Electric Co-op Today

The Commodity Futures Trading Commission has finalized a new rule establishing a whistleblower program mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Russ Wasson

While  co-ops lack the type of profit incentives that could encourage the improprieties targeted by Dodd-Frank, they are subject to the rule.

The CFTC rule, which takes effect Oct. 24, adds a new section to the Commodity Exchange Act. It provides for payment of an award to whistleblowers who offer original information about a violation that leads to successful enforcement.

It also protects whistleblowers against retaliation for reporting information and assisting the agency in its related investigations and enforcement actions.

According to Russ Wasson, NRECA director of tax, finance and accounting policy, CFTC’s final rule ignored commenters’ recommendation that whistleblowers be required to utilize employer-sponsored complaint and reporting procedures before bringing a matter to the federal agency.

This recommendation, submitted by NRECA and more than 600 other parties, stemmed from a concern that incentivizing whistleblowers to go directly to the commission would render internal compliance and ethics reporting programs ineffectual, Wasson said. This could create incentives for employees “to play the CFTC lottery,” he cautioned.

The rule does provide, however, that the commission will consider a whistleblower’s report of information internally to an employer’s compliance or legal system as a factor that potentially can increase the amount of an award. Conversely, a whistleblower’s interference with such internal systems is a factor that can potentially decrease an award.

Dodd-Frank, and the whistleblower provisions, was enacted in response to “pretty widespread abuses” in the financial community, Wasson noted.

However, he added, the new rule’s scope extends far beyond the financial sector, providing “the first indication of the potential wide breadth of CFTC’s regulatory jurisdiction over the non-financial side of the U.S. economy.”

The rule applies to electric co-ops regardless of whether they have an existing whistleblower policy, Wasson emphasized. While it is not necessary to change existing whistleblower policies, he added, some entities are considering amending their policies to conform to the new CFTC rule.

NRECA’s sample whistleblower policy is on cooperative.com. Registered users may click here to access it.

Tags: Business and Finance