The Dodd-Frank Act , known formally as the Dodd-Frank Wall Street Reform and Consumer Protection Act, was signed into law July 21, 2010 and is a major piece of reform legislation covering commodities and securities actions worldwide. The Act is meant primarily to promote financial stability by improving accountability and transparency in the financial system. The DFA contained three major whistleblower laws, one covering the Commodity Exchange Act, one cover the Consumer Financial Protection Board and another covering the Security and Exchange Act.
Qui Tam means “in the name of the king.” It refers to lawsuits brought by a private citizen (popularly called a "whistleblower"), on behalf of the United States, against a person or company who is believed to have violated the law. The major qui tam law in the United States is the False Claims Act.
The Dodd-Frank Act contained two modified qui tam provisions, covering violations of the Securities and Exchange Act, the Commodity Exchange Act and the Foreign Corrupt Practices Act.
The law permits individuals to file a complaints with the U.S. Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC), alleging that a person or company violated U.S. securities or commodities law.
Under the Dodd Frank Act, once a complaint is filed, it is up to the SEC or CFTC to investigate the allegations. If the SEC or CFTC confirm the validity of the whistleblower’s complaint, and sanction the wrongdoer for $1 million or more, the whistleblower is entitled to a monetary reward. That reward is between 10-30% of any recovery made by the SEC or CFTC. If the SEC or CFTC does not investigate the wrongdoer and/or issue a sanction of $1 million or more, the whistleblower is not entitled to any award.
Unlike the False Claims Act, in which a whistleblower can initiate a lawsuit against the wrongdoer if the United States fails to investigate or sanction the wrongdoer, the Dodd-Frank Act does not provide for a private right of action. In other words, the whistleblower cannot file his or her own lawsuit against the company, but rather must rely on the SEC or CFTC to do their jobs.
Title 7 U.S.C. § 26 of the Commodity Exchange Act defines "whistleblower" as "any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission [i.e. the Commodity Futures Trading Commission], in a manner established, by rule or regulation, by the Commission [CFTC]."
The “relator” is another word for whistleblowers. It originated in the False Claims Act whistleblower reward law signed by President Abraham Lincoln on March 2, 1863, during the Civil War. The term “relator” is the term used in the statute to identify the original source of the frauds against the government. The term “whistleblower” was not in use in 1863. Consequently, in modern whistleblower reward laws, the term “relator” is often used by the Courts and parties to signify a whistleblower.
The term "original information," as defined in Title 7 U.S.C. § 26(a)(4) of the Commodity Exchange Act means "information that is derived from the independent knowledge or analysis of a whistleblower; is not known to the Commission [CFTC] from any other source, unless the whistleblower is the original source of the information; and is not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news media, unless the whistleblower is a source of the information.”
Title 7 U.S.C. § 26(a)(3) of the Commodity Exchange Act defines "monetary sanctions" as "any monies, including penalties, disgorgement, and interest, ordered to be paid; and any monies deposited into a disgorgement fund or other fund pursuant to section 7246(b) to title 15, as a result of such action or any settlement of such action."
Title 7 U.S.C. § 26(b) of the Commodity Exchange Act requires the CFTC to give whistleblowers who provide original information to the Commission that leads to a successful enforcement 10% to 30% of the monetary sanctions over $1 million. If the total sanctions are less than $1 million the whistleblower is not entitled to any award. If the CFTC sanctions a company/individual at least $1 million, the “related action” provisions of the law kick-in. Under the related action provisions, a whistleblower can also obtain a reward of 10%-30% on sanctions obtained by other government agencies, if these agencies relied upon the information the whistleblower provided to the CFTC.
Title 7 U.S.C. § 26(b)(2) of the Commodity Exchange Act t excludes from the award provision: "
- Any whistleblower who is, or was at the time the whistleblower acquired the original information submitted to the Commission [CFTC], a member, officer, or employee of an appropriate regulatory agency; the Department of Justice; a registered entity; a registered futures association; a self-regulatory organization; the Public Accounting Oversight Board; or a law enforcement organization a defined in section 78c(a) f Title 15; or a law enforcement agency;
- Any whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower otherwise could receive an award under this section.
- To any whistleblower who submits information to the Commission [CFTC] that is based on facts underlying the covered action submitted previously by another whistleblower;
- To any whistleblower who fail to submit information to the commission in such form as the Commission may, by rule or regulation, require.”
Title 7 U.S.C. § 26(d)(2) of the Commodity Exchange Act reads as follows: "Any whistleblower who anonymously makes a claim for an award...shall be represented by counsel if the whistleblower anonymously submits the information upon which the claim is based. Prior to the payment of an award, a whistleblower shall disclose the identity of the whistleblower and provide other information as the Commission [CFTC] may require, directly or through counsel for the whistleblower."
The Dodd-Frank Act required the Commodity Futures Trading Commission to establish a Whistleblower Office . This Office contains useful information about the commodities whistleblower law. Complaints and requests for a reward must be filed with this Office. The Office has an excellent website located at www.whistleblower.gov.
Whistleblowers can appeal the denial of an award. Title 7 U.S.C. § 26(f) of the Commodity Exchange Act However, there is no appeal as to the percentage of the monetary sanction paid by the Commission. In other words, if the Commission provides you with a lower award (e.g.10%), you cannot appeal and claim you were entitled to a higher award (e.g. 30%). But if the Commission concludes that you were not a “whistleblower” entitled to an award, you can appeal the denial. Appeals must be filed within 30-days to the appropriate United States Court of Appeals.
Title 7 U.S.C. § 26(h) of the Commodity Exchange Act prohibits retaliation against any employee who filed a claim for a reward under the Exchange Act and/or assists the CFTC in an investigation of any such claim. Whistleblower allegations filed internally with the company most likely are not protected under the law’s anti-retaliation provision. Thus, to ensure protection against retaliation whistleblowers should filed an official claim or compliant under the reward law.
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For additional information on the Commodities Exchange Whistleblower Laws, please read the Rules published in The New Whistleblower's Handbook: A Step-by-Step Guide to Doing What's Right and Protecting Yourself (Lyons Press, 2017). An online resource for the Whistleblower handbook is available free of charge. It is indexed to the specific rules and contains links to the relevant statutes and here..
If you have a question for the author of The New Whistleblower's Handbook you can reach him at email@example.com and submit your inquiry.
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