A measure to save the whistleblower program at the Commodity Futures Trading Commission (CFTC) was signed into law by President Joe Biden on Tuesday, providing enough funding to keep the program running through October 2022.
The law (S.409) sets aside $10 million from the existing CFTC Consumer Protection Fund to support the agency’s whistleblower program. The fund, into which the penalties and fines from enforcement actions are paid, is currently capped at $100 million. Any funds generated above the cap are sent to the U.S. Treasury. After Oct. 1, 2022—the first day of a new federal fiscal year—all the money in the new fund will be returned to the Consumer Protection Fund.
There have been indications the CFTC whistleblower program might have become a victim of its own success. In May, the Wall Street Journal reported a whistleblower at Deutsche Bank who provided information to investigators regarding manipulation of the London Interbank Offered Rate (LIBOR) is primed to receive a payout of more than $100 million. Such an award would wipe out funding for the program and cause all progress on other cases to stop. There was even talk of having to shut down the CFTC’s whistleblower office and lay off staff.
When the CFTC’s whistleblower program issued its first bounty in 2014, any thought of one payout topping $100 million seemed fantastical. The program has awarded a total of $123 million over its entire lifespan.
So, what now? The law only provides a temporary solution to the issue of funding the CFTC’s whistleblower program. The original bill, put forth by Sen. Chuck Grassley (R-Iowa) and others, proposed raising the cap on the Consumer Protection Fund to $150 million, but that was stripped out of the version that eventually passed.
Mark Nelson, senior legal analyst with Wolters Kluwer Legal & Regulatory US, said Congress has several options. It could decide to increase the cap on the fund, or lawmakers could take a wait-and-see approach before revisiting the CFTC’s program in fiscal year 2023.
The FY2022 federal budget proposed by House Democrats contains a noticeable funding increase for the CFTC—about $28 million more than the agency received in FY2021.
“It’s a sizeable increase for an agency that historically has been underfunded by Congress,” Nelson said. But there’s nothing specifically carved out for the whistleblower program, he said.
The October 2022 end point for the temporary fund is “curious,” Nelson said, and might indicate Congress views the measure as all that’s necessary.
“Maybe they think there’s just one big award, and once it’s dealt with, everything will return to normal,” he said.
But payouts to whistleblowers at the Securities and Exchange Commission (SEC) have exploded the past two years, with a record $376 million announced so far this fiscal year. The agency is approaching $1 billion ($938 million) in total payouts since the program issued its first bounty in 2012.
The CFTC’s whistleblower program will likely follow suit on a somewhat smaller scale, Nelson said.
“I expect we will see a similar pattern of more frequent whistleblower payouts, and larger payouts, going forward” he said.