ATTORNEY NEWSLETTER
Leaking Non-Public Information And Insider Trading
Special Access Employees May Not Disclose Non-Public Information
CFTC Targets Unauthorized Disclosures As Fraud
The U.S. Commodities Futures Trading Commission (CFTC) polices the options and commodities markets in the U.S. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. 111-203, established a CFTC whistleblower program to protect investors in all kinds of security, commodity, options, and derivative trading. See 7 U.S.C. § 26 et seq. One type of fraud is insider trading, which often occurs as the result of the release of non-public information to an individual who then trades a commodity or option based on that non-public information to the detriment of others without access to the information. If you have information of any form of commodities or options trading fraud the Los Angeles CFTC whistleblower attorneys at Evans Law Firm, Inc. can assemble your information in the form required by the CFTC for investigation and possibly a reward if the agency completes a successful enforcement action including recovery of civil penalties or disgorgement of illegal gains. If you have information of options trading fraud, call us today at (415)441-8669 or toll free at (888)503-8267.
Disclosing Non-Public Information
According to a recent CFTC announcement, [1] the New York Mercantile Exchange (“NYMEX”), a unit of the Chicago Mercantile Exchange (“CME”), and two of its former employees settled a seven-year lawsuit brought by the CFTC to resolve charges that the former employees leaked material nonpublic information to a broker, in violation of CFTC rules. According to the parties’ consent order, the conduct of the two former employees violated Section 9(e)(1) of the Commodity Exchange Act (“CEA”), 7 U.S.C. § 13(e)(1), which prohibits insider trading, and CFTC Regulation 1.59(d)(1)(ii), 17 C.F.R. § 1.59(d)(1)(ii), which prohibits disclosure of material nonpublic information (“MNPI”) obtained through special access as an employee of a self-regulatory organization. The case marks the first time the CFTC has charged an exchange with violations of the CEA and CFTC regulations prohibiting exchange employees from disclosing MNPI and represents just one of several recent enforcement actions stemming from alleged misuse or improper disclosure of MNPI. More specifically, the CFTC alleged that between 2008 and 2010, the two former NYMEX employees shared confidential information with the broker about the crude oil options and natural gas futures trades of NYMEX clients. As NYMEX employees, the two individuals had lawful access to the MNPI they received but were required to keep that information confidential, and the broker was not authorized to receive it in these instances. To evade detection, one of the former employees allegedly communicated with the broker via cell phone or initially contacted the broker on a recorded line but then switched to cell phones once it came time to share confidential information. The confidential information shared allegedly included identities of parties to specific trades, the buy or sell side of each party to specific trades, identities of the brokers involved in certain trades, the number of contracts traded, the prices paid, structures of specific transactions, and trading strategies of market participants.
Rewards In Covered Actions
Individuals who provide the CFTC with information of this or any other form of trading fraud are entitled to a reward. A CFTC case begins with a TCR (“Tip, Complaint, or Referral”) Form filed with the Commission. The Commission recommends that whistleblowers seek the counsel of experienced CFTC/SEC whistleblower attorneys to assist them in the process of submitting a TCR form. This will ensure they take the proper steps to remain anonymous and qualify for a whistleblower award. Once the CFTC determines a fine or obtains any recovery based on the information contained in the TCR then submit a Form WB-APP with the CFTC to claim a reward for the information they provided that led to the successful enforcement action.
Contact Us
Ingrid M. Evans and the other CFTC whistleblower attorneys at the Evans Law Firm know how to present your information on a TCR with the best chance for an ultimate reward if the CFTC elects to take action and the enforcement action is successful. Call Ingrid and the firm’s other CFTC whistleblower attorneys today at (415) 441-8669, or toll free at (888)503-8267 or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>. Ingrid and our other whistleblower attorneys also represent whistleblowers in cases involving the False Claims Act, offshore tax avoidance schemes or other tax fraud before the Internal Revenue Service, and bank fraud under the Financial Reform, Recovery, and Enforcement Act (FIRREA/FIAFEA),
[1] Evans Law Firm, Inc. was not involved in this case in any way.
