The financial industry implosion of 2008 gave birth to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). One of the most highly publicized sections of Dodd-Frank are the “whistleblower” provisions.
Under Dodd-Frank, increased monetary rewards are offered under Section 922 of the act to individuals who provide information to the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) regarding securities law and commodity law violations.
In order to be compensated, the individual must provide “original information” based on their independent knowledge or analysis. There are some limitations as to who can receive an award and under what circumstances:
-No award can be given to a whistleblower who is convicted of a criminal violation related to the judicial or administrative action for which the whistleblower provided information.
-No award available when the person gains the information by auditing financial statements as required under the securities laws; or who fails to submit information to the SEC as required by an SEC rule.
-Awards not available to employees of the Department of Justice or a regulatory agency, an SRO, the PCAOB or a law enforcement organization.
If not excluded as set forth above, any person providing the “original information” can be awarded between 10 and 30 percent of the amount of any sanction that exceeds $1,000,000 that results based on his or her tip. Previously the award was limited to 10 percent of any penalties the commission obtained. As noted by Pratt H. Davis, an attorney at Page Perry, a nationwide securities arbitration and litigation law firm; under Dodd-Frank, the potential awards to those reporting securities law and commodity law violations can be very significant.
Importantly, it is also still illegal for employers to retaliate against employees who (1) provide information to the SEC or the CFTC pursuant to these new programs; (2) initiate, testify, or assist in an investigation or judicial or administrative action based on or related to such information; or (3) make disclosures that are required or protected under SOX.
Page Perry, is an Atlanta-based law firm with over 125 years of collective experience representing securities industry employees in intra-industry disputes and regulatory matters. For further information, please contact us.