July 1, 2024
We caught up with Christina McGlosson for a discussion about current SEC/CFTC Enforcement Division priorities, the types of information whistleblowers can provide to help these enforcement divisions open investigations and combat fraud, and more.
Christina recently joined our Whistleblower practice as our expert in the Dodd Frank whistleblower provisions. She previously served as the former acting director of the Whistleblower Office in the Division of Enforcement at the U.S. Commodity Futures Trading Commission. She was also a senior attorney in the SEC’s Division of Enforcement for over a decade.
What do you see as current SEC/CFTC areas of enforcement interest?
The SEC and CFTC are focused on combating fraud in the global markets due, among other concerns, to the rise of technology and artificial intelligence. Their priorities include:
- At both agencies, digital assets and crypto exchanges.
- At the CFTC, unregistered entities, such as unregistered commodity pool operators and futures commission merchants, as well as unregistered exchanges.
- For the SEC and CFTC, off-channel communications, like messaging about company business using WhatsApp, Telegram, and other apps to circumvent company servers, or transferring company client calls to personal cell phones.
- Although financial fraud has always been a staple of the SEC’s Enforcement Division, Financial fraud has re-emerged as a priority.
- At both agencies, market manipulation, including pump-and-dump schemes, wash trading, and at the CFTC, spoofing.
- AI whitewashing is a top priority for the SEC, which is monitoring companies for falsely adding the words “artificial intelligence” to future business, for example, in order to improve imminent earnings reports, and increase share prices.
Who are whistleblowers?
Whistleblowers play a critical role in stopping fraud and misconduct and ensuring the integrity of financial markets.
They are often professionals in banks, those who work at broker-dealers, hedge funds, investment advisors, investment companies, other financial services companies, both public and private companies, on trading floors, or in compliance, among other places.
What types of information can whistleblowers provide that is helpful to enforcement agencies?
The SEC and CFTC are interested in whistleblower tips involving fraud or misconduct that violates the federal securities laws or the commodity exchange act, respectively.
The ideal whistleblower is someone with direct knowledge of the fraud and who has supporting evidence, such as documents, emails, text messages, or participated directly in conversations.
Can whistleblowers be outsiders?
Absolutely. Any individual who became aware of an entity’s fraud or misconduct through documents received or conversations with those at the entity who engaged in the fraud or misconduct can be a whistleblower.
What is the best way to present a whistleblower’s information to a government agency?
Accurately describing the fraud or misconduct on a whistleblower tip, complaint, or referral (TCR) form is critical to inspiring review and the opening of an investigation by the SEC or CFTC’s Enforcement Division.
Even the most brilliant individual who has witnessed fraud or has documentary evidence of fraud in his or her possession may not know the provisions under, say, the Commodities Exchange Act or the federal securities laws, to properly draft and submit a whistleblower TCR to the SEC or CFTC.
Hiring an attorney with Dodd-Frank and federal securities law expertise is an efficient and effective way to assess whether your claim rises to the level of an enforcement agency review, let alone an investigation.
If you want to file a TCR anonymously, you must hire an attorney to represent you.
Your attorney will also help you organize and index your documentary evidence and prepare your whistleblower TCR in the most compelling way, which is more likely to result in an enforcement investigation and subsequent monetary award for the whistleblower.
The decision to blow the whistle on fraud can feel risky. Can whistleblowers maintain anonymity?
Yes. But if you do, you are required by law to retain an attorney to represent you. A whistleblower’s strongest possibility to obtain a monetary award for helping an enforcement division is to hire an attorney with significant Dodd-Frank expertise to represent you.
In addition to helping prepare your TCR, your attorney will appear on your behalf at SEC and CFTC Enforcement Division meetings to discuss your TCR. To remain anonymous, the whistleblower will present him or herself at Enforcement Division meetings only through voice technology.
Whistleblower confidentiality and identity protection are critical to the success of the SEC and CFTC whistleblower programs.
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Christina McGlosson served as the senior counsel to the director of the SEC’s Division of Enforcement, assisting in the restructuring of the division on the heels of the Madoff fraud, which included structuring the Office of the Whistleblower and drafting the rules to implement the Dodd Frank Whistleblower Provisions.