The Dodd-Frank Wall Street Reform and Consumer Protection Act attempts to address the financial industry abuses that led to the financial crisis in the late 2000s. Enacted in 2010, the Act is considered one of the most sweeping reforms of the financial industry and Wall Street since the Great Depression.
In addition to regulating the derivatives market and credit rating agencies, and limiting bank ownership of hedge funds and private equity funds, the Dodd-Frank Act includes amendments to the Securities Exchange Commission whistleblower program, attempting to encourage whistleblowers to come forward with information about securities law violations.
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Who are Securities Exchange Commission whistleblowers?
The Dodd-Frank Act defines an SEC whistleblower as any individual, or group of individuals, who voluntarily provides information relating to securities law violations to the government.
The Act amends the whistleblower provisions in the Securities Exchange Act of 1934, which only allowed whistleblowers to disclose information about insider trading. The new whistleblower provisions are substantially broader, allowing whistleblowers to report any violations of federal securities law, including insider trading and other types of market manipulation.
SEC Whistleblower Program rewards
The Dodd-Frank Act further expanded existing whistleblower provisions by creating the SEC whistleblower reward program, and a similar whistleblower program for the Commodity Futures Trading Commission (CFTC).
Under the Dodd-Frank Act, whistleblowers may be entitled to receive financial rewards for their role in disclosing information about securities law violations to the SEC or CFTC. SEC and CFTC whistleblowers may receive 10-30% of the amount of money recovered by the government agency.
The percentage of the government recovery to be awarded to the SEC or CFTC whistleblower is determined, among other things, by:
- The significance of the information
- The assistance provided by the whistleblower
- The SEC’s interest in preventing the particular type of fraud reported
SEC whistleblower eligibility rules
SEC whistleblower rules, established by the Dodd-Frank Act, are conditions that whistleblowers must typically satisfy in order to be considered for a financial reward and protection from employer retaliation.
In order to be eligible for a financial award, the information submitted by the whistleblower must typically be voluntary and lead to a recovery by the government of at least $1 million. Additionally, the information provided by the whistleblower must be:
- From the whistleblower’s independent knowledge or analysis
- Previously unknown to the SEC
- Derived from a source other than allegations made in a judicial hearing, governmental report, the news media, or a related source
Confidentiality for SEC whistleblowers
The Dodd-Frank Act contains one of the strongest confidentiality provisions for whistleblowers ever enacted, allowing whistleblowers who have hired an attorney to report fraud anonymously. Whistleblowers’ identities may remain unknown even to the SEC until the time comes for the payment of an award.
Job protection for SEC whistleblowers
The law prohibits employers from retaliating against whistleblowers. Employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. Whistleblowers who suffer from employment retaliation or who are terminated for their participation in a whistleblower lawsuit may sue for reinstatement, and are entitled to twice the amount of the back pay owed to them.