This post was also written by Amy Greer and Carl Krasik.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was enacted July 21, 2010. Among other things, it added new Section 21F to the Securities Exchange Act of 1934 (“Exchange Act”). This Section establishes a whistleblower program that directs the SEC (the “Agency”) to pay monetary awards, or what has been viewed as “bounties,” to whistleblowers who voluntarily provide the SEC with original information about violations of the securities laws. If the original information results in the SEC obtaining monetary sanctions exceeding $1 million, the whistleblower can recover between 10 percent and 30 percent of the monetary penalties. The Section also sets forth a robust anti-retaliation framework for whistleblowers. For a detailed discussion of Dodd-Frank’s anti-retaliation provisions, please click here to see our earlier Alert, “Financial Regulators Set Out to Get Their Man: Federally Mandated Bounties and Anti-Retaliation Provisions Designed to Regulate the Financial Services Industry.”
The SEC’s proposed regulations recognize that tension exists between an employee’s use of his/her company’s internal corporate compliance procedures and the lure of a potential bounty by proceeding directly to the SEC. The proposed regulations seek public comment about this particular issue, among others. Regardless of whether this tension is resolved adequately from the employer’s perspective, employers can strengthen their position by carefully evaluating their internal compliance process to ensure its effectiveness.
To read the full Alert, please click here.