U.S. Regulators Probe Banks' Use of Non-Disclosure Agreements

The CFTC is investigating major U.S. banks' use of NDAs that could discourage whistleblowers, highlighting regulators' efforts to promote financial industry transparency.

Ebenezer Mensah
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U.S. Regulators Probe Banks' Use of Non-Disclosure Agreements

U.S. Regulators Probe Banks' Use of Non-Disclosure Agreements

The U.S. Commodities Futures Trading Commission (CFTC) is investigating major U.S. banks, including JPMorgan Chase, Bank of America, and Citigroup, over their potential use of non-disclosure agreements (NDAs) in derivatives and clearing operations. The CFTC has requested that the banks provide their employment and customer agreements to determine whether the contracts include language that could impede whistleblowers from reporting violations to the regulator.

The probe is part of regulators' broader efforts to crack down on the alleged use of confidentiality agreements by companies to discourage the reporting of potential misconduct. The CFTC's scrutiny follows similar government probes into companies allegedly using NDAs to discourage workers or clients from reporting wrongdoing.

According to sources familiar with the matter, the CFTC is seeking information from the banks to determine if the NDAs contain language that could prevent potential whistleblowers from reporting wrongdoing. None of the banks currently face any allegations of wrongdoing, and the investigation may not result in any action.

Why this matters: The investigation highlights the increasing regulatory focus on ensuring that confidentiality agreements do not hinder whistleblowers from reporting potential misconduct in the financial industry. The outcome of the probe could have implications for how banks structure their NDAs and interact with employees and customers.

The effort is part of the CFTC's broader push to encourage individuals to come forward with tips, which are critical for the agency's financial enforcement program. The CFTC recently hired a former Justice Department prosecutor to run its whistleblower program as part of this initiative. The Securities and Exchange Commission (SEC) has also ramped up its enforcement in this area, levying fines against companies that do not comply with rules allowing individuals to report securities violations to the regulator.

In January, JPMorgan Chase agreed to pay an $18 million fine for violating whistleblower-protection rules with its confidentiality agreements during a three-year period. The CFTC's ongoing investigation into major banks' use of NDAs underscores the heightened regulatory scrutiny on potential barriers to whistleblowing in the financial sector. As the probe unfolds, it could lead to further enforcement actions and changes in how banks approach confidentiality agreements with their employees and customers.

Key Takeaways

  • CFTC investigating major U.S. banks' use of NDAs to discourage whistleblowing.
  • Probe aims to determine if NDAs contain language preventing reporting of misconduct.
  • No current allegations of wrongdoing, but investigation could lead to enforcement actions.
  • Effort part of CFTC's push to encourage whistleblowing in financial industry.
  • Heightened regulatory scrutiny on potential barriers to whistleblowing in finance.