1 RECOMMENDATION K: ENHANCE WHISTLEBLOWER PROTECTIONS

3 [Recommendation: The Report recommends legislation on whistleblower protections. The

4 agencies recommend that legislation be enacted to encourage whistleblowers to come forward

5 with relevant information to authorities in both the securities andfutures markets. Specifically,

6 the legislation shouldprovide for: (i) rewards for legitimate whistleblowing; and (ii) protection

7 ofwhistleblowers.]

9 The Commodity Exchange Act (7 U.S.c. 1. et seq.) is amended by adding the following new Section

10 6e:

11
12 SEC. 6e. COMMODITY WHISTLEBLOWER INCENTIVES AND PROTECTION.
13
14 "(a) IN GENERAL.-In any judicial or administrative action brought by the Commission

15 under the Act that results in a monetary judgment exceeding $1,000,000, the Commission, under

16 regulations prescribed by the Commission and subject to subsection (b), may pay an award or awards

17 not exceeding an amount equal to 30 percent, in total, of the monetary judgment imposed in the

18 action (or related actions) to one or more whistleblowers who voluntarily provided original

19 information to the Commission that led to the successful resolution of the action. Any amount

20 payable under the preceding sentence shall be paid from the fund described in subsection (f).

21 "(b) DETERMINATION OF AMOUNT OF AWARD; DENIAL OF AwARD.-

22 "(1) DETERMINATION OF AMOUNT OF AWARD.-In determining the amount of an

23 award, within the limit specified in subsection (a), the Commission may take into account the

24 significance of the whistleblower's information to the successful resolution of the judicial or

25 administrative action described in subsection (a), the degree of assistance provided by the

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 1 whistleblower and any legal representative of the whistleblower in such action, the

2 Commission's interest in deterring violations of the Act and regulations thereunder by

3 making awards to whistleblowers who provide original information that leads to the

4 successful enforcement of such laws, and such additional factors as the Commission may

5 establish by rule or regulation.

6 "(2) DENIAL OF AWARD.-

7 "(A) No award under subsection (a) shall be made to any individual who-

8 "(i) is, or was at the time he or she acquired the original information

9 submitted to the Commission, a member, officer, or employee of any

10 department or agency of the Government of the United States, a registered

11 entity, a registered futures association, or a self-regulatory organization as

12 defined in Section 3(a)(26) of the Securities Exchange Act of 1934; or

13 "(ii) fails to submit information to the Commission in such form as

14 the Commission may, by rule or regulation, require.

15 "(B) The Commission may determine to make an award to an individual

16 under subsection (a) notwithstanding that such individual knowingly violated,

17 assisted in the violation of, or caused to be violated any rule, regulation, or order of

18 the Commission with respect to which the Commission or a court has imposed a

19 monetary judgment; provided, however, that no award under subsection (a) shall be

20 made to any individual who is convicted of a criminal violation related to the judicial

21 or administrative action for which the individual otherwise could receive an award

22 under this section.

23 "(c) REPRESENTATION.-

24 "(1) PERMITTED REPRESENTATION.-Any whistleblower who makes a claim for an

25 award under subsection (a) may be represented by counsel.

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 1 "(2) REQUIRED REPRESENTATION.-Any whistleblower who makes a claim for an

2 award under subsection (a) must be represented by counsel if the whistleblower submits the

3 information upon which the claim is based anonymously. Prior to the payment of an award, a

4 whistleblower must disclose his or her identity and provide such other information as the

5 Commission may require.

6 "(d) No CONTRACT NECESSARY.-No contract with the Commission is necessary for any

7 whistleblower to receive an award under subsection (a), unless the Commission, by rule or

8 regulation, so requires.

9 "(e) APPEALs.-Any determination under this section, including whether, to whom, or in

10 what amount to make an award, shall be in the sole discretion of the Commission, and any such

11 determination shall be final and not subject to judicial review.

12 "(f) CUSTOMER PROTECTION FUND.-

13 "(1) FUND ESTABLISHED.-There is established in the Treasury of the United States a

14 fund to be known as the "Commodity Futures Trading Commission Customer Protection

15 Fund" (referred to in this section as the "Fund").

16 "(2) USEOF FUND.-The Fund shall be available to the Commission, without further

17 appropriation or fiscal year limitation, for the following purposes:

18 "(A) paying awards to whistleblowers as provided in subsection (a); and

19 "(B) funding customer education initiatives designed to help customers

20 protect themselves against fraud or other violations of this Act, or the rules and

21 regulations thereunder.

22 "(3) DEPOSITS AND CREDITS.-There shall be deposited into or credited to the

23 Fund-

24 "(A) any monetary judgment collected by the Commission in any judicial or

25 administrative action brought by the Commission under this Act, that is not otherwise

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 1 distributed to victims of a violation of this Act or the rules and regulations thereunder

2 underlying such action, unless the balance of the Fund at the time the monetary

3 judgment is collected exceeds $100,000,000; and

4 "(B) all income from investments made under paragraph (4).

5 "(4) INVESTMENTS.-

6 "(A) AMOUNTS IN FUND MAYBE INVESTED.-The Commission may request

7 the Secretary of the Treasury to invest the portion of the Fund that is not, in the

8 Commission's judgment, required to meet the current needs of the Fund.

9 "(B) ELIGIBLE INVESTMENTS.-!nvestments shall be made by the Secretary

10 of the Treasury in obligations of the United States or obligations that are guaranteed

11 as to principal and interest by the United States, with maturities suitable to the needs

12 of the Fund as determined by the Commission.

13 "(C) INTEREST AND PROCEEDS CREDITED.-The interest on, and the proceeds

14 from the sale or redemption of, any obligations held in the Fund shall be credited to,

15 and form a part of, the Fund.

16 "(5) REpORTS TO CONGRESS.-Not later than October 30 of each year, the

17 Commission shall transmit to the Committee on Agriculture, Nutrition and Forestry of the

18 Senate, and the Committee on Agriculture of the House of Representatives a report on-

19 "(A) the Commission's whistleblower award program under this section,

20 including a description of the number of awards granted and the types of cases in

21 which awards were granted during the preceding fiscal year;

22 "(B) customer education initiatives described in paragraph (2)(B) that were

23 funded by the Fund during the preceding fiscal year;

24 "(C) the balance of the Fund at the beginning of the preceding fiscal year;

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 1 "(D) the amounts deposited into or credited to the Fund during the preceding

2 fiscal year;

3 "(E) the amount of earnings on investments of amounts in the Fund during the

4 preceding fiscal year;

5 "(F) the amount paid from the Fund during the preceding fiscal year to

6 whistleblowers pursuant to subsection (a);

7 "(G) the amount paid from the Fund during the preceding fiscal year for

8 customer education initiatives described in paragraph (2)(B);

9 "(H) the balance of the Fund at the end of the preceding fiscal year; and

10 "(I) a complete set of audited financial statements, including a balance sheet,

11 income statement, and cash flow analysis.

12 "(g) PROTECTION OF WHISTLEBLOWERS.-

13 "(1) PROHIBITION AGAINSTRETALIATION.-

14 "(A) INGENERAL.-Any employee, contractor, or agent shall be entitled to all

15 relief necessary to make that employee, contractor, or agent whole, if that employee,

16 contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in

17 any other manner discriminated against in the terms and conditions of employment

18 because of any lawful act done by the employee, contractor, or agent in providing

19 information to the Commission, or in assisting in any investigation or judicial or

20 administrative action of the Commission based upon or related to such information.

21 "(B) RELIEF.-Reliefunder subparagraph (A) shall include reinstatement

22 with the same seniority status that the employee, contractor, or agent would have had,

23 but for the discrimination, 2 times the amount of back pay (with interest), and

24 compensation for any special damages sustained as a result of the discrimination,

25 including litigation costs, expert witness fees, and reasonable attorneys' fees. An

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 1 action under this subsection may be brought in the appropriate district court of the

2 United States for the relief provided in this subsection.

3 "(C) PROCEDURE.-

4 "(i) SUBPOENAS.-A subpoena requiring the attendance of a witness

5 at a trial or hearing conducted under this subsection may be served at any

6 place in the United States.

7 "(ii) STATUTE OF LIMITATIONS.-An action under this subsection

8 may not be brought more than 6 years after the date on which the violation

9 reported in subparagraph (A) is committed, or more than 3 years after the date

10 when facts material to the right of action are known or reasonably should

11 have been known by the whistleblower, but in no event after 10 years after

12 the date on which the violation is committed.

13 "(2) CONFIDENTIALITY.-

14 "(A) IN GENERAL.-Except as provided in subparagraph (B), all information

15 provided to the Commission by a whistleblower shall be confidential and privileged

16 as an evidentiary matter (and shall not be subject to civil discovery or other legal

17 process) in any proceeding in any Federal or State court or administrative agency, and

18 shall be exempt from disclosure, in the hands of a department or agency of the

19 Government of the United States, under the Freedom ofInformation Act (5 U.S.c.

20 552) or otherwise, unless and until required to be disclosed to a defendant or

21 respondent in connection with a public proceeding instituted by the Commission or

22 any entity described in subparagraph (B). For purposes of section 552 of title 5,

23 United States Code, this paragraph shall be considered a statute described in

24 subsection (b)(3)(B). Nothing herein is intended to limit the Attorney General's

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 1 ability to present such evidence to a grand jury or to share such evidence with

2 potential witnesses or defendants in the course of an ongoing criminal investigation.

3 "(B ) AVAILABILITY TO GOVERNMENT AGENCIES.-Without the loss of its

4 status as confidential and privileged in the hands of the Commission, all information

5 referred to in subparagraph (A) may, in the discretion of the Commission, when

6 determined by the Commission to be necessary or appropriate to accomplish the

7 purposes of this Act and protect customers, be made available to-

8 "(i) the United States Department of Justice;

9 "(ii) an appropriate department or agency of the Government of the

10 United States, acting within the scope of its jurisdiction;

11 "(iii) a registered entity, registered futures association, or self-

12 regulatory organization as defined in section 3(a)(26) of the Securities

13 Exchange Act of 1934;

14 "(iv) a State attorney general in connection with any criminal

15 investigation;

16 "(v) an appropriate department or agency of any State, acting within

17 the scope of its jurisdiction; and

18 "(vi) a foreign futures authority,

19 each of which shall maintain such information as confidential and privileged,

20 in accordance with the requirements in subparagraph (A).

21 "(3) RIGHTS RETAINED.-Nothing in this section shall be deemed to diminish the

22 rights, privileges, or remedies of any whistleblower under any Federal or State law, or under

23 any collective bargaining agreement.

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 1 "(h) RULEMAKING AUTHORITY.-The Commission shall have the authority to issue such

2 rules and regulations as may be necessary or appropriate to implement the provisions of this section

3 consistent with the purposes of this section.

4 "(i) DEFINITIONS.-For purposes of this section, the following terms have the following

5 meanmgs:

6 "(1) ORIGINAL INFORMATION.-The term 'original information' means information

7 that-

8 "(A) is based on the direct and independent knowledge or analysis of a

9 whistleblower;

10 "(B) is not known to the Commission from any other source; and

11 "( C) is not based on allegations in a judicial or administrative hearing, in a

12 governmental report, hearing, audit, or investigation, or from the news media, unless

13 the whistleblower is the initial source of the information that resulted in the judicial

14 or administrative hearing, governmental report, hearing, audit, or investigation, or the

15 news media's report on the allegations.

16 "(2) MONETARY JUDGMENT.-The term 'monetary judgment,' when used with

17 respect to any judicial or administrative action, means any monies, including but not limited

18 to penalties, disgorgement, restitution, and interest, ordered to be paid as a result of such

19 action or any settlement of such action.

20 "(3) RELATED ACTION.-The term 'related action,' when used with respect to any

21 judicial or administrative action brought by the Commission under this Act, means any

22 judicial or administrative action brought by an entity described in subsection (g)(2)(B) that is

23 based upon the same original information voluntarily provided by a whistleblower that led to

24 the successful resolution of the Commission action.

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 1 "(4) WHISTLEBLOWER.-The term 'whistleblower' means an individual, or two or

2 more individuals acting jointly, who submit information to the Commission as provided in

3 this section.

4 "(5) SUCCESSFUL RESOLUTION.-The term 'successful resolution,' when used with

5 respect to any judicial or administrative action brought by the Commission under this Act,

6 includes any settlement of such action.

7 "(j) IMPLEMENTING RULES.-The Commission shall issue final rules or regulations

8 implementing the provisions of this section no later than 270 days after the date of enactment of the

9 Over-the-Counter Derivatives Markets Act of2009.

10 "(k) ORIGINAL INFORMATION.-Information submitted to the Commission by a

11 whistleblower in accordance with rules or regulations implementing the provisions of this section

12 shall not lose its status as original information, as defined in subsection (i)(1), solely because the

13 whistleblower submitted such information prior to the effective date of such rules or regulations,

14 provided such information was submitted after the date of enactment of the Over-the-Counter

15 Derivatives Markets Act of2009.

16 "(1) AWARDS.-A whistleblower may receive an award pursuant to this section regardless of

17 whether any violation of a provision of this Act, or a rule or regulation thereunder, underlying the

18 judicial or administrative action upon which the award is based occurred prior to the date of

19 enactment of the Over-the-Counter Derivatives Markets Act of2009.

20 "(m) PROVISION OFFALSE INFORMATION.-A whistleblower who knowingly and willfully

21 makes any false, fictitious, or fraudulent statement or representation, or who makes or uses any false

22 writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry,

23 shall not be entitled to an award under this section and shall be subject to prosecution under section 1001

24 of title 18, United States Code.".

25

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