The CFTC has proposed amendments to its whistleblower rules that reinterpret its anti-retaliation authority and proposes appropriate rule amendments to implement that authority.
When the CFTC initially adopted its whistleblower rules, the CFTC was asked to clarify its enforcement authority over retaliation against whistleblowers. Citing the private right of action for whistleblowers created by Commodity Exchange Act Section 23(h)(1)(B), the CFTC stated that it lacked “the statutory authority to conclude that any entity that retaliates against a whistleblower” could be subject to enforcement action “as a separate and independent violation of the CEA.” The CFTC stated that CEA Section 23(h)(1)(B)(i) “clearly states only an individual who alleges retaliation in violation of being a whistleblower may bring such a cause of action.”
Questions have been raised, however, about the inconsistency between this interpretation and the SEC’s interpretation of its own authority to take enforcement actions against violators of the anti-retaliation provisions of the SEC’s whistleblower protection rules. Accordingly, the CFTC is revisiting this issue. The CFTC proposes to set aside its earlier interpretation because it fails to adequately take into full consideration the statutory context of CEA Section 23 and other CEA provisions. According to the CFTC, there are several CEA sections that empower the CFTC to take action for the violation of “any” CEA provision or rule or regulation thereunder.
The CFTC believes the SEC’s statutory authority in this area is nearly identical to the CFTC’s, and that the SEC took a different path when the SEC whistleblower rules were adopted. When commenters asked the SEC to clarify protections against retaliation, it did so by adopting a rule that made any rules promulgated under the protections against retaliation provisions enforceable in an action or proceeding brought by the SEC. Upon reconsideration of its statutory authority on this issue, and noting that harmonization between the SEC’s and the CFTC’s whistleblower programs would be beneficial to the public by making the consequences of illegal retaliation more uniform, the CFTC has decided to join the SEC on that path.
The CFTC’s proposal also removes any question about a gap in statutory whistleblower protection under the securities laws and the CEA. Consistent with the SEC’s approach in its rule, the CFTC proposes to add new rules to implement its enforcement authority. The rule proposal prohibits the enforcement of confidentiality and pre-dispute arbitration clauses respecting actions by potential whistleblowers in any pre-employment, employment or post-employment agreements. The proposed rules also prohibit employers from threatening or harassing or retaliating against individuals who participate in the CFTC’s whistleblower program, irrespective of whether those individuals qualify for an award, or report internally before providing the CFTC with information.
The proposed amendments also enhance the process for reviewing whistleblower claims and make related changes to clarify staff authority to administer the whistleblower program. The amendments make changes in key areas such as: eligibility requirements; award claims review; contents of record for award determinations; whistleblower identifying information; clarify the CFTC’s position on awards for related actions; replace the Whistleblower Award Determination Panel with a Claims Review Staff; and provide the CFTC with the opportunity to review Proposed Final Determinations.