preventing and/or 
remedying misconduct; but such a whistleblower should be no less 
incentivized to report to the Commission. Second, if a whistleblower 
reports information internally within an entity, according to the Final 
Rules the Commission will attribute to the whistleblower all 
information later reported by the entity to the Commission, including 
any additional information reported by the entity that was not part of 
the whistleblower's internal report.
    In response to this possibility, the Commission has tailored the 
Final Rules to provide whistleblowers who are otherwise pre-disposed to 
report internally, but who may also be affected by financial 
incentives, with additional economic incentives to continue to report 
internally. Specifically, after considering the comments received, the 
Commission has decided to revise and adopt the Proposed Rules to 
incentivize internal reporting, as discussed throughout this Release, 
specifically by providing whistleblowers who report internally with: 
(a) Positive weight in Commission award determinations; \159\ and (b) 
the benefit of the employer's

[[Page 53195]]

investigation.\160\ The Commission has decided not to deem ineligible a 
person for an award who does not cooperate with an internal 
investigation because the Commission has previously indicated that the 
Commission will take into consideration the degree to which a 
whistleblower took steps to prevent the violations from occurring, or 
continuing, when making an award determination.\161\
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    \159\ See Rule 165.9 Criteria for determining amount of award.
    \160\ See Rule 165.2(i) (``Information that led to successful 
enforcement'').
    \161\ See 75 FR at 75739.
---------------------------------------------------------------------------

    Commission staff has consulted with SEC staff regarding drafting of 
rules to implement the Commission's and SEC's respective Dodd-Frank Act 
whistleblower provisions, Section 748 (Commodity Whistleblower 
Incentives and Protection) and Section 922 (Whistleblower Protection). 
Several commenters noted that some companies may be subject to both 
whistleblower programs, and to reduce uncertainty and cost to these 
companies the respective whistleblower programs should be as uniform as 
possible.\162\ Wherever appropriate and consistent with the underlying 
statutory mandate in Section 23 of the CEA, the Commission has 
endeavored to harmonize its whistleblower rules with those of the SEC.
---------------------------------------------------------------------------

    \162\ See letters from NSCP at 2, ABA at 4, ICI at 1, SIFMA/FIA 
at 14.
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    However, the CFTC's Proposed Rules and SEC's Final Rules are 
similar but not identical due to a number of factors, including the 
following: (1) While similar, the provisions of the Sections 748 and 
922 are not identical; (2) certain terms in the SEC's statutory 
provision are either defined terms under the Securities Exchange Act of 
1934 or are terms of art under SEC case law, and there is no comparable 
CFTC precedent; (3) unlike the CFTC, the SEC has an existing 
whistleblower program for insider trading violations that was 
established under Section 21A(e) of the Securities Exchange Act of 
1934, 15 U.S.C. 78u-1(e); and (4) also unlike the CFTC, the SEC has 
existing obligations for persons to report violations to it (see, e.g., 
Section 10A of the Securities Exchange Act of 1934, 15 U.S.C. 78j-1 
(establishing requirements and procedure for a ``registered public 
accounting firm [that] detects or otherwise becomes aware of 
information indicating that an illegal act (whether or not perceived to 
have a material effect on the financial statements of the issuer) has 
or may have occurred'' to report such illegal act to management, board 
of directors, and the SEC) (alteration in original)).

III. Administrative Compliance

A. Cost-Benefit Considerations

    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its action before promulgating a regulation.\163\ 
Furthermore, such costs and benefits shall be evaluated in light of the 
following five considerations: (1) Protection of market participants 
and the public; (2) efficiency, competitiveness, and financial 
integrity of futures markets; (3) price discovery; (4) sound risk 
management practices; and (5) other public interest considerations. The 
Commission may in its discretion give greater weight to any one of the 
five enumerated areas depending upon the nature of the regulatory 
action.\164\
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    \163\ 7 U.S.C. 19(a).
    \164\ See, e.g., Fisherman's Doc Co-op., Inc v. Brown, 75 F.3d 
164 (4th Cir. 1996); Center for Auto Safety v. Peck, 751 F.2d 1336 
(D.C. Cir. 1985) (noting that an agency has discretion to weigh 
factors in undertaking cost-benefit analysis).
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    The Final Rules implement Section 23 of the CEA which requires the 
Commission, subject to certain requirements, to pay eligible 
whistleblowers a monetary award for voluntarily providing original 
information about violations of the CEA leading to a successful 
enforcement action. The Final Rules define the key terms, specify 
procedures for the submission and handling of original information, and 
enumerate procedures for consideration and payment of awards including 
appeals.
    Many of the Final Rules are mandated by section 748 of the Dodd-
Frank Act, leaving the Commission with little or no discretion to 
consider any alternatives where the statute prescribes particular 
procedures. Therefore, the Commission's final regulations adhere 
closely to the enabling language of the statute. For example, the final 
regulations implement, among other provisions, the statutory 
requirement that, if all preconditions are met, the Commission must pay 
an award to one or more whistleblowers in an aggregate amount of not 
less than 10 percent and not more than 30 percent of what has been 
collected of the monetary sanctions imposed in the Commission's action 
or related actions. Another example is the statutory requirement that 
anonymous whistleblowers must be represented by counsel when making a 
claim for a whistleblower award. To the extent that the Commission was 
left with discretion under section 748 of the Dodd-Frank Act, the 
Commission exercised that discretion with consideration of minimizing 
the potential costs while maintaining fidelity to the Congressional 
intent behind section 748 of the Dodd-Frank Act.
    The Commission has considered the costs and benefits of its 
regulations as part of the deliberative rulemaking process, and 
discussed them throughout the preamble. The Commission generally views 
the costs-benefits section of this Final Rulemaking to be an extension 
of that discussion. Paperwork Reduction Act related costs are included 
in the overall compliance costs considered with respect to Final Rule 
165.
    The comments that the Commission received regarding costs and 
benefits can be categorized under three major topics. Broadly speaking, 
the comments assert that (1) Employers and the CFTC will face increased 
costs because the Final Rule does not contain a requirement that a 
whistleblower first report an alleged CEA violation internally to the 
entity committing the alleged offense; (2) firms regulated by both the 
CFTC and the SEC will face increased costs due to the lack of 
regulatory harmonization between the CFTC and SEC whistleblower rules; 
and (3) potential whistleblowers will face costs excessive procedural 
burdens under the rules.
    A discussion of the comments on each topic and the Commission's 
response to those comments in light of the five public interest 
considerations follows.
1. Costs to Employers and the Commission Associated With the Lack of an 
Internal Reporting Requirement
    Three commenters \165\ commented specifically on the cost-benefit 
section of the Proposed Rules, stating that the cost-benefit section of 
the Proposed Rules only described costs to whistleblowers and did not 
describe costs to employers and the Commission that would arise under 
the Proposed Rules. One commenter stated that the anti-retaliation 
provision would lead to false or spurious whistleblower claims and that 
firms and the Commission would incur significant costs to evaluate 
these claims.\166\ Another commenter stated that two types of costs to 
employers would be incurred by not requiring whistleblowers to report 
to the firm's compliance department.\167\ According to that commenter, 
the costs of responding to Commission investigations exceed the costs 
of internal investigations. In addition, the

[[Page 53196]]

commenter stated that the lack of an internal reporting requirement 
would give rise to meritless complaints which would be costly to 
investigate. Further, though not specifically enumerated in its 
analysis of the cost-benefit section, that commenter stated that the 
proposed rule would likely result in slower identification, 
investigation, and potentially remediation by employers of alleged 
violations. Another commenter also stated that the lack of an internal 
reporting requirement would increase employer costs.\168\ The common 
theme in the above cost-benefit comments, as well as other more general 
cost comments submitted by several commenters \169\ focused on the 
potential damage to existing compliance systems without an internal 
reporting requirement. While not specifically commenting on the cost-
benefit section of the Proposed Rules, several commenters noted 
increased legal, investigative, and remedial costs to firms and 
increased costs to and use of resources by the Commission.\170\ One of 
the commenters expanded upon potential costs and negative consequences 
of the lack of a rule requiring, at a minimum, concurrent reporting to 
the firm. This commenter stated that ``a failure or delay in the 
communication of whistleblower reports of potential violations to these 
entities may reduce the entity's ability of their independent 
accountants to rely on the efficacy of an entity's internal control 
systems and could adversely impact the entity's and independent 
accountants' evaluations of internal control over financial 
reporting.\171\ It could have significant negative consequences for 
investors, reporting entities, and the audit process alike.'' These 
concerns are addressed below in the context of the above mentioned 
Section 15(a) considerations.
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    \165\ See letters from ABA, EEI, and U.S. Chamber of Commerce.
    \166\ See letter from ABA.
    \167\ See letter from EEI.
    \168\ See letter from U.S. Chamber of Commerce.
    \169\ See letters from SIFMA/FIA, EEAC, Working Group, AICPA, 
and NSCP.
    \170\ See letters from NSCP, Working Group, EEAC and AICPA.
    \171\ See letter from AICPA.
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Considerations of Protection of Market Participants and the Public
    The Commission believes that the Final Rules implement the 
statutory mandate and serve the purpose of protecting market 
participants and the public. The statute does not require 
whistleblowers to report violations through an entity's internal 
reporting process. To impose such a requirement may be inconsistent 
with Congressional intent in establishing the whistleblower program. 
Specifically, the Commission believes that this potential alternative 
would impose substantial costs and burdens on whistleblowers, victims 
of CEA violations, market participants, and the public. Such a rule 
could prevent or deter whistleblowers from making legitimate complaints 
out of fear of reprisal from their employer. Consequently, some 
violations may never be brought to the attention of the Commission, 
which would prevent the Commission from bringing actions against 
violators of the CEA. A rule requiring internal reporting could 
therefore deprive victims of restitution and could deprive market 
participants and the public of the benefits associated with detection, 
prosecution, and deterrence of such violations of the CEA. Thus, the 
Commission believes that the overall cost of an internal reporting 
requirement and the attendant risks of undetected violations are 
greater than the cost to firms subject to a potential whistleblower 
referral. Indeed, if Congress thought such a requirement was necessary, 
Congress could have incorporated such a provision in Section 748 of the 
Dodd Frank Act. Regarding the comment that the anti-retaliation 
provision of Section 748 would lead to more meritless complaints, the 
Commission notes that Section 748 of the Dodd-Frank Act prohibits 
retaliation against whistleblowers for any lawful act done by the 
whistleblower. Because the Final Rules implement this statutory 
mandate, the commenter did not provide any basis for claiming that the 
language of the proposed rule will cause such consequences under the 
statutory provision.
    The whistleblower program is distinct from and does not undermine 
or require any changes to any entity's existing compliance systems. 
However, the Commission is cognizant that firms may be incentivized to 
re-evaluate and adjust their existing internal compliance systems to 
encourage employees to report internally and forestall the occurrence 
of CEA violations.
    While the Commission is not persuaded of the need to adopt a rule 
to require internal reporting, after consideration of the comments on 
internal reporting, the Commission has included incentives for internal 
reporting in Final Rule 165.2(i) and 165.9. The Commission has 
determined that the risk of meritless complaints is outweighed by the 
benefits of a Final Rule that enables whistleblowers to make referrals 
without fear of retaliation. Regarding the comment that the lack of an 
internal reporting requirement would likely result in slower 
identification, investigation, and potential remediation of violations 
by firms, the Commission will evaluate whistleblower referrals promptly 
and take action as necessary and appropriate. The comment does not 
illustrate how and to what extent the lack of an internal reporting 
requirement undermines existing compliance protocols. The whistleblower 
program, by definition, is an external reporting regime. To the extent 
there is a delay in the entity learning of violations and taking 
corrective measures in the absence of internal reporting, the cost of 
such a delay is outweighed by the risks of discouraging meritorious 
claims.
Considerations of Efficiency, Competitiveness, and Financial Integrity 
of Futures Markets, Price Discovery, and Sound Risk Management 
Practices
    The Commission has determined that its Final Rules implement 
Congressional intent. After consideration and evaluation of the public 
comments, and to the extent the Commission declines to impose an 
additional internal reporting requirement upon whistleblowers beyond 
the statutory mandate under section 748 of the Dodd-Frank Act, the 
Commission has determined that the Final Rules will further the goals 
of each of these three considerations under Section 15(a) of the CEA. 
For example, to the extent whistleblowers are incentivized to refer 
cases of market manipulation and disruptive trading practices, the 
efficiency, competitiveness and financial integrity of futures markets, 
the price discovery process, and effective risk management will be 
enhanced by improved detection and enforcement of such violations. The 
Commission is not persuaded by, nor was there any reliable evidence to 
support, assertions that the Commission and affected parties will bear 
excess costs due to a high volume of meritless claims in the absence of 
an internal reporting requirement. Congress placed a procedural 
safeguard in the statute by advising whistleblowers that they can be 
criminally prosecuted for making false statements to the Commission 
under 18 U.S.C. 1001.\172\ These and other provisions will reduce the 
risk of meritless referrals. Moreover, whistleblowers are incentivized 
to provide referrals only if they believe those referrals have merit 
since they can only get an award if their referrals lead

[[Page 53197]]

to a successful enforcement action (see Rules 165.2(i) and 165.9.).
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    \172\ Such false statements also could be a violation of 
Sections 6(c)(2) and 9(a)(3) of the CEA, 7 U.S.C. 9, 13(a)(3), 15.
---------------------------------------------------------------------------

2. Costs to Firms Regulated by Both the Commission and SEC
    One commenter stated that the lack of regulatory harmonization 
between the Commission and SEC whistleblower rules would ``impose costs 
and lead to the potential for confusion for dually-regulated firms 
without any corresponding benefit.'' \173\ Another commenter stated 
that Commission-SEC harmonization would benefit ``dually registered 
firms [and] the financial industry generally.'' \174\ In addition, 
another commenter stated that the Proposed Rules are ``inconsistent 
with the framework of compliance processes established under Sarbanes-
Oxley and other federal laws and regulations.'' This commenter further 
stated the importance of harmonizing the implementation of the Dodd-
Frank Act with existing processes.\175\ We address each of these 
concerns below in the context of the above mentioned Section 15(a) 
considerations.
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    \173\ See letter from SIFMA/FIA.
    \174\ See letter from NSCP.
    \175\ See letter from EEI.
---------------------------------------------------------------------------

    The Commission has considered the public comments calling for 
harmonization with SEC whistleblower rules. The Dodd-Frank Act does not 
require harmonization between the Commission and the SEC with respect 
to their respective whistleblower provisions. Moreover, this is not a 
joint Commission-SEC rulemaking. Having considered the comments and 
consulted with SEC staff, the Commission has revised several 
whistleblower rules, as discussed in detail under Section II.S. above, 
with those of the SEC's whistleblower rules to enhance regulatory 
certainty for market participants subject to both whistleblower 
programs, which furthers the public interest.\176\
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    \176\ Similar to the SEC, the Commission is not persuaded by the 
commenter's suggestion that the Proposed Rules were inconsistent 
with the Sarbanes-Oxley Act of 2002. See 76 FR at 34326 n.230 (the 
SEC concluded that the mandates of Section 301 of the Sarbanes-Oxley 
Act of 2002 and Section 21F of the Securities Exchange Act of 1934 
were different and declined to follow the commenters' suggestion 
that the SEC impose a ``requirement that employees of listed 
companies also utilize internal audit committee or other complaint 
procedures.'').
---------------------------------------------------------------------------

    With respect to costs, as explained in various places throughout 
this release, the remaining differences between the SEC and Commission 
rules are due to differences between the statutes governing the two 
agencies and their respective regulatory objectives. Consequently, 
costs associated with these remaining differences are not likely to be 
significant under the five broad areas as enumerated in Section 15(a) 
of the CEA.
3. Costs to Whistleblowers
    A commenter stated that the proposed claims process is burdensome 
and backwards. Specifically, this commenter noted that it is 
problematic to require that a whistleblower notify the Commission of a 
claim for reward upon the successful completion of an enforcement 
action. The commenter also recommended that the Commission notify the 
individual about a reward after an administrative or judicial action 
has been taken.\177\ Another commenter shared similar concerns and 
stated that the Commission should establish better policies for 
communicating with whistleblowers throughout the application process to 
lessen whistleblowers' burden to explain the importance of their 
disclosures.\178\ We address each of these concerns below in the 
context of Section 15(a) considerations.
---------------------------------------------------------------------------

    \177\ See letter from TAF.
    \178\ See letter from POGO.
---------------------------------------------------------------------------

Protection of Market Participants and the Public Considerations of 
Efficiency, Competitiveness, and Financial Integrity of Futures 
Markets, Price Discovery, and Sound Risk Management Practices
    The Final Rules implement procedures mandated by section 748 of the 
Dodd-Frank Act for whistleblowers to report CEA violations. The 
Commission is aware of the concerns expressed by Commenters and intends 
to implement policies and procedures for communicating with 
whistleblowers that will address these concerns. Specifically, 
following the successful completion of a covered action, the Commission 
will publish a Notice of Covered Action on the Commission web site. 
Whistleblowers will be able to utilize the Commission's Email 
Subscriptions service \179\ to receive an email message when their 
actions are resolved successfully. The Final Rules also reduce the 
number of forms that a whistleblower must submit to the Commission from 
three to two.
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    \179\ See https://service.govdelivery.com/service/multi_subscribe.html?code=USCFTC.
---------------------------------------------------------------------------

    The Commission has considered the paperwork requirements in light 
of all five of the considerations in Section 15(a) of the CEA. With 
respect to benefits, the procedural requirements under the Final Rule 
will enable the Commission to effectively implement and administer the 
mandated whistleblower program in furtherance of these considerations 
without imposing excessive costs or burdens upon whistleblowers.

B. Anti-Trust Considerations

    Section 15(b) of the CEA \180\ requires the Commission to consider 
the public interests protected by the antitrust laws and to take 
actions involving the least anti-competitive means of achieving the 
objectives of the CEA. The Commission believes that the Proposed Rules 
will have a positive effect on competition by improving the fairness 
and efficiency of the markets through improving detection and 
remediation of potential violations of the CEA and Commission 
regulations.
---------------------------------------------------------------------------

    \180\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

IV. Paperwork Reduction Act

    Certain provisions of the Proposed Rules contained ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act (``PRA'') of 1995.\181\ An agency may not sponsor, 
conduct, or require a response to an information collection unless a 
currently valid Office of Management and Budget (``OMB'') control 
number is displayed. The Commission submitted proposed collections of 
information to OMB for review in accordance with the PRA.\182\ The 
titles for the collections of information were: (1) Form TCR (Tip, 
Complaint or Referral); (2) Form WB-DEC (Declaration Concerning 
Original Information Provided Pursuant to Section 23 of the Commodity 
Exchange Act); and (3) Form WB-APP (Application for Award for Original 
Information Provided Pursuant to Section 23 of the Commodity Exchange 
Act). These three forms were proposed to implement Section 23 of the 
CEA. The proposed forms allowed a whistleblower to provide information 
to the Commission and its staff regarding: (1) Potential violations of 
the CEA; and (2) the whistleblower's eligibility for and entitlement to 
an award.
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    \181\ 44 U.S.C. 3501 et seq.
    \182\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
---------------------------------------------------------------------------

    The Commission did not receive any comments that directly addressed 
its PRA analysis or its burden estimates. In comments on the Proposing 
Release, a commenter suggested that the three-form process proposed for 
obtaining information from whistleblowers was burdensome.\183\ As the 
Commission discusses in connection with Rule 165.3, its Final Rules 
require largely the same information to be collected, but in response 
to comments the Commission has combined the information collection

[[Page 53198]]

into only two forms--Form TCR, which incorporates several questions 
previously posed on Proposed Form WB-DEC, and Form WB-APP--to simplify 
the process for whistleblowers.
---------------------------------------------------------------------------

    \183\ See letter from NWC.
---------------------------------------------------------------------------

A. Summary of Collection of Information

    Form TCR, submitted pursuant to Rule 165.3, requests the following 
information:
    1. Background information regarding each complainant submitting the 
TCR, including the person's name and contact information. The 
Commission has added a section for the identification of additional 
complainants;
    2. If the complainant is represented by an attorney, the name and 
contact information for the complainant's attorney;
    3. Information regarding the individual or entity that is the 
subject of the tip or complaint, including contact information;
    4. Information regarding the tip or complaint, including: the date 
of the alleged violation; the nature of the complaint; the name and 
type of financial product or investment, if relevant; whether the 
complainant or counsel has had prior contact with Commission staff and 
with whom; whether information has been communicated to another agency 
and, if so, details about that communication, including the name and 
contact information for the point of contact at such agency, if 
available; whether the complaint relates to an entity of which the 
complainant is or was an officer, director, counsel, employee, 
consultant or contractor; whether the complainant has reported this 
violation to his or her supervisor, compliance office, whistleblower 
hotline, ombudsman, or any other available mechanism at the entity for 
reporting violations and the date of such action was taken;
    5. A description of the facts pertinent to the alleged violation, 
including an explanation of why the complainant believes the acts 
described constitute a violation of the CEA;
    6. A description of all supporting materials in the complainant's 
possession and the availability and location of any additional 
supporting materials not in the complainant's possession;
    7. An explanation of how the person submitting the complaint 
obtained the information and, if any information was obtained from an 
attorney or in a communication where an attorney was present, the 
identification of any such information;
    8. A description of any information obtained from a public source 
and a description of such source;
    9. A description of any documents or other information in the 
complainant's submission that the complainant believes could reasonably 
be expected to reveal his or her identity, including an explanation of 
the basis for the complainant's belief that his or her identity would 
be revealed if the documents were disclosed to a third party; and
    10. Any additional information the complainant believes may be 
relevant.
    Also included in Form TCR are several items previously included in 
proposed Form WB-DEC, which was required to be submitted pursuant to 
Proposed Rule 165.3. First, there are several questions that require a 
complainant to provide eligibility-related information by checking a 
series of ``yes/no'' answers. Second, the form contains a declaration, 
signed under penalty of perjury, that the information provided to the 
Commission pursuant to Rule 165.3 is true, correct and complete to the 
best of the person's knowledge, information and belief. Third, there is 
a counsel certification, which is required to be executed in instances 
where a complainant makes an anonymous submission pursuant to the 
whistleblower program and is represented by an attorney. This statement 
certifies that the attorney has verified the complainant's identity, 
and has reviewed the complainant's completed and signed Form TCR for 
completeness and accuracy, and that the information contained therein 
is true, correct and complete to the best of the attorney's knowledge, 
information and belief. The certification also contains new statements, 
which were not included in proposed Form WB-DEC, that: (i) The attorney 
has obtained the complainant's non-waivable consent to provide the 
Commission with the original completed and signed Form TCR in the event 
that the Commission requests it due to concerns that the form may 
contain false, fictitious or fraudulent statements or representations 
that were knowingly or willfully made by the complainant; and (ii) the 
attorney consents to be legally obligated to provide the signed Form 
TCR within seven (7) calendar days of receiving such request from the 
Commission.
    Form WB-APP, submitted pursuant to Rule 165.7, requires the 
following information:
    1. The applicant's name, address and contact information;
    2. The applicant's social security number, if any;
    3. If the person is represented by an attorney, the name and 
contact information for the attorney;
    4. Details concerning the tip or complaint, including (a) The 
manner in which the information was submitted to the Commission, (b) 
the subject of the tip, complaint or referral, (c) the Form TCR number, 
and (d) the date the Form TCR was submitted to the Commission;
    5. Information concerning the Notice of Covered Action to which the 
claim relates, including (a) The date of the Notice, (b) the Notice 
number, and (c) the case name and number;
    6. For related actions, (a) The name and contact information for 
the agency or organization to which the person provided the original 
information, (b) the date the person provided this information, (c) the 
date the agency or organization filed the related action, (d) the case 
name and number of the related action, and (e) the name and contact 
information for the point of contact at the agency or organization, if 
known;
    7. A series of questions concerning the person's eligibility to 
receive an award as described in the Form TCR discussion above;
    8. An optional explanation of the reasons why that the person 
believes he is entitled to an award in connection with his submission 
of information to the Commission, or to another agency in a related 
action, including any additional information and supporting documents 
that may be relevant in light of the criteria for determining the 
amount of an award set forth in Rule 165.9, and any supporting 
documents; and
    9. A declaration, signed under penalty of perjury, that the 
information provided in Form WB-APP is true, correct and complete to 
the best of the person's knowledge, information and belief.

B. Use of Information

    The collection of information on Forms TCR and WB-APP will be used 
to permit the Commission and its staff to collect information from 
whistleblowers regarding alleged violations of the CEA and the rules 
and regulations thereunder and to determine claims for whistleblower 
awards.

C. Respondents

    The likely respondents to Form TCR will be individuals who wish to 
provide information relating to possible violations of the CEA and the 
rules and regulations thereunder, and who wish to be eligible for 
whistleblower awards. The likely respondents to Form WB-APP will be 
individuals who have provided the Commission, or another

[[Page 53199]]

agency in a related action, with information relating to a possible 
violation of the CEA and who believe they are entitled to an award.

D. Total Annual Reporting and Recordkeeping Burden

1. Form TCR
    The Commission estimates that it will receive submissions of 
approximately 3,800 tips, complaints and referrals each year.\184\ Of 
those 3,800 submissions, the Commission estimates that it will receive 
approximately 100 whistleblower tips, complaints and referrals on Form 
TCR each year.\185\ Each respondent would submit only one Form TCR and 
would not have a recurring obligation to file additional Forms TCR. In 
the Proposing Release, the Commission proposed that a whistleblower 
would have to complete two forms, proposed Form TCR and proposed Form 
WB-DEC, to be eligible for an award. In the Final Rules, the Commission 
has eliminated Form WB-DEC and added the eligibility questions from 
that proposed form to Form TCR.
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    \184\ This number is a staff estimate based upon the volume of 
tips, complaints or referrals received by the Commission in recent 
years.
    \185\ This number is a staff estimate based on the volume of 
whistleblower tips, complaints and referrals that the Commission has 
received in the first eleven months after the enactment of the Dodd-
Frank Act (less than two dozen) and an expectation that this volume 
will increase as the public becomes more aware of the Commission's 
whistleblower program.
---------------------------------------------------------------------------

    The Commission estimates that it will take a whistleblower, on 
average, two and one-half hours to complete the Form TCR, which 
includes the questions that had previously been included in proposed 
Form WB-DEC. The completion time will depend largely on the complexity 
of the alleged violation and the amount of information the 
whistleblower possesses in support of the allegations. As a result, the 
Commission estimates that the annual PRA burden of Form TCR is 250 
hours.
2. Form WB-APP
    Each whistleblower who believes that he is entitled to an award 
because he provided original information to the Commission that led to 
successful enforcement of a covered judicial or administrative action, 
or a related action, is required to submit a Form WB-APP to be 
considered for an award. The Commission estimates that it will receive 
approximately nine Forms WB-APP each year.\186\ Finally, the Commission 
estimates that it will take a whistleblower, on average, ten hours to 
complete Form WB-APP. The completion time will depend largely on the 
complexity of the alleged violation and the amount of information the 
whistleblower possesses in support of his application for an award. 
This estimate assumes that most whistleblowers will elect to complete 
optional Section G (Entitlement to Award) of Form WB-APP. As a result, 
the Commission estimates that the annual PRA burden of Form WB-APP is 
90 hours.
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    \186\ This number is a staff estimate based on two expectations: 
First, that the Commission will receive Forms WB-APP in 
approximately 15 percent of cases in which it posts a Notice of 
Covered Action because the Commission expects that the Commission 
will continue to bring a substantial number of enforcement cases 
that are not based on whistleblower information; and second, that 
the Commission will receive approximately three Forms WB-APP in each 
of those cases. Because this is a new program, the staff does not 
have prior relevant data on which it can base these estimates.
---------------------------------------------------------------------------

3. Involvement and Cost of Attorneys
    Under the Proposed Rules, an anonymous whistleblower is required 
(when filing a claim for an award), and a whistleblower whose identity 
is known may elect to retain counsel to represent the whistleblower in 
the whistleblower program. The Commission expects that, in most of 
those instances, the whistleblower's counsel will complete, or assist 
in the completion, of some or all of the required forms on behalf of 
the whistleblower. The Commission also expects that in the vast 
majority of cases in which a whistleblower is represented by counsel, 
the whistleblower will enter into a contingency fee arrangement with 
counsel, providing that counsel will be paid for the representation 
through a fixed percentage of any recovery by the whistleblower under 
the program. Thus, most whistleblowers will not incur any direct, 
quantifiable expenses for attorneys' fees for the completion of the 
required forms.
    The Commission anticipates that a small number of whistleblowers 
(no more than five percent) will enter into hourly fee arrangements 
with counsel.\187\ In those cases, a whistleblower will incur direct 
expenses for attorneys' fees for the completion of the required forms. 
To estimate those expenses, the Commission makes the following 
assumptions:
---------------------------------------------------------------------------

    \187\ This estimate is based, in part, on the Commission's 
belief that most whistleblowers likely will not retain counsel to 
assist them in preparing the forms.
---------------------------------------------------------------------------

    1. The Commission will receive approximately 100 Forms TCR, and 
nine Forms WB-APP annually; \188\
---------------------------------------------------------------------------

    \188\ The basis for these assumed amounts are explained in Parts 
IV.D.1. and I.V.D.2. above.
---------------------------------------------------------------------------

    2. Whistleblowers will pay hourly fees to counsel for the 
submission of approximately five Forms TCR and one Form WB-APP 
annually; \189\
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    \189\ These amounts are based on the assumption, as noted above, 
that no more than five percent of all whistleblowers will be 
represented by counsel pursuant to an hourly fee arrangement.
---------------------------------------------------------------------------

    3. Counsel retained by whistleblowers pursuant to an hourly fee 
arrangement will charge on average $400 per hour; \190\ and
---------------------------------------------------------------------------

    \190\ The Commission uses this hourly rate for estimating the 
billing rates of lawyers for purposes of other rules. Absent 
historical data for the Commission to rely upon in connection with 
the whistleblower program, the Commission believes that this billing 
rate estimate is appropriate, recognizing that some attorneys 
representing whistleblowers may charge different average hourly 
rates.
---------------------------------------------------------------------------

    4. Counsel will bill on average: (a) 2.5 hours to complete a Form 
TCR, and (b) 10 hours to complete a Form WB-APP.
Based on those assumptions, the Commission estimates that each year 
whistleblowers will incur the following total amounts of attorneys' 
fees for completion of the whistleblower program forms: (i) $5,000 for 
the completion of Forms TCR; and (ii) $4,000 for the completion of Form 
WB-APP.

E. Mandatory Collection of Information

    A whistleblower would be required to complete a Form TCR, or submit 
his information electronically, and a Form WB-APP, or submit his 
information electronically, to qualify for a whistleblower award.

F. Confidentiality

    As explained above, the statute provides that the Commission must 
maintain the confidentiality of the identity of each whistleblower, 
subject to certain exceptions. Section 23(h)(2) of the CEA states that, 
except as expressly provided:

    [T]he Commission, and any officer or employee of the Commission, 
shall not disclose any information, including information provided 
by a whistleblower to the Commission, which could reasonably be 
expected to reveal the identity of a whistleblower, except in 
accordance with the provisions of section 552a of title 5, United 
States Code, unless and until required to be disclosed to a 
defendant or respondent in connection with a public proceeding 
instituted by the Commission [or certain specific entities listed in 
paragraph (C) of Section 23(h)(2)].

    Section 23(h)(2) also allows the Commission to share information 
received from whistleblowers with certain domestic and foreign 
regulatory and law enforcement agencies. However, the statute requires 
the domestic entities to maintain such

[[Page 53200]]

information as confidential, and requires foreign entities to maintain 
such information in accordance with such assurances of confidentiality 
as the Commission deems appropriate.
    In addition, Section 23(d)(2) provides that a whistleblower may 
submit information to the Commission anonymously, so long as the 
whistleblower is represented by counsel when the time comes for the 
whistleblower to make a claim for an award. However, the statute also 
provides that a whistleblower must disclose his or her identity prior 
to receiving payment of an award.

V. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act \191\ requires that agencies 
consider whether the rules they propose will have a significant 
economic impact on a substantial number of small entities and, if so, 
provide a regulatory flexibility analysis respecting the impact.\192\ 
In the Commission's Proposing Release, the Chairman, on behalf of the 
Commission, certified that a regulatory flexibility analysis is not 
required because the persons that would be subject to the rules--
individuals--are not ``small entities'' for purposes of the Regulatory 
Flexibility Act and the rules therefore would not have a significant 
economic impact on a substantial number of small entities. The 
Commission received no comments regarding this conclusion.
---------------------------------------------------------------------------

    \191\ 5 U.S.C. 601, et seq.
    \192\ Id.
---------------------------------------------------------------------------

VI. Statutory Authority

    The Commission is adopting the rules and forms contained in this 
document under the authority contained in Sections 2, 5, 8a(5) and 23 
of the Commodity Exchange Act.

List of Subjects in 17 CFR Part 165

    Whistleblowing.

    In consideration of the foregoing and pursuant to the authority 
contained in the Commodity Exchange Act, in particular, Sections 2, 5, 
8a(5) and 23 thereof, the Commodity Futures Trading Commission adds a 
new 17 CFR Part 165 as set forth below:

PART 165--WHISTLEBLOWER RULES

Sec.
165.1 General.
165.2 Definitions.
165.3 Procedures for submitting original information.
165.4 Confidentiality.
165.5 Prerequisites to the consideration of an award.
165.6 Whistleblowers ineligible for an award.
165.7 Procedures for award applications and Commission award 
determinations.
165.8 Amount of award.
165.9 Criteria for determining amount of award.
165.10 Contents of record for award determination.
165.11 Awards based upon related actions.
165.12 Payment of awards from the Fund, financing of customer 
education initiatives, and deposits and credits to the Fund.
165.13 Appeals.
165.14 Procedures applicable to the payment of awards.
165.15 Delegations of authority.
165.16 No immunity.
165.17 Awards to whistleblowers who engage in culpable conduct.
165.18 Staff communications with whistleblowers from represented 
entities.
165.19 Nonenforceability of certain provisions waiving rights and 
remedies or requiring arbitration of disputes.
Appendix A to Part 165--Guidance With Respect to the Protection of 
Whistleblowers Against Retaliation

    Authority:  7 U.S.C. 2, 5, 12a(5) and 26, as amended by Title 
VII of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Pub. L. 111-203, 124 Stat. 1376 (July 16, 2010).

Sec.  165.1  General.

    Section 23 of the Commodity Exchange Act, entitled ``Commodity 
Whistleblower Incentives and Protection,'' requires the Commission to 
pay awards, subject to certain limitations and conditions, to 
whistleblowers who voluntarily provide the Commission with original 
information about violations of the Commodity Exchange Act. This part 
165 describes the whistleblower program that the Commission intends to 
establish to implement the provisions of Section 23, and explains the 
procedures the whistleblower will need to follow in order to be 
eligible for an award. Whistleblowers should read these procedures 
carefully, because the failure to take certain required steps within 
the time frames described in this part may result in disqualification 
from receiving an award. Unless expressly provided for in this part, no 
person is authorized to make any offer or promise, or otherwise to bind 
the Commission with respect to the payment of any award or the amount 
thereof.

Sec.  165.2  Definitions.

    As used in this part:
    (a) Action. The term ``action'' generally means a single captioned 
judicial or administrative proceeding. Notwithstanding the foregoing:
    (1) For purposes of making an award under Sec.  165.7, the 
Commission will treat as a Commission action two or more administrative 
or judicial proceedings brought by the Commission if these proceedings 
arise out of the same nucleus of operative facts; or
    (2) For purposes of determining the payment on an award under Sec.  
165.14, the Commission will deem as part of the Commission action upon 
which the award was based any subsequent Commission proceeding that, 
individually, results in a monetary sanction of $1,000,000 or less, and 
that arises out of the same nucleus of operative facts.
    (b) Aggregate amount. The phrase ``aggregate amount'' means the 
total amount of an award granted to one or more whistleblowers pursuant 
to Sec.  165.8.
    (c) Analysis. The term ``analysis'' means the whistleblower's 
examination and evaluation of information that may be generally 
available, but which reveals information that is not generally known or 
available to the public.
    (d) Collected by the Commission. The phrase ``collected by the 
Commission'' refers to any funds received, and confirmed by the U.S. 
Department of the Treasury, in satisfaction of part or all of a civil 
monetary penalty, disgorgement obligation, or fine owed to the 
Commission.
    (e) Covered judicial or administrative action. The phrase ``covered 
judicial or administrative action'' means any judicial or 
administrative action brought by the Commission under the Commodity 
Exchange Act whose successful resolution results in monetary sanctions 
exceeding $1,000,000.
    (f) Fund. The term ``Fund'' means the Commodity Futures Trading 
Commission Customer Protection Fund.
    (g) Independent knowledge. The phrase ``independent knowledge'' 
means factual information in the whistleblower's possession that is not 
generally known or available to the public. The whistleblower may gain 
independent knowledge from the whistleblower's experiences, 
communications and observations in the whistleblower's personal 
business or social interactions. The Commission will not consider the 
whistleblower's information to be derived from the whistleblower's 
independent knowledge if the whistleblower obtained the information:
    (1) From sources generally available to the public such as 
corporate filings and the media, including the Internet;
    (2) Through a communication that was subject to the attorney-client 
privilege, unless the disclosure is

[[Page 53201]]

otherwise permitted by the applicable federal or state attorney conduct 
rules;
    (3) In connection with the legal representation of a client on 
whose behalf the whistleblower, or the whistleblower's employer or 
firm, have been providing services, and the whistleblower seek to use 
the information to make a whistleblower submission for the 
whistleblower's own benefit, unless disclosure is authorized by the 
applicable federal or state attorney conduct rules;
    (4) Because the whistleblower was an officer, director, trustee, or 
partner of an entity and another person informed the whistleblower of 
allegations of misconduct, or the whistleblower learned the information 
in connection with the entity's processes for identifying, reporting, 
and addressing possible violations of law;
    (5) Because the whistleblower was an employee whose principal 
duties involved compliance or internal audit responsibilities; or
    (6) By a means or in a manner that is determined by a United States 
court to violate applicable Federal or state criminal law.
    (7) Exceptions. Paragraphs (g)(4) and (5) of this section shall not 
apply if:
    (i) The whistleblower has a reasonable basis to believe that 
disclosure of the information to the Commission is necessary to prevent 
the relevant entity from engaging in conduct that is likely to cause 
substantial injury to the financial interest or property of the entity 
or investors;
    (ii) The whistleblower has a reasonable basis to believe that the 
relevant entity is engaging in conduct that will impede an 
investigation of the misconduct; or
    (iii) At least 120 days have elapsed since the whistleblower 
provided the information to the relevant entity's audit committee, 
chief legal officer, chief compliance officer (or their equivalents), 
or the whistleblower's supervisor, or since the whistleblower received 
the information, if the whistleblower received it under circumstances 
indicating that the entity's audit committee, chief legal officer, 
chief compliance officer (or their equivalents), or the whistleblower's 
supervisor was already aware of the information.
    (h) Independent analysis. The phrase ``independent analysis'' means 
the whistleblower's own analysis, whether done alone or in combination 
with others.
    (i) Information that led to successful enforcement. The Commission 
will consider that the whistleblower provided original information that 
led to the successful enforcement of a judicial or administrative 
action, or related action, in the following circumstances:
    (1) The whistleblower gave the Commission original information that 
was sufficiently specific, credible, and timely to cause the Commission 
staff to commence an examination, open an investigation, reopen an 
investigation that the Commission had closed, or to inquire concerning 
different conduct as part of a current examination or investigation, 
and the Commission brought a successful judicial or administrative 
action based in whole or in part on conduct that was the subject of the 
whistleblower's original information; or
    (2) The whistleblower gave the Commission original information 
about conduct that was already under examination or investigation by 
the Commission, the Congress, any other authority of the federal 
government, a state Attorney General or securities regulatory 
authority, any self-regulatory organization, futures association or the 
Public Company Accounting Oversight Board (except in cases where the 
whistleblower was an original source of this information as defined in 
paragraph (i) of this section), and the whistleblower's submission 
significantly contributed to the success of the action.
    (3) The whistleblower reported original information through an 
entity's internal whistleblower, legal, or compliance procedures for 
reporting allegations of possible violations of law before or at the 
same time the whistleblower reported them to the Commission; the entity 
later provided the whistleblower's information to the Commission, or 
provided results of an audit or investigation initiated in whole or in 
part in response to information the whistleblower reported to the 
entity; and the information the entity provided to the Commission 
satisfies either paragraph (i)(1) or (i)(2) of this section. Under this 
paragraph (i)(3), the whistleblower must also submit the same 
information to the Commission in accordance with the procedures set 
forth in Sec.  165.3 within 120 days of providing it to the entity.
    (j) Monetary sanctions. The phrase ``monetary sanctions,'' when 
used with respect to any judicial or administrative action, or related 
action, means--
    (1) Any monies, including penalties, disgorgement, restitution, and 
interest ordered to be paid; and
    (2) Any monies deposited into a disgorgement fund or other fund 
pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7246(b)) as a result of such action or any settlement of such action.
    (k) Original information. The phrase ``original information'' means 
information that--
    (1) Is derived from the independent knowledge or independent 
analysis of a whistleblower;
    (2) Is not already known to the Commission from any other source, 
unless the whistleblower is the original source of the information;
    (3) Is not exclusively derived from an allegation made in a 
judicial or administrative hearing, in a governmental report, hearing, 
audit, or investigation, or from the news media, unless the 
whistleblower is a source of the information; and
    (4) Is submitted to the Commission for the first time after July 
21, 2010 (the date of enactment of the Wall Street Transparency and 
Accountability Act of 2010).
    (5) Original information shall not lose its status as original 
information solely because the whistleblower submitted such information 
prior to October 24, 2011, provided such information was submitted 
after July 21, 2010, the date of enactment of the Wall Street 
Transparency and Accountability Act of 2010. In order to be eligible 
for an award, a whistleblower who submits original information to the 
Commission after July 21, 2010, but prior to October 24, 2011, must 
comply with the procedure set forth in Sec.  165.3(d).
    (l) Original source. The whistleblower must satisfy the 
whistleblower's status as the original source of information to the 
Commission's satisfaction.
    (1) Information obtained from another source. The Commission will 
consider the whistleblower to be an ``original source'' of the same 
information that the Commission obtains from another source if the 
information the whistleblower provide satisfies the definition of 
original information and the other source obtained the information from 
the whistleblower or the whistleblower's representative.
    (i) In order to be considered an original source of information 
that the Commission receives from Congress, any other federal, state or 
local authority, or any self-regulatory organization, the whistleblower 
must have voluntarily given such authorities the information within the 
meaning of this part. In determining whether the whistleblower is the 
original source of information, the Commission may seek assistance and 
confirmation from one of the other entities or authorities described 
above.
    (ii) In the event that the whistleblower claims to be the original 
source of

[[Page 53202]]

information that an authority or another entity, other than as set 
forth in paragraph (l)(1)(i) of this section, provided to the 
Commission, the Commission may seek assistance and confirmation from 
such authority or other entity.
    (2) Information first provided to another authority or person. If 
the whistleblower provides information to Congress, any other federal 
or state authority, a registered entity, a registered futures 
association, a self-regulatory organization, or to any of any of the 
persons described in paragraphs (g)(4) and (5) of this section, and the 
whistleblower, within 120 days, make a submission to the Commission 
pursuant to Sec.  165.3, as the whistleblower must do in order for the 
whistleblower to be eligible to be considered for an award, then, for 
purposes of evaluating the whistleblower's claim to an award under 
Sec.  165.7, the Commission will consider that the whistleblower 
provided original information as of the date of the whistleblower's 
original disclosure, report, or submission to one of these other 
authorities or persons. The whistleblower must establish the 
whistleblower's status as the original source of such information, as 
well as the effective date of any prior disclosure, report, or 
submission, to the Commission's satisfaction. The Commission may seek 
assistance and confirmation from the other authority or person in 
making this determination.
    (3) Information already known by the Commission. If the Commission 
already knows some information about a matter from other sources at the 
time the whistleblower makes the whistleblower's submission, and the 
whistleblower is not an original source of that information, as 
described above, the Commission will consider the whistleblower an 
``original source'' of any information the whistleblower separately 
provides that is original information that materially adds to the 
information that the Commission already possesses.
    (m) Related action. The phrase ``related action,'' when used with 
respect to any judicial or administrative action brought by the 
Commission under the Commodity Exchange Act, means any judicial or 
administrative action brought by an entity listed in Sec.  165.11(a) 
that is based upon the original information voluntarily submitted by a 
whistleblower to the Commission pursuant to Sec.  165.3 that led to the 
successful resolution of the Commission action.
    (n) Successful resolution. The phrase ``successful resolution,'' 
when used with respect to any judicial or administrative action brought 
by the Commission under the Commodity Exchange Act, includes any 
settlement of such action or final judgment in favor of the Commission. 
It shall also have the same meaning as ``successful enforcement.''
    (o) Voluntary submission or voluntarily submitted. (1) The phrase 
``voluntary submission'' or ``voluntarily submitted'' within the 
context of submission of original information to the Commission under 
this part, shall mean the provision of information made prior to any 
request from the Commission, Congress, any other federal or state 
authority, the Department of Justice, a registered entity, a registered 
futures association, or a self-regulatory organization to the 
whistleblower or anyone representing the whistleblower (such as an 
attorney) about a matter to which the information in the 
whistleblower's submission is relevant. If the Commission or any of 
these other authorities makes a request, inquiry, or demand to the 
whistleblower or the whistleblower's representative first, the 
whistleblower's submission will not be considered voluntary, and the 
whistleblower will not be eligible for an award, even if the 
whistleblower's response is not compelled by subpoena or other 
applicable law. For purposes of this paragraph, the whistleblower will 
be considered to have received a request, inquiry or demand if 
documents or information from the whistleblower is within the scope of 
a request, inquiry, or demand that the whistleblower's employer 
receives, unless, after receiving the documents or information from the 
whistleblower, the whistleblower's employer fails to provide the 
whistleblower's documents or information to the requesting authority in 
a timely manner.
    (2) In addition, the whistleblower's submission will not be 
considered voluntary if the whistleblower is under a pre-existing legal 
or contractual duty to report the violations that are the subject of 
the whistleblower's original information to the Commission, Congress, 
any other federal or state authority, the Department of Justice, a 
registered entity, a registered futures association, or a self-
regulatory organization, or a duty that arises out of a judicial or 
administrative order.
    (p) Whistleblower(s). (1) The term ``whistleblower'' or 
``whistleblowers'' means any individual, or two (2) or more individuals 
acting jointly, who provides information relating to a potential 
violation of the Commodity Exchange Act to the Commission, in the 
manner established by Sec.  165.3. A company or another entity is not 
eligible to be a whistleblower.
    (2) Prohibition against retaliation. The anti-retaliation 
protections under Section 23(h) of the Commodity Exchange Act apply 
whether or not the whistleblower satisfies the requirements, procedures 
and conditions to qualify for an award. For purposes of the anti-
retaliation protections afforded by Section 23(h)(1)(A)(i) of the 
Commodity Exchange Act, the whistleblower is a whistleblower if:
    (i) The whistleblower possess a reasonable belief that the 
information the whistleblower is providing relates to a possible 
violation of the CEA, or the rules or regulations thereunder, that has 
occurred, is ongoing, or is about to occur; and
    (ii) The whistleblower provides that information in a manner 
described in Sec.  165.3.

Sec.  165.3  Procedures for submitting original information.

    A whistleblower's submission of information to the Commission will 
be a two-step process.
    (a) First, the whistleblower will need to submit the 
whistleblower's information to the Commission. The whistleblower may 
submit the whistleblower's information:
    (1) By completing and submitting a Form TCR online and submitting 
it electronically through the Commission's Web site at http://www.cftc.gov; or
    (2) By completing the Form TCR and mailing or faxing the form to 
the Commission, Three Lafayette Centre, 1155 21st Street, NW., 
Washington, DC 20581, Fax (202) 418-5975.
    (b) Further, to be eligible for an award, the whistleblower must 
declare under penalty of perjury at the time the whistleblower submits 
the whistleblower's information pursuant to paragraph (a)(1) or (2) of 
this section that the whistleblower's information is true and correct 
to the best of the whistleblower's knowledge and belief.
    (c) Notwithstanding paragraph (b) of this section, if the 
whistleblower submitted the whistleblower's original information to the 
Commission anonymously, then the whistleblower's identity must be 
disclosed to the Commission and verified in a form and manner 
acceptable to the Commission consistent with the procedure set forth in 
Sec.  165.7(c) prior to Commission's payment of any award.
    (d) If the whistleblower submitted original information in writing 
to the Commission after July 21, 2010 (the date of enactment of the 
Wall Street Transparency and Accountability Act of

[[Page 53203]]

2010) but before the effective date of these rules, the whistleblower 
will be eligible for an award only in the event that the whistleblower 
provided the original information to the Commission in a format or 
manner other than that described in paragraph (a) of this section, the 
whistleblower submits a completed Form TCR within 120 days of the 
effective date of these rules and otherwise follows the procedures set 
forth above in paragraphs (a) and (b) of this section.

Sec.  165.4  Confidentiality.

    (a) In general. Section 23(h)(2) of the Commodity Exchange Act 
requires that the Commission not disclose information that could 
reasonably be expected to reveal the identity of a whistleblower, 
except that the Commission may disclose such information in the 
following circumstances:
    (1) When disclosure is required to a defendant or respondent in 
connection with a public proceeding that the Commission institutes or 
in another public proceeding that is filed by an authority to which the 
Commission provides the information, as described below;
    (2) When the Commission determines that it is necessary to 
accomplish the purposes of the Commodity Exchange Act and to protect 
customers, it may provide whistleblower information to: The Department 
of Justice; an appropriate department or agency of the Federal 
Government, acting within the scope of its jurisdiction; a registered 
entity, registered futures association, or a self-regulatory 
organization; a state attorney general in connection with a criminal 
investigation; any appropriate state department or agency, acting 
within the scope of its jurisdiction; or a foreign futures authority; 
and
    (3) The Commission may make disclosures in accordance with the 
Privacy Act of 1974 (5 U.S.C. 552a).
    (b) Anonymous whistleblowers. A whistleblower may anonymously 
submit information to the Commission, however, the whistleblower must 
follow the procedures in Sec.  165.3(c) for submitting original 
information anonymously. Such whistleblower who anonymously submits 
information to the Commission must also follow the procedures in Sec.  
165.7(c) in submitting to the Commission an application for a 
whistleblower award.

Sec.  165.5  Prerequisites to the consideration of an award.

    (a) Subject to the eligibility requirements described in these 
rules, the Commission will pay an award to one or more whistleblowers 
who:
    (1) Provide a voluntary submission to the Commission;
    (2) That contains original information; and
    (3) That leads to the successful resolution of a covered Commission 
judicial or administrative action or successful enforcement of a 
related action; and
    (b) In order to be eligible, the whistleblower must:
    (1) Have given the Commission original information in the form and 
manner that the Commission requires in Sec.  165.3 and be the original 
source of information;
    (2) Provide the Commission, upon its staff's request, certain 
additional information, including: explanations and other assistance, 
in the manner and form that staff may request, in order that the staff 
may evaluate the use of the information submitted; all additional 
information in the whistleblower's possession that is related to the 
subject matter of the whistleblower's submission; and testimony or 
other evidence acceptable to the staff relating to the whistleblower's 
eligibility for an award; and
    (3) If requested by Commission staff, enter into a confidentiality 
agreement in a form acceptable to the Commission, including a provision 
that a violation of the confidentiality agreement may lead to the 
whistleblower's ineligibility to receive an award.

Sec.  165.6  Whistleblowers ineligible for an award.

    (a) No award under Sec.  165.7 shall be made:
    (1) To any whistleblower who is, or was at the time the 
whistleblower acquired the original information submitted to the 
Commission, a member, officer, or employee of: the Commission; the 
Board of Governors of the Federal Reserve System; the Office of the 
Comptroller of the Currency; the Board of Directors of the Federal 
Deposit Insurance Corporation; the Director of the Office of Thrift 
Supervision; the National Credit Union Administration Board; the 
Securities and Exchange Commission; the Department of Justice; a 
registered entity; a registered futures association; a self-regulatory 
organization; or a law enforcement organization;
    (2) To any whistleblower who is convicted of a criminal violation 
related to the judicial or administrative action for which the 
whistleblower otherwise could receive an award under Sec.  165.7;
    (3) To any whistleblower who submits information to the Commission 
that is based on the facts underlying the covered judicial or 
administrative action submitted previously by another whistleblower;
    (4) To any whistleblower who acquired the information the 
whistleblower gave the Commission from any of the individuals described 
in paragraphs (a)(1), (2), (3) or (6) of this section;
    (5) To any whistleblower who, in the whistleblower's submission, 
the whistleblower's other dealings with the Commission, or the 
whistleblower's dealings with another authority in connection with a 
related action, knowingly and willfully makes any false, fictitious, or 
fraudulent statement or representation, or uses any false writing or 
document, knowing that it contains any false, fictitious, or fraudulent 
statement or entry, or omitted any material fact, where, in the absence 
of such fact, other statements or representations made by the 
whistleblower would be misleading;
    (6) To any whistleblower who acquired the original information 
reported to the Commission as a result of the whistleblower's role as a 
member, officer or employee of either a foreign regulatory authority or 
law enforcement organization;
    (7) To any whistleblower who is, or was at the time the 
whistleblower acquired the original information submitted to the 
Commission, a member, officer, or employee of a foreign regulatory 
authority or law enforcement organization; or
    (8) To any whistleblower who acquired the original information the 
whistleblower gave the Commission from any other person with the intent 
to evade any provision of these rules.
    (b) Notwithstanding a whistleblower's ineligibility for an award 
for any reason set forth in paragraph (a) of this section, the 
whistleblower will remain eligible for the anti-retaliation protections 
set forth in Section 23(h)(1) of the Commodity Exchange Act.

Sec.  165.7  Procedures for award applications and Commission award 
determinations.

    (a) Whenever a Commission judicial or administrative action results 
in monetary sanctions totaling more than $1,000,000 (i.e., a covered 
judicial or administrative action) the Commission will publish on the 
Commission's Web site a ``Notice of Covered Action.'' Such Notice of 
Covered Action will be published subsequent to the entry of a final 
judgment or order that alone, or collectively with other judgments or 
orders previously entered in the Commission covered administrative or 
judicial action, exceeds $1,000,000 in

[[Page 53204]]

monetary sanctions. The Commission will not contact whistleblower 
claimants directly as to Notices of Covered Actions; prospective 
claimants should monitor the Commission Web site for such Notices. A 
whistleblower claimant will have 90 days from the date of the Notice of 
Covered Action to file a claim for an award based on that action, or 
the claim will be barred.
    (b) To file a claim for a whistleblower award, the whistleblower 
must file Form WB-APP, Application for Award for Original Information 
Provided Pursuant to Section 23 of the Commodity Exchange Act. The 
whistleblower must sign this form as the claimant and submit it to the 
Commission by mail or fax to Commodity Futures Trading Commission, 
Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581, 
Fax (202) 418-5975. The Form WB-APP, including any attachments, must be 
received by the Commission within 90 calendar days of the date of the 
Notice of Covered Action or 90 calendar days following the date of a 
final judgment in a related action in order to be considered for an 
award.
    (c) If the whistleblower provided the whistleblower's original 
information to the Commission anonymously pursuant to Sec. Sec.  165.3 
and 165.4 and:
    (1) The whistleblower is making the whistleblower's claim for a 
whistleblower award on a disclosed basis, the whistleblower must 
disclose the whistleblower's identity on the Form WB-APP. The 
whistleblower's identity must be verified in a form and manner that is 
acceptable to the Commission prior to the payment of any award; or
    (2) The whistleblower is making the whistleblower's claim for a 
whistleblower award on an anonymous basis, the whistleblower must be 
represented by counsel. The whistleblower must provide the 
whistleblower's counsel with a completed Form WB-APP that is signed by 
the whistleblower by no later than the date upon which the 
whistleblower's counsel submits to the Commission a copy of the Form 
WB-APP that does not disclose the whistleblower's identity and is 
signed solely by the whistleblower's counsel. In addition, the 
whistleblower's counsel must retain the signed original of the 
whistleblower's Form WB-APP in counsel's records. Upon request of the 
Commission staff, whistleblower's counsel must produce to the 
Commission the whistleblower's signed original WB-APP and the 
whistleblower's identity must be verified in a form and manner that is 
acceptable to the Commission prior to the payment of any award.
    (d) Once the time for filing any appeals of the Commission's 
judicial or administrative action and all related actions has expired, 
or, where an appeal has been filed, after all appeals in the judicial, 
administrative and related actions have concluded, the Commission will 
evaluate all timely whistleblower award claims submitted on Form WB-APP 
in accordance with the criteria set forth in this Part 165. In 
connection with this process, the Commission may require that the 
whistleblower provide additional information relating to the 
whistleblower's eligibility for an award or satisfaction of any of the 
conditions for an award, as set forth in Sec.  165.5(b). Following that 
evaluation, the Commission will send the whistleblower a Final Order 
setting forth whether the claim is allowed or denied and, if allowed, 
setting forth the award percentage amount.
    (e) The Commission's Office of the Secretariat will provide the 
whistleblower with the Final Order of the Commission.

Sec.  165.8  Amount of award.

    If all of the conditions are met for a whistleblower award in 
connection with a covered judicial or administrative action or a 
related action, the Commission will then decide the amount of the award 
pursuant to the procedure set forth in Sec.  165.7.
    (a) Whistleblower awards shall be in an aggregate amount equal to--
    (1) Not less than 10 percent, in total, of what has been collected 
of the monetary sanctions imposed in the covered judicial or 
administrative action or related actions; and
    (2) Not more than 30 percent, in total, of what has been collected 
of the monetary sanctions imposed in the covered judicial or 
administrative action or related actions.
    (b) If the Commission makes awards to more than one whistleblower 
in connection with the same action or related action, the Commission 
will determine an individual percentage award for each whistleblower, 
but in no event will the total amount awarded to all whistleblowers as 
a group be less than 10 percent or greater than 30 percent of the 
amount the Commission or the other authorities collect.

Sec.  165.9  Criteria for determining amount of award.

    The determination of the amount of an award shall be in the 
discretion of the Commission. The Commission may exercise this 
discretion directly or through delegated authority pursuant to Sec.  
165.15.
    (a) In determining the amount of an award, the Commission shall 
take into consideration--
    (1) The significance of the information provided by the 
whistleblower to the success of the covered judicial or administrative 
action or related action;
    (2) The degree of assistance provided by the whistleblower and any 
legal representative of the whistleblower in a covered judicial or 
administrative action or related action;
    (3) The programmatic interest of the Commission in deterring 
violations of the Commodity Exchange Act by making awards to 
whistleblowers who provide information that leads to the successful 
enforcement of such laws;
    (4) Whether the award otherwise enhances the Commission's ability 
to enforce the Commodity Exchange Act, protect customers, and encourage 
the submission of high quality information from whistleblowers; and
    (5) Potential adverse incentives from oversize awards.
    (b) Factors that may increase the amount of a whistleblower's 
award. In determining whether to increase the amount of an award, the 
Commission will consider the following factors, which are not listed in 
order of importance.
    (1) Significance of the information provided by the whistleblower. 
The Commission will assess the significance of the information provided 
by a whistleblower to the success of the Commission action or related 
action. In considering this factor, the Commission may take into 
account, among other things:
    (i) The nature of the information provided by the whistleblower and 
how it related to the successful enforcement action, including whether 
the reliability and completeness of the information provided to the 
Commission by the whistleblower resulted in the conservation of 
Commission resources; and
    (ii) The degree to which the information provided by the 
whistleblower supported one or more successful claims brought in the 
Commission action or related action.
    (2) Assistance provided by the whistleblower. The Commission will 
assess the degree of assistance provided by the whistleblower and any 
legal representative of the whistleblower in the Commission action or 
related action. In considering this factor, the Commission may take 
into account, among other things:
    (i) Whether the whistleblower provided ongoing, extensive, and 
timely

[[Page 53205]]

cooperation and assistance by, for example, helping to explain complex 
transactions, interpreting key evidence, or identifying new and 
productive lines of inquiry;
    (ii) The timeliness of the whistleblower's initial report to the 
Commission or to an internal compliance or reporting system of business 
organizations committing, or impacted by, the violations of the 
Commodity Exchange Act, where appropriate;
    (iii) The resources conserved as a result of the whistleblower's 
assistance;
    (iv) Whether the whistleblower appropriately encouraged or 
authorized others to assist the staff of the Commission who might 
otherwise not have participated in the investigation or related action;
    (v) The efforts undertaken by the whistleblower to remediate the 
harm caused by the violations of the Commodity Exchange Act, including 
assisting the authorities in the recovery of the fruits and 
instrumentalities of the violations; and
    (vi) Any unique hardships experienced by the whistleblower as a 
result of his or her reporting and assisting in the enforcement action.
    (3) Law enforcement interest. The Commission will assess its 
programmatic interest in deterring violations of the Commodity Exchange 
Act by making awards to whistleblowers who provide information that 
leads to the successful enforcement of such laws. In considering this 
factor, the Commission may take into account, among other things:
    (i) The degree to which an award enhances the Commission's ability 
to enforce the commodity laws;
    (ii) The degree to which an award encourages the submission of high 
quality information from whistleblowers by appropriately rewarding 
whistleblower submissions of significant information and assistance, 
even in cases where the monetary sanctions available for collection are 
limited or potential monetary sanctions were reduced or eliminated by 
the Commission because an entity self-reported a commodities violation 
following the whistleblower's related internal disclosure, report, or 
submission;
    (iii) Whether the subject matter of the action is a Commission 
priority, whether the reported misconduct involves regulated entities 
or fiduciaries, whether the whistleblower exposed an industry-wide 
practice, the type and severity of the commodity violations, the age 
and duration of misconduct, the number of violations, and the isolated, 
repetitive, or ongoing nature of the violations;
    (iv) The dangers to market participants or others presented by the 
underlying violations involved in the enforcement action, including the 
amount of harm or potential harm caused by the underlying violations, 
the type of harm resulting from or threatened by the underlying 
violations, and the number of individuals or entities harmed; and
    (v) The degree, reliability and effectiveness of the 
whistleblower's assistance, including the consideration of the 
whistleblower's complete, timely truthful assistance to the Commission 
and criminal authorities.
    (4) Participation in internal compliance systems. The Commission 
will assess whether, and the extent to which, the whistleblower and any 
legal representative of the whistleblower participated in internal 
compliance systems. In considering this factor, the Commission may take 
into account, among other things:
    (i) Whether, and the extent to which, a whistleblower reported the 
possible Commodity Exchange Act violations through internal 
whistleblower, legal or compliance procedures before, or at the same 
time as, reporting them to the Commission; and
    (ii) Whether, and the extent to which, a whistleblower assisted any 
internal investigation or inquiry concerning the reported Commodity 
Exchange Act violations.
    (c) Factors that may decrease the amount of a whistleblower's 
award. In determining whether to decrease the amount of an award, the 
Commission will consider the following factors, which are not listed in 
order of importance.
    (1) Culpability. The Commission will assess the culpability or 
involvement of the whistleblower in matters associated with the 
Commission's action or related actions. In considering this factor, the 
Commission may take into account, among other things:
    (i) The whistleblower's role in the Commodity Exchange Act 
violations;
    (ii) The whistleblower's education, training, experience, and 
position of responsibility at the time the violations occurred;
    (iii) Whether the whistleblower acted with scienter, both generally 
and in relation to others who participated in the violations;
    (iv) Whether the whistleblower financially benefitted from the 
violations;
    (v) Whether the whistleblower is a recidivist;
    (vi) The egregiousness of any wrongdoing committed by the 
whistleblower; and
    (vii) Whether the whistleblower knowingly interfered with the 
Commission's investigation of the violations or related enforcement 
actions.
    (2) Unreasonable reporting delay. The Commission will assess 
whether the whistleblower unreasonably delayed reporting the Commodity 
Exchange Act violations. In considering this factor, the Commission may 
take into account, among other things:
    (i) Whether the whistleblower was aware of the relevant facts but 
failed to take reasonable steps to report or prevent the violations 
from occurring or continuing;
    (ii) Whether the whistleblower was aware of the relevant facts but 
only reported them after learning about a related inquiry, 
investigation, or enforcement action; and
    (iii) Whether there was a legitimate reason for the whistleblower 
to delay reporting the violations.
    (3) Interference with internal compliance and reporting systems. 
The Commission will assess, in cases where the whistleblower interacted 
with his or her entity's internal compliance or reporting system, 
whether the whistleblower undermined the integrity of such system. In 
considering this factor, the Commission will take into account whether 
there is evidence provided to the Commission that the whistleblower 
knowingly:
    (i) Interfered with an entity's established legal, compliance, or 
audit procedures to prevent or delay detection of the reported 
Commodity Exchange Act violation;
    (ii) Made any material false, fictitious, or fraudulent statements 
or representations that hindered an entity's efforts to detect, 
investigate, or remediate the reported Commodity Exchange Act 
violations; or
    (iii) Provided any false writing or document knowing the writing or 
document contained any false, fictitious or fraudulent statements or 
entries that hindered an entity's efforts to detect, investigate, or 
remediate the reported Commodity Exchange Act violations.
    (d) The Commission shall not take into consideration the balance of 
the Fund in determining the amount of an award.

Sec.  165.10  Contents of record for award determinations.

    (a) The following items constitute the record upon which the award 
determination under Sec.  165.7 shall be made:

[[Page 53206]]

    (1) The whistleblower's Form TCR, ``Tip, Complaint or Referral,'' 
including related attachments, and other documentation provided by the 
whistleblower to the Commission;
    (2) The whistleblower's Form WB-APP, ``Application for Award for 
Original Information Provided Pursuant to Section 23 of the Commodity 
Exchange Act,'' and related attachments;
    (3) The complaint, notice of hearing, answers and any amendments 
thereto;
    (4) The final judgment, consent order, or administrative speaking 
order;
    (5) The transcript of the related administrative hearing or civil 
injunctive proceeding, including any exhibits entered at the hearing or 
proceeding;
    (6) Any other documents that appear on the docket of the 
proceeding; and
    (7) Sworn declarations (including attachments) from the 
Commission's Division of Enforcement staff regarding any matters 
relevant to the award determination.
    (b) The record upon which the award determinations under Sec.  
165.7 shall be made shall not include any Commission pre-decisional, 
attorney-client privilege, attorney work product privilege, or internal 
deliberative process materials related to the Commission or its staff's 
determination: To file or settle the related covered judicial or 
administrative action; and/or whether, to whom and in what amount to 
make a whistleblower award. Further, the record upon which the award 
determination under Sec.  165.7 shall be made shall not include any 
other entity's pre-decisional, attorney-client privilege, attorney work 
product privilege, or internal deliberative process materials related 
to its or its staff's determination to file or settle a related action.

Sec.  165.11  Awards based upon related actions.

    Provided that a whistleblower or whistleblowers comply with the 
requirements in Sec. Sec.  165.3, 165.5 and 165.7, and pursuant to 
Sec.  165.8, the Commission or its delegate may grant an award based on 
the amount of monetary sanctions collected in a ``related action'' or 
``related actions'' rather than on the amount collected in a covered 
judicial or administrative action, where:
    (a) A ``related action'' is a judicial or administrative action 
that is brought by:
    (1) The Department of Justice;
    (2) An appropriate department or agency of the Federal Government, 
acting within the scope of its jurisdiction;
    (3) A registered entity, registered futures association, or self-
regulatory organization;
    (4) A State criminal or appropriate civil agency, acting within the 
scope of its jurisdiction; or
    (5) A foreign futures authority; and
    (b) The ``related action'' is based on the same original 
information that the whistleblower voluntarily submitted to the 
Commission and led to a successful resolution of the Commission 
judicial or administrative action.

Sec.  165.12  Payment of awards from the Fund, financing of customer 
education initiatives, and deposits and credits to the Fund.

    (a) The Commission shall pay awards to whistleblowers from the 
Fund.
    (b) The Commission shall deposit into or credit to the Fund:
    (1) Any monetary sanctions collected by the Commission in any 
covered judicial or administrative action that is not otherwise 
distributed, or ordered to be distributed, to victims of a violation of 
the Commodity Exchange Act underlying such action, unless the balance 
of the Fund at the time the monetary sanctions are collected exceeds 
$100,000,000. In the event the Fund's value exceeds $100,000,000, any 
monetary sanctions collected by the Commission in a covered judicial or 
administrative action that is not otherwise distributed, or ordered to 
be distributed, to victims of violations of the Commodity Exchange Act 
or the rules and regulations thereunder underlying such action, shall 
be deposited into the general fund of the U.S. Treasury.
    (2) In the event that the amounts deposited into or credited to the 
Fund under paragraph (b)(1) of this section are not sufficient to 
satisfy an award made pursuant to Sec.  165.7, then, pursuant to 
Section 23(g)(3)(B) of the Commodity Exchange Act;
    (i) An amount equal to the unsatisfied portion of the award;
    (ii) Shall be deposited into or credited to the Fund;
    (iii) From any monetary sanction collected by the Commission in any 
judicial or administrative action brought by the Commission under the 
Commodity Exchange Act, regardless of whether it qualifies as a 
``covered judicial or administrative action''; provided, however, that 
such judicial or administrative action is based on information provided 
by a whistleblower.
    (c) Office of Consumer Outreach. The Commission shall undertake and 
maintain customer education initiatives through its Office of Consumer 
Outreach. The initiatives shall be designed to help customers protect 
themselves against fraud or other violations of the Commodity Exchange 
Act, or the rules or regulations thereunder. The Commission shall fund 
the initiatives and may utilize funds deposited into the Fund during 
any fiscal year in which the beginning (October 1) balance of the Fund 
is greater than $10,000,000. The Commission shall budget, on an annual 
basis, the amount used to finance customer education initiatives, 
taking into consideration the balance of the Fund.

Sec.  165.13  Appeals.

    (a) Any Final Order of the Commission relating to a whistleblower 
award determination, including whether, to whom, or in what amount to 
make whistleblower awards, may be appealed to the appropriate court of 
appeals of the United States not more than 30 days after the Final 
Order of the Commission is issued.
    (b) The record on appeal shall consist of:
    (1) The Contents of Record for Award Determinations, as set forth 
in Sec.  165.9; and
    (2) The Final Order of the Commission, as set forth in Sec.  165.7.

Sec.  165.14  Procedures applicable to the payment of awards.

    (a) A recipient of a whistleblower award is entitled to payment on 
the award only to the extent that the monetary sanction upon which the 
award is based is collected in the Commission judicial or 
administrative action or in a related action.
    (b) Payment of a whistleblower award for a monetary sanction 
collected in a Commission action or related action shall be made within 
a reasonable time following the later of:
    (1) The date on which the monetary sanction is collected; or
    (2) The completion of the appeals process for all whistleblower 
award claims arising from:
    (i) The Notice of Covered Action, in the case of any payment of an 
award for a monetary sanction collected in a covered judicial or 
administrative action; or
    (ii) The related action, in the case of any payment of an award for 
a monetary sanction collected in a related action.
    (c) If there are insufficient amounts available in the Fund to pay 
the entire amount of an award payment within a reasonable period of 
time from the time for payment specified by paragraph (b) of this 
section, then subject to the following terms, the balance of the 
payment shall be paid when amounts become available in the Fund, as 
follows:

[[Page 53207]]

    (1) Where multiple whistleblowers are owed payments from the Fund 
based on awards that do not arise from the same Notice of Covered 
Action (or related action), priority in making these payments will be 
determined based upon the date that the Final Order of the Commission 
is made. If two or more of these Final Orders of the Commission are 
entered on the same date, then those whistleblowers owed payments will 
be paid on a pro rata basis until sufficient amounts become available 
in the Fund to pay their entire payments.
    (2) Where multiple whistleblowers are owed payments from the Fund 
based on awards that arise from the same Notice of Covered Action (or 
related action), they will share the same payment priority and will be 
paid on a pro rata basis until sufficient amounts become available in 
the Fund to pay their entire payments.

Sec.  165.15  Delegations of authority.

    (a) Delegation of authority to the Executive Director. The 
Commission hereby delegates, until such time as the Commission orders 
otherwise, to the Executive Director or to any Commission employee 
under the Executive Director's supervision as he or she may designate, 
the authority to take the following actions to carry out this Part 165 
and the requirements of Section 23(h) of Commodity Exchange Act.
    (1) Delegated authority under Sec.  165.12(a), (b). The Executive 
Director's delegated authority to deposit into or credit collected 
monetary sanctions to the Fund and the payment of awards therefrom 
shall be with the concurrence of the General Counsel and the Director 
of the Division of Enforcement or of their respective designees.
    (2) Delegated authority to select a Whistleblower Award 
Determination Panel that shall be composed of three of the Commission's 
Offices or Divisions. The Whistleblower Award Determination Panel shall 
include neither the Division of Enforcement nor the Office of General 
Counsel.
    (b) Delegation of Authority to Whistleblower Award Determination 
Panel. The Commission hereby delegates, until such time as the 
Commission orders otherwise, to the Whistleblower Award Determination 
Panel the authority to make whistleblower award determinations under 
this Part 165, including the determinations as whether, to whom, or in 
what amount to make awards. Award determinations in matters involving 
monetary sanctions in either the Commission's action or a related 
action that total more than $15,000,000 (i.e., matters with a maximum 
potential whistleblower award greater than $5,000,000) must be 
determined by the heads of the Offices or Divisions comprising the 
Whistleblower Award Determination Panel. In all other matters, award 
determinations may be determined by the employee designees of the heads 
of the Offices or Divisions comprising the Whistleblower Award 
Determination Panel.
    (c) Delegation of Authority to the Whistleblower Office. With the 
exception of Sec.  165.12, the Commission hereby delegates, until such 
time as the Commission orders otherwise, to the head of the 
Whistleblower Office the authority to take any action under this Part 
165 that is not otherwise delegated to either the Executive Director or 
the Whistleblower Award Determination Panel under this section, 
including the authority to administer the Commission's whistleblower 
program and liaise with whistleblowers.

Sec.  165.16  No immunity.

    The Commodity Whistleblower Incentives and Protections provisions 
set forth in Section 23(h) of Commodity Exchange Act and this Part 165 
do not provide individuals who provide information to the Commission 
with immunity from prosecution. The fact that an individual may become 
a whistleblower and assist in Commission investigations and enforcement 
actions does not preclude the Commission from bringing an action 
against the whistleblower based upon the whistleblower's own conduct in 
connection with violations of the Commodity Exchange Act and the 
Commission's regulations. If such an action is determined to be 
appropriate, however, the Commission's Division of Enforcement will 
take the whistleblower's cooperation into consideration in accordance 
with its sanction recommendations to the Commission.

Sec.  165.17  Awards to whistleblowers who engage in culpable conduct.

    In determining whether the required $1,000,000 threshold has been 
satisfied for purposes of making any award, the Commission will not 
take into account any monetary sanctions that the whistleblower is 
ordered to pay, or that is ordered against any entity whose liability 
is based primarily on conduct that the whistleblower principally 
directed, planned, or initiated. Similarly, if the Commission 
determines that a whistleblower is eligible for an award, any amounts 
that the whistleblower or such an entity pay in sanctions as a result 
of the action or related actions will not be included within the 
calculation of the amounts collected for purposes of making payments 
pursuant to Sec.  165.14.

Sec.  165.18  Staff communications with whistleblowers from represented 
entities.

    If the whistleblower is a whistleblower who is a director, officer, 
member, agent, or employee of an entity that has counsel, and the 
whistleblower has initiated communication with the Commission relating 
to a potential violation of the Commodity Exchange Act, the 
Commission's staff is authorized to communicate directly with the 
whistleblower regarding the subject of the whistleblower's 
communication without seeking the consent of the entity's counsel.

Sec.  165.19  Nonenforceability of certain provisions waiving rights 
and remedies or requiring arbitration of disputes.

    The rights and remedies provided for in this Part 165 of the 
Commission's regulations may not be waived by any agreement, policy, 
form, or condition of employment, including by a predispute arbitration 
agreement. No predispute arbitration agreement shall be valid or 
enforceable if the agreement requires arbitration of a dispute arising 
under this Part.

Appendix A to Part 165--Guidance With Respect to the Protection of 
Whistleblowers Against Retaliation

    Section 23(h)(1) of Commodity Exchange Act prohibits employers 
from engaging in retaliation against whistleblowers. This provision 
provides whistleblowers with certain protections against 
retaliation, including: A federal cause of action against the 
employer, which must be filed in the appropriate district court of 
the United States within two (2) years of the employer's retaliatory 
act; and potential relief for prevailing whistleblowers, including 
reinstatement, back pay, and compensation for other expenses, 
including reasonable attorney's fees.
    (a) In General. No employer may discharge, demote, suspend, 
threaten, harass, directly or indirectly, or in any other manner 
discriminate against, a whistleblower in the terms and conditions of 
employment because of any lawful act done by the whistleblower--
    (1) In providing information to the Commission in accordance 
with this part 165; or
    (2) In assisting in any investigation or judicial or 
administrative action of the Commission based upon or related to 
such information.
    (b) Enforcement--(1) Cause of Action.--An individual who alleges 
discharge or other discrimination in violation of section 
23(h)(1)(A) of the Commodity Exchange Act may bring an action under 
section 23(h)(1)(B) of the Commodity Exchange Act in the appropriate 
district court of the United States

[[Page 53208]]

for the relief provided in section 23(h)(1)(C) of the Commodity 
Exchange Act, unless the individual who is alleging discharge or 
other discrimination in violation of section 23(h)(1)(A) of the 
Commodity Exchange Act is an employee of the Federal Government, in 
which case the individual shall only bring an action under section 
1221 of title 5, United States Code.
    (2) Subpoenas.--A subpoena requiring the attendance of a witness 
at a trial or hearing conducted under section 23(h)(1)(A) of the 
Commodity Exchange Act may be served at any place in the United 
States.
    (3) Statute of Limitations.--An action under section 23(h)(1)(B) 
of the Commodity Exchange Act may not be brought more than 2 years 
after the date on which the violation reported in Section 
23(h)(1)(A) of the Commodity Exchange Act is committed.
    (c) Relief.--Relief for an individual prevailing in an action 
brought under section 23(h)(1)(B) of the Commodity Exchange Act 
shall include--
    (1) Reinstatement with the same seniority status that the 
individual would have had, but for the discrimination;
    (2) The amount of back pay otherwise owed to the individual, 
with interest; and
    (3) Compensation for any special damages sustained as a result 
of the discharge or discrimination, including litigation costs, 
expert witness fees, and reasonable attorney's fees.
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Privacy Act Statement

    This notice is given under the Privacy Act of 1974. The Privacy 
Act requires that the Commodity Futures Trading Commission (CFTC or 
Commission) inform individuals of the following when asking for 
information. This form may be used by anyone wishing to provide the 
CFTC with information concerning a violation of the Commodity 
Exchange Act or the Commission's regulations. If the whistleblower 
is submitting this information for the Commission's whistleblower 
award program pursuant to Section 23 of the Commodity Exchange Act, 
the information provided will enable the Commission to determine the 
whistleblower's eligibility for payment of an award. This 
information may be disclosed to Federal, state, local, or foreign 
agencies responsible for investigating, prosecuting, enforcing, or 
implementing laws, rules, or regulations implicated by the 
information consistent with the confidentiality requirements set 
forth therein, including pursuant to Section 23 of the Commodity 
Exchange Act and Part 165 of the Commission's regulations 
thereunder. Furnishing the information is voluntary, but a decision 
not to do so may result in the whistleblower not being eligible for 
award consideration.
    Questions concerning this form may be directed to the Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581.

Submission Procedures

     After completing this Form TCR, please send it 
electronically, by mail, e-mail or delivery to the Commission: 
electronically via the Commission's Web site; by mail or delivery to 
the Commodity Futures Trading Commission, Three Lafayette Centre, 
1151 21st Street, NW., Washington, DC 20581; by e-mail to XXXXX.gov; 
or by facsimile to (202) XXX-XXXX.
     The whistleblower has the right to submit information 
anonymously.
     If the whistleblower is submitting information for the 
Commission's whistleblower award program, the whistleblower must 
submit the whistleblower's information using this Form TCR.

Instructions for Completing Form TCR

Section A: Information About You

    Questions 1-4: Please provide the following information about 
yourself:
     Last name, first name, and middle initial;
     Complete address, including city, state and zip code;
     Telephone number and, if available, an alternate number 
where the whistleblower can be reached;
     The whistleblower's e-mail address (to facilitate 
communications, we strongly encourage the whistleblower to provide 
the whistleblower's email address);
     The whistleblower's preferred method of communication; 
and
     The whistleblower's occupation.

Section B: Information about the Whistleblower's Attorney. Complete 
this Section Only if the Whistleblower is Represented by an 
Attorney in this Matter

    Questions 1-4: Provide the following information about the 
attorney representing the whistleblower in this matter:
     Attorney's name;
     Firm name;
     Complete address, including city, state and zip code;
     Telephone number and fax number; and
     E-mail address.

Section C: Tell Us About the Individual and/or Entity The 
Whistleblower Has a Complaint Against

    If the whistleblower's complaint relates to more than two 
individuals and/or entities, the whistleblower may use additional 
sheets, if necessary.
    Question 1: Choose one of the following that best describes the 
individual's profession or entity's type to which the 
whistleblower's complaint relates:
     For Individuals: Accountant, analyst, associated 
person, attorney, auditor, broker, commodity trading advisor, 
commodity pool operator, compliance officer, employee, executing 
broker, executive officer or director, financial planner, floor 
broker, floor trader, trader, unknown, or other (specify).
     For Entities: Bank, commodity trading advisor, 
commodity pool operator, commodity pool, futures commission 
merchant, hedge fund, introducing broker, major swap participant, 
retail foreign exchange dealer, swap dealer, unknown, or other 
(specify).
    Questions 2-4: For each individual and/or entity, provide the 
following information, if known:
     Full name;
     Complete address, including city, state and zip code;
     Telephone number;
     E-mail address; and
     Internet address, if applicable.

Section D: Tell Us About the Whistleblower's Complaint

    Question 1: State the date (mm/dd/yyyy) that the alleged conduct 
began.
    Question 2: Choose the option that the whistleblower believes 
best describes the nature of the whistleblower's complaint. If the 
whistleblower is alleging more than one violation, please list all 
that the whistleblower believes may apply. Use additional sheets, if 
necessary.
     Theft/misappropriation;
     Misrepresentation/omission (i.e., false/misleading 
marketing/sales literature; inaccurate, misleading or non-disclosure 
by commodity pool operator, commodity trading advisor, futures 
commission merchant, introducing broker, retail foreign exchange

[[Page 53217]]

dealer, major swap participant, swap dealer, or their associated 
person(s); false/material misstatements in any report or statement);
     Ponzi/pyramid scheme;
     Off-exchange foreign currency, commodity, or precious 
metal fraud;
     Registration violations (including unregistered 
commodity pool operator; commodity trading advisor; futures 
commission merchant; introducing broker; retail foreign exchange 
dealer; swap dealer; or their associated person(s));
     Trading (after hours trading; algorithmic trading; 
disruptive trading; front running; insider trading; manipulation/
attempted manipulation of commodity prices; market timing; 
inaccurate quotes/pricing information; program trading; trading 
suspensions; volatility);
     Fees/mark-ups/commissions (excessive, unnecessary or 
unearned administrative, commission or sales fees; failure to 
disclose fees; insufficient notice of change in fees; excessive or 
otherwise improper spreads or fills);
     Sales and advisory practices (background information on 
past violations/integrity; breach of fiduciary duty/responsibility; 
churning/excessive trading; cold calling; conflict of interest; 
abuse of authority in discretionary trading; failure to respond to 
client, customer or participant; guarantee against loss; promise to 
profit; high pressure sales techniques; instructions by client, 
customer or participant not followed; investment objectives not 
followed; solicitation methods (e.g., cold calling, seminars);
     Customer accounts (unauthorized trading); identity 
theft affecting account; inaccurate valuation of Net Asset Value; or
     Other (analyst complaints; market maker activities; 
employer/employee disputes; specify other).
    Question 3a: State whether the whistleblower or the 
whistleblower's counsel has had any prior communications with the 
CFTC concerning this matter.
    Question 3b: If the answer to question 3a is yes, provide the 
name of the CFTC staff member with whom the whistleblower or the 
whistleblower's counsel communicated.
    Question 4a: Indicate whether the whistleblower or the 
whistleblower's counsel has provided the information the 
whistleblower is providing to the CFTC to any other agency or 
organization.
    Question 4b: If the answer to question 4a is yes, provide 
details.
    Question 4c: Provide the name and contact information of the 
point of contact at the other agency or organization, if known.
    Question 5a: Indicate whether the whistleblower's complaint 
relates to an entity of which the whistleblower is, or was in the 
past, an officer, director, counsel, employee, consultant, or 
contractor.
    Question 5b: If the answer to question 5a is yes, state whether 
the whistleblower has reported this violation to the whistleblower's 
supervisor, compliance office, whistleblower hotline, ombudsman, or 
any other available mechanism at the entity for reporting 
violations.
    Question 5c: If the answer to question 5b is yes, provide 
details.
    Question 5d: Provide the date on which the whistleblower took 
the actions described in questions 5a and 5b.
    Question 6a: Indicate whether the whistleblower has taken any 
other action regarding the whistleblower's complaint, including 
whether the whistleblower complained to the Commission, another 
regulator, a law enforcement agency, or any other agency or 
organization; initiated legal action, mediation or arbitration, or 
initiated any other action.
    Question 6b: If the whistleblower answered yes to question 6a, 
provide details, including the date on which the whistleblower took 
the action(s) described, the name of the person or entity to whom 
the whistleblower directed any report or complaint and contact 
information for the person or entity, if known, and the complete 
case name, case number, and forum of any legal action the 
whistleblower has taken. Use additional sheets, if necessary.
    Question 7a: Choose from the following the option that the 
whistleblower believes best describes the type of financial product 
or investment at issue, if applicable:
     Commodity futures;
     Options on commodity futures;
     Commodity options;
     Foreign currency transactions;
     Swaps; or
     Other (specify).
    Question 7b: Provide the name of the financial product or 
investment, if applicable.
    Question 8: State in detail all the facts pertinent to the 
alleged violation. Explain why the whistleblower believes the facts 
described constitute a violation of the Commodity Exchange Act. Use 
additional sheets, if necessary.
    Question 9: Describe all supporting materials in the 
whistleblower's possession, custody or control, and the availability 
and location of additional supporting materials not in the 
whistleblower's possession, custody or control. Use additional 
sheets, if necessary.
    Question 10: Describe how the whistleblower obtained the 
information that supports the whistleblower's allegation. If any 
information was obtained from an attorney or in a communication 
where an attorney was present, identify such information with as 
much particularity as possible. In addition, if any information was 
obtained from a public source, identify the source with as much 
particularity as possible. Use additional sheets, if necessary.
    Question 11: The whistleblower may use this space to identify 
any documents or other information in the whistleblower's submission 
on this Form TCR that the whistleblower believes could reasonably be 
expected to reveal the whistleblower's identity. Explain the basis 
for the whistleblower's belief that the whistleblower's identity 
would be revealed if the documents or information were disclosed to 
a third party.
    Question 12: Provide any additional information the 
whistleblower thinks may be relevant.

Section E: Eligibility Requirements

    Question 1: State whether the whistleblower is currently, or was 
at the time the whistleblower acquired the original information that 
the whistleblower is submitting to the Commodity Futures Trading 
Commission, a member, officer or employee of the Department of 
Justice, the Commodity Futures Trading Commission, the Comptroller 
of the Currency, the Board of Governors of the Federal Reserve 
System, the Federal Deposit Insurance Corporation, the Office Thrift 
Supervision, National Credit Union Administration, the Securities 
and Exchange Commission, a registered entity, a registered futures 
association, a self-regulatory organization, or any law enforcement 
organization.
    Question 2: State whether the whistleblower is providing the 
information pursuant to a cooperation agreement with the Commodity 
Futures Trading Commission or with any other agency or organization.
    Question 3: State whether the whistleblower is providing this 
information before the whistleblower (or anyone representing you) 
received any request, inquiry or demand that relates to the subject 
matter of the whistleblower's submission: (i) From the CFTC; (ii) in 
connection with an investigation, inspection or examination by any 
registered entity, registered futures association or self-regulatory 
organization; or (iii) in connection with an investigation by the 
Congress, or any other federal or state authority.
    Question 4: State whether the whistleblower is currently a 
subject or target of a criminal investigation, or has the 
whistleblower been convicted of a criminal violation, in connection 
with the information the whistleblower is submitting to the 
Commodity Futures Trading Commission.
    Question 5: State whether the whistleblower acquired the 
information the whistleblower is providing to the Securities and 
Exchange Commission from any individual described in Questions 1 
through 5 of this Section.
    Question 6: State whether the whistleblower is currently, or was 
at the time the whistleblower acquired the original information that 
the whistleblower is submitting to the Commodity Futures Trading 
Commission, a member, officer, or employee of a foreign regulatory 
authority or law enforcement organization.
    Question 7: Use this space to provide additional details 
relating to the whistleblower's responses to questions 1 through 6. 
Use additional sheets, if necessary.

Section F: Whistleblower's Declaration

    The whistleblower must sign this Declaration if the 
whistleblower is submitting this information pursuant to the 
Commodity Futures Trading Commission whistleblower program and wish 
to be considered for an award. If the whistleblower is submitting 
the whistleblower's information anonymously, the whistleblower must 
still sign this Declaration, and the whistleblower must provide the 
whistleblower's attorney with the original of this signed form.
    If the whistleblower is not submitting the whistleblower's 
information pursuant to the

[[Page 53218]]

Commodity Futures Trading Commission whistleblower program, the 
whistleblower do not need to sign this Declaration.

Section G: Counsel Certification

    If the whistleblower is submitting this information pursuant to 
the Commodity Futures Trading Commission whistleblower program and 
is doing so anonymously through an attorney, the whistleblower's 
attorney must sign the Counsel Certification section.
    If the whistleblower is represented in this matter but the 
whistleblower is not submitting the whistleblower's information 
pursuant to the Commodity Futures Trading Commission whistleblower 
program, the whistleblower's attorney does not need to sign the 
Counsel Certification Section.
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Privacy Act Statement

    This notice is given under the Privacy Act of 1974. The Privacy 
Act requires that the Commodity Futures Trading Commission (CFTC or 
Commission) inform individuals of the following when asking for 
information. The information provided will enable the Commission to 
determine the whistleblower's eligibility for payment of an award 
pursuant to Section 23 of the Commodity Exchange Act. This 
information may be disclosed to Federal, state, local, or foreign 
agencies responsible for investigating, prosecuting, enforcing, or 
implementing laws, rules, or regulations implicated by the 
information consistent with the confidentiality requirements set 
forth in Section 23 of the Commodity Exchange Act and Part 165 of 
the Commission's Regulations thereunder. Furnishing the information 
is voluntary, but a decision not

[[Page 53221]]

to do so may result in the whistleblower not being eligible for 
award consideration.
    Questions concerning this form may be directed to the Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581.

General

     This form should be used by persons making a claim for 
a whistleblower award in connection with information provided to the 
CFTC or to another agency in a related action. In order to be deemed 
eligible for an award, the whistleblower must meet all the 
requirements set forth in Section 23 of the Commodities Exchange Act 
and the rules thereunder.
     The whistleblower must sign the Form WB-APP as the 
claimant. If the whistleblower provided the whistleblower's 
information to the CFTC anonymously, the whistleblower must now 
disclose the whistleblower's identity on this form and the 
whistleblower's identity must be verified in a form and manner that 
is acceptable to the CFTC prior to the payment of any award.
    [cir] If the whistleblower is filing the whistleblower's claim 
in connection with information that the whistleblower provided to 
the CFTC, then the whistleblower's Form WB-APP, and any attachments 
thereto, must be received by the CFTC within ninety (90) days of the 
date of the Notice of Covered Action or the date of a final judgment 
in a related action to which the claim relates.
    [cir] If the whistleblower is filing the whistleblower's claim 
in connection with information the whistleblower provided to another 
agency in a related action, then the whistleblower's Form WB-APP, 
and any attachments there to, must be received by the Commodity 
Futures Trading Commission as follows:
     If a final order imposing monetary sanctions has been 
entered in a related action at the time the whistleblower submits 
the whistleblower's claim for an award in connection with a 
Commission action, the whistleblower must submit the whistleblower's 
claim for an award in that related action on the same Form WB-APP 
that the whistleblower uses for the Commission action.
     If a final order imposing monetary sanctions in a 
related action has not been entered at the time the whistleblower 
submits the whistleblower's claim for an award in connection with a 
Commission action, the whistleblower must submit the whistleblower's 
claim on Form WB-APP within ninety (90) days of the issuance of a 
final order imposing sanctions in the related action.
     The whistleblower must submit the whistleblower's Form 
WB-APP to us in one of the following two ways:
    [cir] By mailing or delivering the signed form to the Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581; or
    [cir] By faxing the signed form to (202) XXX-XXXX.

Instructions for Completing Form WB-APP

Section A: Applicant's Information

    Questions 1-3: Provide the following information about yourself:
     First and last name, and middle initial, and social 
security number;
     Complete address, including city, state and zip code;
     Telephone number and, if available, an alternate number 
where the whistleblower can be reached; and
     E-mail address.

Section B: Attorney's Information

    If the whistleblower is represented by an attorney in this 
matter, provide the information requested. If the whistleblower is 
not represented by an attorney in this matter, leave this Section 
blank.
    Questions 1-4: Provide the following information about the 
attorney representing the whistleblower in this matter:
     Attorney's name;
     Firm name;
     Complete address, including city, state and zip code;
     Telephone number and fax number; and
     E-mail address.

Section C: Tip/Complaint Details

    Question 1: Indicate the manner in which the whistleblower's 
original information was submitted to the CFTC.
    Question 2a: Include the TCR (Tip, Complaint or Referral) number 
to which this claim relates.
    Question 2b: Provide the date on which the whistleblower 
submitted the whistleblower's information to the CFTC.
    Question 2c: Provide the name of the individual(s) or entity(s) 
to which the whistleblower's tip, complaint, or referral related.

Section D: Notice of Covered Action

    The process for making a claim for a whistleblower award begins 
with the publication of a ``Notice of a Covered Action'' on the 
Commission's Web site. This Notice is published whenever a judicial 
or administrative action brought by the Commission results in the 
imposition of monetary sanctions exceeding $1,000,000. The Notice is 
published on the Commission's Web site subsequent to the entry of a 
final judgment or order in the action that by itself, or 
collectively with other judgments or orders previously entered in 
the action, exceeds the $1,000,000 threshold required for a 
whistleblower to be potentially eligible for an award. The 
Commission will not contact whistleblower claimants directly as to 
Notices of Covered Actions; prospective claimants should monitor the 
Commission Web site for such Notices.
    Question 1: Provide the date of the Notice of Covered Action to 
which this claim relates.
    Question 2: Provide the notice number of the Notice of Covered 
Action.
    Question 3a: Provide the case name referenced in Notice of 
Covered Action.
    Question 3b: Provide the case number referenced in Notice of 
Covered Action.

Section E: Claims Pertaining to Related Actions

    Question 1: Provide the name of the agency or organization to 
which the whistleblower provided the whistleblower's information.
    Question 2: Provide the name and contact information for the 
whistleblower's point of contact at the agency or organization, if 
known.
    Question 3a: Provide the date on which that the whistleblower 
provided the whistleblower's information to the agency or 
organization referenced in question E1.
    Question 3b: Provide the date on which the agency or 
organization referenced in question E1 filed the related action that 
was based upon the information the whistleblower provided.
    Question 4a: Provide the case name of the related action.
    Question 4b: Provide the case number of the related action.

Section F: Eligibility Requirements and Other Information

    Question 1: State whether the whistleblower is currently, or was 
at the time the whistleblower acquired the original information that 
the whistleblower submitted to the CFTC, a member, officer or 
employee of the Department of Justice, the Commodity Futures Trading 
Commission, the Comptroller of the Currency, the Board of Governors 
of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, the Office of Thrift Supervision, the National Credit 
Union Administration, the Securities and Exchange Commission, a 
registered entity, a registered futures association, a self-
regulatory organization, any law enforcement organization, or a 
foreign regulatory authority or law enforcement organization.
    Question 2: State whether the whistleblower provided the 
information submitted to the CFTC pursuant to a cooperation 
agreement with the CFTC or with any other agency or organization.
    Question 3: State whether the whistleblower acquired the 
information the whistleblower provided to the CFTC from any 
individual described in Question 1 through 2 of this Section.
    Question 5: If the whistleblower answered ``yes'' to questions 1 
though 3 of this Section, please provide details.
    Question 5a: State whether the whistleblower provided the 
information submitted to the CFTC before the whistleblower (or 
anyone representing the whistleblower) received any request, inquiry 
or demand that relates to the subject matter of the whistleblower's 
submission: (i) From the CFTC; (ii) in connection with an 
investigation, inspection or examination by any registered entity, 
registered futures association or self-regulatory organization; or 
(iii) in connection with an investigation by the Congress, or any 
other federal or state authority.
    Question 5b: If the whistleblower answered ``yes'' to questions 
5a, please provide details. Use additional sheets if necessary.
    Question 6a: State whether the whistleblower is the subject or 
target of a criminal investigation, or has been convicted of a 
criminal violation, in connection with the information upon which 
the whistleblower's application for an award is based.
    Question 6b: If the whistleblower answered ``yes'' to question 
6a, please provide details,

[[Page 53222]]

including the name of the agency or organization that conducted the 
investigation or initiated the action against you, the name and 
telephone number of the whistleblower's point of contact at the 
agency or organization, if available, and the investigation/case 
name and number, if applicable. Use additional sheets, if necessary.

Section G: Entitlement to Award

    This section is optional. Use this section to explain the basis 
for the whistleblower's belief that the whistleblower is entitled to 
an award in connection with the whistleblower's submission of 
information to the Commission or to another agency in connection 
with a related action. Specifically, address how the whistleblower 
believes the whistleblower voluntarily provided the Commission with 
original information that led to the successful enforcement of a 
judicial or administrative action filed by the Commission, or a 
related action. Refer to Sec.  165.11 of Part 165 of the 
Commission's Regulations for further information concerning the 
relevant award criteria. The whistleblower may use additional 
sheets, if necessary.
    Section 23(c)(1)(B) of the CEA requires the Commission to 
consider in determining the amount of an award the following 
factors: (a) The significance of the information provided by a 
whistleblower to the success of the Commission action or related 
action; (b) the degree of assistance provided by the whistleblower 
and any legal representative of the whistleblower in the Commission 
action or related action; (c) the programmatic interest of the 
Commission in deterring violations of the Commodity Exchange Act 
(including Regulations under the Act) by making awards to 
whistleblowers who provide information that leads to the successful 
enforcement of such laws; and (d) whether the award otherwise 
enhances the Commission's ability to enforce the Commodity Exchange 
Act, protect customers, and encourage the submission of high quality 
information from whistleblowers. Address these factors in the 
whistleblower's response as well.

Section H: Declaration

    This section must be signed by the claimant.

    Issued in Washington, DC, on August 4, 2011, by the Commission.
David A. Stawick,
Secretary of the Commission.

Appendices to Final Rules for Implementing the Whistleblower Provisions 
of Section 23 of the Commodity Exchange Act--Commission Voting Summary 
and Statements of Commissioners

    Note:  The following appendices will not appear in the Code of 
Federal Regulations

Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn, Chilton 
and O'Malia voted in the affirmative; Commissioner Sommers voted in 
the negative.

Appendix 2--Statement of Chairman Gary Gensler

    I support the final rulemaking to establish a program for 
whistleblowers as mandated by the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. Congress enacted these provisions to 
incentivize whistleblowers to come forward with new information 
about potential fraud, manipulation or other misconduct in the 
financial markets. The final rule authorizes the Commodity Futures 
Trading Commission (CFTC) to provide a monetary award to 
whistleblowers when their original information leads to a successful 
enforcement action that results in sanctions over $1 million. The 
rule encourages people to assist the CFTC in identifying, 
investigating and prosecuting potential violations of the Commodity 
Exchange Act.

[FR Doc. 2011-20423 Filed 8-24-11; 8:45 am]
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