In today’s complex financial landscape, determining what constitutes a security or commodity and discerning which whistleblower program to employ can be challenging. This article provides a basic overview to help guide decision making for legal professionals working within some of the world’s largest corporations and law firms.
The question, “What is a security?” has both short and complex answers. On the other hand, securities like stocks are governed under the regulations set forth by the Securities and Exchange Commission (SEC). Detailed specifics of the SEC’s regulation can be found here.
To similarly draw upon the question, “What is a commodity?”; commodities for instance, like pork bellies, are regulated by the Commodity Futures Trading Commission (CFTC). To comprehend the inner workings of the CFTC, further guidelines can be explored here.
Understanding this separation is crucial as it impacts which whistleblower program to join. Whistleblower programs incentivize individuals to expose illegalities in the financial industry by offering cash rewards to individuals who submit original information that leads to successful enforcement action. To understand the intricate details of these whistleblower programs, it may be insightful to follow this article on Financial Frauds 101 provided by Pollock Cohen LLP.
Undeniably, knowing the ins and outs of such convoluted concepts is critical for financial and legal professionals alike. Recognizing whether an instrument is a security or commodity and effectively applying an appropriate whistleblower program could mark the difference between successful enforcement action and failure.