The U.S. Securities Exchange Commission ("SEC") and Commodity Futures Trading Commission ("CFTC") administer whistleblower claims under the Sarbanes-Oxley Act of 2002. While the SEC has jurisdiction to regulate U.S. securities markets, the CFTC regulates the U.S. derivatives markets, which includes futures, swaps, and certain types of option contracts. In October, the CFTC's Whistleblower Office ("WBO") released its 2019 Annual Report (the "Report") to two congressional subcommittees to provide insights into its whistleblower program and customer education initiatives. The Report provides an overview of the tips received by the WBO from October 1, 2018-September 30, 2019 (the "reporting period"), highlights several of the whistleblower awards from the past year, and discusses the WBO's efforts to educate stakeholders about its whistleblower program.
Breakdown of Tips Received during the Reporting Period
The WBO reported a decrease in the number of whistleblower tips and complaints that it received in 2018-455 tips in 2019 compared to 760 tips in 2019but noted that the number was almost the same as the number of tips it received in 2017 (465). Interestingly, the WBO attributed the 2018 spike in tips to "increased popular interest in virtual currencies and certain WBO publicity around them, which encouraged members of the public to report virtual currency fraud through the Whistleblower Program."
The WBO also reported that it received 117 whistleblower award applications in 2019, just below its program record of 120 in 2018. Overall, the 2019 whistleblower tips regarded activities such as: Bank Secrecy Act violations; failures to register; false reporting; foreign bribery; fraud involving virtual currencies, precious metals, foreign currency exchange, or binary options; inadequate risk controls; insider trading; money laundering; retaliation against employees; and spoofing and other forms of disruptive trading or market manipulation.
Profiles of Bounty Recipients
During the reporting period, the CFTC announced five whistleblower awards totaling more than $15 million (including two awards based in part on related actions), bringing the total payout under the program to...