Employees in the financial sector are in a unique position: They’re often the first to uncover illegal practices. In their day-to-day work, they may be privy to misconduct that would otherwise fly under the radar. Possessing that information puts them in an uncomfortable position: Report it and risk their job security, or stay silent and risk being complicit?
Fortunately, several federal whistleblower programs offer protections for people in this position. Federal law provides financial incentives, confidentiality and job protection for those who blow the whistle.
One such program is handled by the Commodity Futures Trading Commission (CFTC), the federal agency responsible for regulating the derivatives market. Established by the Dodd-Frank Act, the CFTC program awards whistleblowers with up to 30 percent of monetary sanctions obtained as a result of the whistleblower’s information. To qualify, the whistleblower’s information must be original (meaning it hasn’t already been reported), independently obtained and voluntarily reported. Additionally, the resulting sanctions must total at least one million dollars.
Examples of illegal schemes
In such a highly regulated industry, illegal schemes can take any number of forms. Examples include:
- Spoofing: artificially influencing the market by placing futures orders and then canceling them before they’re executed
- Pump-and-dump schemes: artificially inflating the market by spreading false or misleading information, then dumping the holdings
- Insider trading: using material nonpublic information to make trading decisions
The illegal conduct must involve U.S. markets, but it doesn’t need to occur within the U.S.
Consider this first
Whistleblowers can report violations by filing a Form TCR (Tip, Complaint, or Referral) through the CFTC’s website. However, speak with an attorney before doing so. With an attorney, you can file anonymously. Additionally, a lawyer can help ensure that you file strategically – including evidence that’s specific, credible and authentic, which will put your claim on the strongest footing for success.
An attorney can also help you decide whether to first report the misconduct internally. While not required, it may be advantageous to do so.