On July 21, 2010, President Obama signed into law perhaps the most comprehensive reform of the nation’s financial regulatory system in America’s history. The goal of the lengthy bill, commonly known as the Dodd-Frank Act, was to address many of the underlying causes of the economic meltdown that occurred in late 2008 and to prevent similar collapses – and accompanying bailouts – in the future. As part of the scheme, the law sought to encourage whistleblowers to come forward with information about misconduct by strengthening existing whistleblower protections, including the employee protection provisions of the Sarbanes-Oxley Act and the False Claims Act. The Dodd-Frank Act also created new whistleblower protections and incentive programs to reward individuals who report violations of the law that result in monetary sanctions against the offending party.
SEC Whistleblower Incentive Program And Anti-Retaliation Protections
Section 922 of the Dodd-Frank Act amends the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., to create a new federal program by which the Securities and Exchange Commission (“SEC”) will reward whistleblowers who voluntarily provide original information to the SEC regarding securities violations that result in the imposition of monetary sanctions greater than $1 million. Section 922 states that the whistleblower’s financial reward for the provision of such original information shall be not less than 10 percent and not more than 30 percent of the total collected monetary sanctions from the offending party. The SEC maintains discretion in determining the size of the whistleblower’s financial reward. In crafting this reward, the SEC will consider the significance of the information provided, the extent of the whistleblower’s assistance, the programmatic interests of the SEC, and any other relevant factor that the SEC establishes by subsequent rule or regulation. Section 922 specifically forbids awards to whistleblowers who were employees of an “appropriate regulatory agency,” the Department of Justice, a self-regulatory organization, the Public Company Accounting Oversight Board, or a law enforcement organization. Section 922 also prohibits financial rewards to whistleblowers who are convicted of a criminal violation related to the judicial or administrative action for which the whistleblower provided information, individuals who gain the original information by auditing financial statements as required under the securities laws and individuals who fail to submit information to the SEC as required by an SEC rule.
In addition to creating the federal program to encourage the reporting of securities violations, Section 922 protects employees against retaliation when these employees provide information about their employer to the SEC in accordance with the program, or when these employees initiate, testify or assist in any investigation related to the program, or make required disclosures under SOX, the Securities Exchange Act of 1934, and any other law, rule, or regulation under the jurisdiction of the SEC. This private right of action may be filed in federal court. A whistleblower’s remedies under this new provision include reinstatement, double back pay with interest, attorneys’ fees, and the reimbursement of other related litigation expenses.
CFTC Whistleblower Incentive Program And Anti-Retaliation Protections
Similar to Section 922’s creation of a whistleblower incentive program and a private right of action for the reporting of securities violations to the SEC, Section 748 of the Dodd-Frank Act amends the Commodity Exchange Act, 7 U.S.C. § 1 et seq., to create an incentive program and anti-retaliation protections for whistleblowers who provide original information to the Commodity Futures Trading Commission (“CFTC”) that results in the imposition of monetary sanctions greater than $1 million. Section 748’s CFTC program is distinct from Section 922’s SEC program, however, in that a whistleblower under the CFTC program has the right to appeal the size of the monetary award that she receives as the result of providing original information.
Newly-Created Whistleblower Protections For Financial Service Employees
Section 1057 of the Dodd-Frank Act creates a new private cause of action for financial services industry employees who experience retaliation for disclosing information regarding an employer’s fraudulent or unlawful conduct related to the provision of a consumer financial product or service. Section 1057’s anti-retaliation provisions apply to a wide array of employers, including organizations that extend credit or service or broker loans, provide financial advisory services to consumers regarding proprietary financial products, provide real estate settlement services or perform property appraisals, or analyze, collect, maintain, or provide consumer report information in connection with any decision related to the offering or provision of a consumer financial product or service.
Section 1057 prohibits retaliation against covered employees who have engaged in the following categories of protected activity:
- the provision or impending provision of information to the employer, Bureau of Consumer Financial Protection (“Bureau”), or any other state, local, or federal government authority or law enforcement agency, relating to any violation of any provision of Title X of the Dodd-Frank Act or any rule, order, standard or prohibition prescribed or enforced by the Bureau. This type of protected activity includes the employee’s provision of information regarding an act or omission that the employee reasonably believes to be a violation of these provisions and rules.
- testimony in any proceeding resulting from the administration or enforcement of any provision of Title X of the Dodd-Frank Act or any rule, order, standard or prohibition prescribed or enforced by the Bureau
- the filing or instituting any proceeding under any federal consumer financial law; or
- objecting to, or refusing to participate in any activity, practice, or assigned task that the covered employee reasonably believes to be a violation of any law, rule, standard, or prohibition subject to the jurisdiction of, or enforceable, by the Bureau.
Section 1057 provides employees with a burden-shifting framework that is comparably favorable to the interests of whistleblowers. The Dodd-Frank Act also provides whistleblowers with a variety of remedies, including reinstatement, backpay, compensatory damages, and attorney’s fees and litigation expenses. The statute of limitations for the new private cause of action under Section 1057 is 180 days. An employee must file their claim with the Occupational Safety Health Administration (“OSHA”). OSHA investigators will then investigate the employee’s complaint and issues findings. As is the case with other federal whistleblower protections, both the employee and the employer can appeal OSHA’s findings and request a hearing before a Department of Labor (“DOL”). If the DOL fails to issue a final order within 210 days of filing, the employee then can remove their Section 1057 claim to federal court for a jury trial.
