In an embattled decision, the U.S. Commodity Futures Trading Commission (CFTC) has imposed a $55 million fine on Trafigura Trading LLC, a Houston-based subsidiary of the global commodities trader Trafigura PTE, Ltd. This marks the CFTC’s first-ever enforcement action under its whistleblower protection rule, implemented seven years ago. The settlement, announced on June 17, 2024, addresses multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations by Trafigura Trading LLC.
The Case Explained
A significant aspect of this case is the CFTC’s allegation that Trafigura required employees to sign and requested former employees to sign Non-Disclosure Agreements (NDAs) that effectively prevented them from communicating with the CFTC, law enforcement, and other regulators. These restrictive covenants reportedly hindered the CFTC’s investigation.
“This is the first CFTC action charging a company under regulations designed to prevent interference with whistleblower communications,” stated Brian Young, director of the CFTC’s Whistleblower Office. “This groundbreaking action demonstrates the CFTC’s commitment to protecting potential whistleblowers and puts the market on notice that the CFTC will not tolerate contractual arrangements that could impede communication by potential witnesses.“
The CFTC’s whistleblower rule, Regulation 165.19(b), prohibits companies from taking actions that impede individuals from directly communicating with the Commission about potential violations of the CEA. The rule was violated when Trafigura‘s NDAs, signed between July 31, 2017, and 2020, lacked specific exceptions that would allow employees to share information with regulatory bodies.
The company argued that it had voluntarily taken significant remedial steps to enhance its compliance program, including implementing new risk-based policies and training employees.
Two CFTC Commissioners Disagree
However, two CFTC commissioners, Summer Mersinger and Caroline Pham, expressed disagreement with the enforcement. They argued that the company had not explicitly “acted” to impede reporting and that the whistleblower rules do not mandate specific language in employment agreements for compliance.
This enforcement action by the CFTC aligns with similar measures by other federal regulators, such as the U.S. Department of Justice and the Securities Exchange Commission (SEC), which have been actively encouraging whistleblower activity. The SEC, for instance, fined a company in 2024 for using NDAs that allegedly impeded whistleblower activity.
Given this precedent, regulated employers should review their employment and separation agreements to ensure they do not inadvertently restrict employees from participating in whistleblower programs. The outcome of the upcoming presidential election could also influence the future of federal whistleblower programs, potentially altering enforcement priorities and approaches.
