Today, July 21, 2014, is the fourth anniversary of the passage of the Dodd-Frank Act — the most significant financial reform law enacted since the Great Depression to combat Wall Street and financial fraud. However, the law is under attack from Wall Street and Corporate America, and its most important provisions are in danger.
Dodd-Frank was passed in 2010 in reaction to the financial crisis and stock market fallout from the Great Recession. The federal government had to bail out major banks and corporations, and the President and many members of Congress felt obligated to make sure it would never happen again.
Part of those reforms was to include robust protections to encourage corporate whistleblowers to report financial fraud and securities violations. As the Dodd-Frank Act was being written, attorneys with the National Whistleblower Center worked directly with the Senate Banking Commission to ensure that whistleblowers could maintain anonymity, protect their jobs, and receive monetary rewards as an incentive for providing critical information about financial fraud to the Securities Exchange Commission. After the Dodd-Frank Act was signed into law, attorneys with the National Whistleblower Center also met directly with every Commissioner of the Securities and Exchange Commission and submitted written comments to the SEC that greatly influenced the shape of the final whistleblower rules for the SEC’s whistleblower program.
Since the enactment of Dodd-Frank, the SEC’s Office of the Whistleblower receives thousands of high quality whistleblower allegations each year about ongoing financial fraud and securities violations, and the SEC has recovered millions of dollars based on these whistleblower disclosures. The Dodd-Frank Act authorizes the Securities and Exchange Commission and the Commodity Futures Trading Commission to pay monetary awards to whistleblowers that come forward with information that leads to an enforcement action in which more than $1,000,000 in sanctions is ordered. The range for awards is between 10 and 30 percent of the money collected.
Thus far, the SEC has issued six orders granting awards to whistleblowers, but it is expected there will be large whistleblower awards issued in the near future as the SEC Office of the Whistleblower processes more claims filed under the Dodd-Frank whistleblower provisions. Under other new authorities in the Dodd-Frank Act, the SEC has also brought enforcement actions against companies that retaliate against whistleblowers.
However, from the very beginning, publicly traded companies and big business have been fighting Dodd-Frank to keep corporate whistleblowers silent. Corporations have increased the practices of illegal gag agreements and whistleblower retaliation while at the same time arguing that whistleblowers must report to internal compliance programs before they can go to the SEC. Currently, members of Congress and the SEC are investigating one such case of illegal gag agreements in a case.
These anti-whistleblower practices are a threat to the Dodd-Frank whistleblower provisions and chill the reporting of financial fraud, ponzi schemes and other securities violations. Without being able to maintain anonymity, whistleblowers stand to lose everything.
In addition, large special interests working for Wall Street and Corporate America are working overtime to lobby Congress to either roll back or repeal the Dodd-Frank whistleblower program and other corporate whistleblower rights.
In the weeks and months ahead, the National Whistleblower Center will be calling for citizen action to oppose Corporate America’s attack on whistleblowers and providing specific rebuttals to oppose new legislation that is being proposed by groups like the Chamber of Commerce and corporate interests that want to silence whistleblowers who disclose large-scale fraud against taxpayers, shareholders and consumers.
Watch this blog for additional information.
Paul Lyons contributed to writing this post.
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