Monday, March 18, 2024

Internal auditor awarded $1.25 million for reporting misconduct

By John Filar Atwood

The CFTC has awarded $1.25 million to a whistleblower whose responsibilities included compliance or internal audit functions at the subject company. Stricter whistleblower requirements apply to employees with compliance or internal audit responsibilities, but the CFTC said that the whistleblower satisfied those requirements by first raising the matter internally and then waiting at least 120 days to contact the agency.

It is the first CFTC whistleblower award that applied the 120-day safe harbor provision to a person who served in an entity’s internal compliance or audit function. The whistleblower contacted the CFTC only after the employer took no meaningful remedial action on the issues in question.

In its order, the CFTC noted that it normally does not consider information that a whistleblower obtains from his or her role as an internal audit or compliance employee to be derived from his or her independent knowledge. However, the exclusion from independent knowledge does not apply when the employee waits at least 120 days after reporting it to his or her supervisor, or the audit committee, chief legal officer, or chief compliance officer.

In granting the award, the CFTC noted that the whistleblower’s information by itself was responsible for the agency’s enforcement staff opening an investigation and taking action against the company.

The CFTC’s director of enforcement said that the award recognizes the risks that company insiders take in coming forward with information as well as the value of the specific information provided.