The U.S. Commodity Futures Trading Commission (CFTC) has contacted a number of major banks requesting non-disclosure agreements used in their swaps and clearing businesses to see whether they restrict whistleblowing, according to reporting by Bloomberg.
A CFTC Whistleblower Program rule prohibits entities from taking any action to prohibit individuals from contacting the CFTC about potential commodities law violations. This rule covers language in NDAs or other contacts which discourage employees or clients from reporting misconduct.
According to Bloomberg, the CFTC “has reached out to a number of banks, including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.” and “has requested that the banks hand over employment and customer agreements in their swaps and clearing businesses.”
The CFTC is to review whether any of these agreements violate its whistleblower protection rule which states that “No person may take any action to impede an individual from communicating directly with the Commission’s staff about a possible violation of the Commodity Exchange Act, including by enforcing, or threatening to enforce, a confidentiality agreement or predispute arbitration agreement with respect to such communications.”
In recent months, the U.S. Securities and Exchange Commission (SEC), which has a similar whistleblower rule, has cracked down on companies for muzzling whistleblowers through restrictive NDAs.
For example, in January, the SEC announced an enforcement action against J.P. Morgan Securities LLC in which the company agreed to pay $18 million to settle charges that it impeded the ability of advisory clients and brokerage customers to blow the whistle to the SEC. This was the largest penalty ever levied by the SEC for such a violation.
In an article in NYU Law’s Compliance and Enforcement blog, whistleblower attorney Benjamin Calitri of Kohn, Kohn & Colapinto explained that “Corporations should be looking at the SEC’s recent [restrictive NDAs] rulings as a sign that the age of blocking whistleblowers from disclosing in contractual agreements is over — it is now more expensive for a corporation to try to cover up fraud and corruption by silencing whistleblowers than it is for them to do the right thing.”
Further Reading:
Big Banks Face Probe Over Non-Disclosure Agreements in Swaps, Clearing Businesses