U.S. regulator pays record award for fruitful tip

With a record-setting US$200 million award, the U.S. Commodity Futures Trading Commission (CFTC) tripled its total whistleblower payouts in one fell swoop.

The CFTC announced that it paid the massive bounty to a tipster who provided original information to an ongoing investigation that led to successful enforcement action by the derivatives regulator, along with two related actions (one by another U.S. regulator and one brought by a foreign regulator).

According to the CFTC’s order, the whistleblower’s information “led the CFTC to important, direct evidence of wrongdoing.”

The award also represented the first time that the CFTC paid a whistleblower, in part, for the outcome of an enforcement action by a foreign regulator.

In a statement, CFTC commissioner Dawn Stump criticized the decision, saying there was insufficient evidence to prove that the foreign regulator’s action was based on the tipster’s information.

And, even if there was enough evidence of a connection, she said an award should be denied.

“We should be particularly careful in making whistleblower awards based on monetary sanctions collected by a foreign futures authority, because such awards come from funds that would otherwise be available to whistleblowers to the commission or other U.S. regulators, or to the U.S. Treasury,” she said.

The payout represents by far the largest award under the CFTC’s whistleblower program, which has now paid a combined US$300 million to whistleblowers.

Those cases generated monetary sanctions totalling more than US$3 billion.

In fiscal 2020 the CFTC received over 1,000 whistleblower tips, an increase of 36% over the previous record in 2018.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.