HUNTON & WILLIAMS LLP

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FAX 202 • 778 • 2201

MARK W. MENEZES
R. MICHAEL SWEENEY, JR.
DAVID T. MCINDOE

February 4, 2011 DIRECT DIAL: 202 • 419 • 2122

FILE NO: 76142.2

David A. Stawick, Secretary

Commodity Futures Trading Commission VIA ELECTRONIC MAIL
Three Lafayette Center
1155 21st Street, NW
Washington, D.C. 20581

RE: Implementing the Whistleblower Provisions of Section 23 of the Commodity Exchange

Act, Notice of Proposed Rulemaking, RIN 3038-AD04

Dear Secretary Stawick:

I. INTRODUCTION.

In accordance with the Commodity Futures Trading Commission’s (the “CFTC” or the
“Commission”) Notice of Proposed Rulemaking, Implementing the Whistleblower Provisions of
Section 23 of the Commodity Exchange Act (the “Proposed Rule”), issued pursuant to Section
748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”), 1
and published in the Federal Register on December 6, 2010, 2 the Working Group of Commercial
Energy Firms (the “Working Group”) hereby submits comments in support of those filed by the
Edison Electric Institute and the National Rural Electric Cooperative Association.

The Working Group is a diverse group of commercial firms in the energy industry whose
primary business activity is the physical delivery of one or more energy commodities to others,
including industrial, commercial, and residential consumers. Members of the Working Group
are energy producers, marketers, and utilities. The Working Group considers and responds to
requests for public comment regarding regulatory and legislative developments with respect to
the trading of energy commodities, including derivatives and other contracts that reference
energy commodities.

1
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).
2
Implementing the Whistleblower Provisions of Section 23 of the Commodity Exchange Act, 75 Fed. Reg.
75,728 (Dec. 6, 2010).
David A. Stawick, Secretary
February 4, 2011
Page 2

II. COMMENTS OF THE WORKING GROUP OF COMMERCIAL ENERGY FIRMS.

A. GENERAL COMMENTS.

The Working Group generally supports the comments filed by the Edison Electric
Institute and the National Rural Electric Cooperative Association regarding the Proposed Rule.
We appreciate the opportunity to submit comments on the Proposed Rule and support the intent
of the Dodd-Frank Act and the Commission to provide incentives and protections for
whistleblowers that identify and help remedy violations of applicable securities laws and
regulations.

Members of the Working Group are committed to establishing strong cultures of

compliance that prevent and mitigate violations and minimize harm to employers and investors.
We agree with the Commission that the Proposed Rule should not discourage whistleblowers
who work for companies with robust compliance programs from first reporting a potential
violation to appropriate company personnel, but are concerned that the Proposed Rule does
nothing to encourage the use of internal reporting systems before a person reports a potential
violation to the Commission.

Indeed, without a prerequisite to report potential violations internally, the appeal of a

large financial reward may lead to slower identification and remediation, increased investigative
and remedial costs, an increase in meritless complaints, and the abuse of the Commission’s
reporting process by disgruntled employees. Additionally, as drafted, the Proposed Rule might
encourage employees to allow misconduct to arise (instead of proactively preventing or
mitigating it) in order to ensure they will qualify for an award.

The Proposed Rule should broaden the definition of “original information” to include
information an employee provided to his or her company and that is later reported to the
Commission by the company. This clarification would assure consistency in the content of the
information. Also, culpable individuals, in-house lawyers, and other compliance personnel
should not be eligible for whistleblower awards. Allowing these employees to be awarded
bounties will undermine the effectiveness of internal compliance systems. The Commission
should be required to share information reported to it by a whistleblower with the company, and
should permit the company to conduct a concurrent investigation. Additionally, the Commission
should extend the 60-day window a company has to investigate internal reports before an
employee may report such information to the Commission. The current 60-day proposal may not
provide sufficient time for a company to investigate complex issues or those that may arise in
international offices.

B. THE PROPOSED RULE DISCOURAGES THE USE OF INTERNAL REPORTING

SYSTEMS.

The Working Group supports the intent of the Proposed Rule, but is concerned that, as
currently written, the offer of a large financial reward will encourage employees to report
perceived problems or violations to the Commission without first notifying their employer. The
David A. Stawick, Secretary
February 4, 2011
Page 3

members of the Working Group are well-regulated by both state and federal agencies and are
committed to compliance. They encourage their employees to express concerns about the
operations of their businesses and have established internal policies that provide efficient
methods for reporting, responding to, and addressing employee complaints. The Working Group
believes that these internal processes provide an important screening mechanism that reduces the
costs incurred by the Commission and employers in order to investigate complaints.

As stated above, the offer of a large financial reward without a prerequisite to report a
problem internally encourages the use of the Commission’s reporting process as the primary
resort for all complaints or concerns. While the Working Group does not intend to suggest that
the Commission should not serve as a resource for employees to express concerns or complaints,
we believe making the Commission an employee’s primary resort would create several
unintended consequences. Initial reports to the Commission may slow the process by which a
company is notified and remedies a potential violation, due to the time the Commission needs to
process a complaint and assess its validity. Additionally, the potential for a large financial
reward is likely to lead to an increase in meritless complaints and the abuse of the Commission’s
reporting process, particularly by employees that might be facing a justifiable, performance-
based termination.

C. THE PROPOSED RULE SHOULD REQUIRE EMPLOYEES TO FIRST REPORT

POTENTIAL VIOLATIONS INTERNALLY AS A PREREQUISITE TO ENTITLEMENT TO
AN AWARD.

The Commission should require that employees of companies with internal compliance
programs established to meet the requirements of the Sarbanes-Oxley Act of 2002 and other
federal laws to report potential violations to their employer first in order to be considered for a
financial reward following a successful enforcement action. Specifically, employees should be
required to first satisfy all applicable reporting obligations under his or her company’s code of
conduct and in accordance with the company’s internal procedures in order to be eligible for a
bounty. The government has long required companies to establish strong compliance and
reporting programs, and many have done so at significant cost in time, money, and other
resources. Indeed, Working Group member companies have implemented and maintain internal
compliance programs designed to foster a “culture of compliance” and constantly strive to
integrate components required by all laws, regulations and formal policy guidance, including
those required by Sarbanes-Oxley, Securities and Exchange Commission Rule 10A-3, the U.S.
Sentencing Guidelines, and the Federal Energy Regulatory Commission’s Revised Enforcement
Policy Statement and Compliance Policy Statement.

By not requiring employees to use these internal programs first, the Commission is
undermining the very culture of compliance it and other regulators have sought to encourage.
Conversely, requiring an employee to first report internally does not undermine the
Commission’s objective of providing additional recourse to whistleblowers should a potential
violation not be addressed by an employer. The use of internal compliance systems will not only
reduce the investigative and remedial costs to the Commission and employers, but will aid in the
David A. Stawick, Secretary
February 4, 2011
Page 4

screening of meritless complaints, reduce abuse of the Commission’s reporting process, and
continue to provide the most efficient method for employees to raise concerns and for employers
to respond to complaints.

III. CONCLUSION.

In summary, the Working Group supports the intent of the Proposed Rule but believes
that requiring primary internal reporting will improve employees’ options for raising concerns,
provide an efficient method for addressing complaints, and discourage meritless and unjustified
reports that needlessly consume Commission resources. If you have any questions, or if we may
be of further assistance, please contact the undersigned.

Respectfully submitted,

/s/ Mark W. Menezes

Mark W. Menezes
R. Michael Sweeney, Jr.
David T. McIndoe

Counsel for the

Working Group of Commercial Energy Firms

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