The North American Securities Administrators Association (NASAA) is an international securities-regulatory organization seeking to protect investors and promote capital markets for the benefit of all investors. Since its founding in 1919, NASAA’s membership has grown exponentially. Currently, NASAA has 67 members––which include all fifty U.S. states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, as well as various territories and provinces of both Canada and Mexico.
In essence, NASAA aims to protect investors from fraud and exploitation and does so in myriad of ways, including: licensing firms and their agents, investigating violations of law, filing enforcement actions, educating the public about investment fraud, providing training seminars for securities-agency regulators, and ensuring that its members are sharing important information with each other. Additionally, NASAA sets standards of conduct for the securities industry by adding new rules to its compilation of “Model Rules,” which NASAA members can later adopt in their respective jurisdictions.
Recently, NASAA has adopted a new model rule known as the NASAA Model Whistleblower Award and Protection Act (Act). The Act establishes a state-level whistleblower program that financially rewards individuals who report violations of state securities laws and protects them from retaliation. The state-level programs created by the Act mirror the highly successful whistleblower award program of the Securities and Exchange Commission (SEC).
With respect to the whistleblower-award component, whistleblowers are eligible for a financial award if they voluntarily provide original information leading to the successful enforcement of an administrative or judicial action under the particular state’s securities laws. In addition, whistleblowers have the right to remain anonymous; however, they must be represented by an attorney and they must reveal their identity prior to receiving an award. Depending on how helpful the whistleblower is and how vital the disclosure is to the enforcement action, whistleblowers can expect to receive a share ranging between ten and thirty percent of the monetary penalties recovered. However, the Act automatically disqualifies whistleblowers that have a legal duty to disclose the information, provide false statements in their disclosure, or are convicted of a felony in connection with the enforcement action.
Under the Act’s other component, employers are forbidden from retaliating against their employees who report possible securities violations, participate in an investigation or enforcement action, make disclosures that are required or protected under law, or report wrongdoing to an internal supervisor. However, whistleblowers are entitled to the Act’s anti-retaliation protections if they knowingly or recklessly provide false statements within the disclosure. Whistleblowers who qualify for anti-retaliation protections but still experience retaliation by their employer can bring a cause of action against their employer.
The Act is already making a meaningful impact. Since NASAA’s adoption of the Act, Montana has enacted a state-level whistleblower program which mirrors the Act. Montana joins Indiana and Utah in being the only states to have a state-level whistleblower program. Although it’s unclear whether all of the other remaining 47 states will adopt the Act, it is likely that it’s only a matter of time before we see some of the states follow Montana’s lead in enacting a state-level whistleblower program.
The Act will be a topic of discussion at this year’s whistleblower conference celebrating National Whistleblower Day, which will be hosted virtually from July 28th until the 30th. The three-day conference will have panels of speakers comprised of politicians, activists, experts, whistleblowers, and government officials. Attendees interested in the Act can tune in to the discussion panel with NASAA on July 28 at 3:30PM EST. Andrew Hartnett, John Cochran, Emily Kisicki, and Francswai Grayson are scheduled to speak.
Hartnett, who will be serving as the moderator, is the Deputy Administrator for Securities in the Iowa Insurance Division and President-elect of NASAA. Prior to that, Hartnett worked in privately practiced securities laws for several years before going on to serve as an Assistant Attorney General.
Cochran is the Commissioner of the Indiana Securities Division, which regulates the securities industry, loan brokers, collection agencies, franchises, and retirement communities. Prior to his appointment in 2021, Cochran was a member of the Indiana House of Representatives.
Kisicki is the Director of Policy for the Vermont Department of Financial Regulation and a member of the NASAA’s Enforcements Publications, State legislation, and Investment Adviser Regulatory Policy project groups. Before that, Kisicki served as the Director of Examination and Enforcement for the Vermont Securities Division where she oversaw investment-adviser registrations, examinations, investigations, and enforcement actions.
Grayson currently serves as the Director of Communication and Outreach for the Division of Securities at the Utah Department of Commerce, where she is responsible for managing the Division’s written correspondence, public presentations, and investor education program. Previously, Grayson worked at the Division as Securities Compliance Examiner and a Securities Enforcement Legal analyst. In that role, Grayson drafted the Division’s complaints and reviewed public records access requests.
National Whistleblower Day commemorates whistleblowers from around the world who have stepped forward to report wrongdoing, recognize their personal sacrifices, and celebrates the many ways in which they have contributed to the advancement of the rule of law. The upcoming NASAA panel will highlight how meaningful model whistleblower laws can be to state legislators. RSVP for the event here.