The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included a whistleblower program allowing individuals who report original information to the SEC leading to a recovery exceeding $1 million to obtain between 10 percent and 30 percent of the recovery. It also included a prohibition on retaliation.
It has been about one year since the SEC established its Office of the Whistleblower, and according to Sean X. McKessy, the chief of that office, the SEC has received almost 3,000 securities law violation tips, or about eight tips per day.
After much deliberation, the Securities and Exchange Commission (SEC) issued final rules implementing the whistleblower program mandated by the Dodd-Frank Act. Under the new rules, individuals (referred to as whistleblowers) may claim rewards if they voluntarily provide to the SEC original information about a violation of the federal securities laws, including violations of the Foreign Corrupt Practices Act that leads to a successful enforcement action resulting in monetary sanctions that total more than $1 million.
If an individual meets each of these requirements, the SEC will be required to award the whistleblower between 10 and 30 percent of the monetary penalties recovered, including penalties recovered in related actions by other regulatory agencies.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 brings a new round of sweeping reform to our nation’s financial system. Under the Dodd-Frank Act, a whistleblower who provides “original information” to the U.S. Securities Exchange Commission (SEC) or the U.S. Commodity Futures Trading Commission (CFTC) is eligible to receive a portion of the proceeds recovered by the government as a result of a successful enforcement action.
The recent regulatory reform package known as the Dodd-Frank Wall Street Reform and Consumer Protection Act authorizes the Securities and Exchange Commission to pay bounties to whistleblowers whose information results in a monetary recovery. In cases involving valuable information concerning securities fraud, the whistleblower payment can be as high as 30 percent of the total recovery. There is good reason to believe that these bounty provisions will extend to cases involving violations of the Foreign Corrupt Practices Act of 1977 (FCPA), which broadly prohibits the payment of bribes to foreign officials for the purpose of obtaining government contracts; securities fraud occurs because the bribes are seldom, if ever, properly accounted for on a company’s books. Recent FCPA cases have resulted in recoveries in the tens of millions of dollars.
Commentators are talking about the somewhat under-the-radar whistleblower provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, recently signed into law by President Obama. This massive law is a sweeping overhaul of the financial system, and it includes a number of provisions expanding opportunities and increasing protections for whistleblowers. The National Whistleblower Center has compiled the sections of the act pertaining to whistleblowers and has posted it here.