U.S. derivatives regulator doles out $45 million to whistleblowers

WASHINGTON (Reuters) – A top U.S. financial regulator announced on Thursday it had awarded whistleblowers over $45 million for helping the watchdog identify improper activity.

The Commodity Futures Trading Commission said the high payouts, a dramatic increase from smaller awards granted in prior years, are evidence the regulator is increasingly receiving tips to help hunt down wrongdoing.

James McDonald, director of the agency’s enforcement division, said it had been a “transformative year” for its whistleblower program, and he expected more to come.

“Whistleblowers have added significant value to our enforcement program by enabling the commission to swiftly identify misconduct and hold wrongdoers accountable,” he said in a statement. “I expect this trend to continue as the Commission continues to receive increasing numbers of high-quality whistleblower tips.”

The regulator did not identify how many whistleblowers received the award, or what activity the tips helped the regulators hunt down. Under the program, whistleblowers can receive between 10 and 30 percent of any monetary sanctions that emanate from their tips.

Prior to 2018, the CFTC had issued just four whistleblower awards totaling less than $11 million, according to the agency’s website. In the last month, the agency had granted three more totaling over $75 million.

In July, the CFTC announced it had awarded $30 million to a single whistleblower, its largest single award since the program was authorized in 2010. It also announced in July it had granted an award to a whistleblower living in a foreign country for the first time in a separate case.

The derivatives regulator’s aggressive courting of whistleblowers comes as its fellow markets regulator, the Securities and Exchange Commission, is looking to place new limits on its program.

In June, the SEC proposed changes to its whistleblower program that would give it more flexibility in determining the size of awards. Like the CFTC’s program, awards are set as a percentage of the amount the regulator collects. SEC Chairman Jay Clayton said its whistleblower program has been a success, but the agency would be better served being able to increase payouts for smaller cases, and limiting the payments for massive settlements.

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