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EU Directive

The New EU Whistleblower Directive: The 27 member-states of the European Union must adopt new whistleblower laws by December 17, 2021. Each member-state is now separately debating how to implement whistleblower protections under its own laws.

International whistleblower law firm Kohn, Kohn & Colapinto, LLP has long supported enhanced whistleblower protections in Europe. While the scope of the EU Directive was under debate within the European Parliament, KKC submitted a comprehensive proposal for the Directive.

A KKC partner testified in the EU Parliament regarding the need to protect European employees who reported financial crimes to directly to law enforcement agencies.

Currently, KKC is taking the lead in promoting that all 27 member-states of the EU implement aggressive whistleblower protections. KKC drafted a 27-page memo addressing all of the major issues facing whistleblowers and provided specific recommendations for legislative action. This proposal has been officially filed with all EU member-states.

Additionally, KKC partners helped draft a follow-up submission to EU nations urging them to include climate-related crimes and frauds to the definition of a protected disclosure under the law.

KKC has also joined in a coalition of advocacy groups working to ensure that Europe finally enacts laws that will work in practice and provide, for the first time, real whistleblower protections to the people in Europe. Among the groups we are now working with include the National Whistleblower Center, Whistleblowing International, and the European Center for Whistleblower Rights.

KKC has also participated in conferences and other public meetings related to the Directive, including a major international conference.

Because the Directive sets forth the “common minimum standards” for whistleblower protection required by each European Union (“EU”) Member State, implementation of the Directive creates a unique opportunity for Member States to extend protections beyond these minimum standards.

KKC will continue to aggressively participate in the international movement within Europe and other nations to promote laws that create robust whistleblower programs that protect whistleblowers, incentivize the reporting of crimes or regulatory violations, and enable law enforcement agencies to effectively combat corruption.

Because the Directive sets forth the “common minimum standards” for whistleblower protection required by each European Union (“EU”) Member State, the Directive plainly permits Member States to extend protections beyond these minimum standards. Therefore, when implementing the Directive each Member State has an opportunity to create robust whistleblower programs that protect whistleblowers, incentivize the reporting of crimes or regulatory violations, and enable law enforcement agencies to effectively combat corruption.

In essence, Kohn, Kohn & Colapinto, LLP’s recommended best practices include:

  • Expanding whistleblower protections to cover disclosures permitted under international anti-corruption conventions signed by Member States;
  • Adopting language and procedures that have proven effective in protecting whistleblowers when implementing Articles 6-7, 11, 14-16, 19-21, and 23-24 of the Directive;
  • Narrowly interpreting Article 22 of the Directive in order to ensure that whistleblowers are not chilled from making disclosures and their confidentiality is maintained; and
  • Enacting whistleblower reward laws to combat specific legal violations, including foreign bribery, money laundering, tax evasion, government procurement fraud, and ocean pollution.

Kohn, Kohn & Colapinto’s 29-page comment going over, in detail, what the EU nations need to include in order to enact successful whistleblower laws.

What You Should Know

This directive, when applied, may fix some of these glaring holes in current European whistleblower laws. For example, this directive will require protection for any persons who disclose information to which they had privileged access and will protect whistleblowers who report internally, externally, or publicly. This directive also includes a more comprehensive list of retaliatory actions that are prohibited. Therefore, legislation enacting the Whistleblower Directive should ensure that all whistleblowers who report corporate fraud will receive more extensive protection.

Nevertheless, while this directive requires that a workplace whistleblower have access to legal remedies and compensation, there is no provision providing rewards for successful disclosures.

Therefore, when it comes to global financial institutions with a presence in the United States, whistleblowers are better off reporting to the United States Securities & Exchange Commission (“SEC”). The SEC Whistleblower Program, which contains comprehensive anti-retaliation regulations and unique whistleblower reward provisions, remains superior to most European whistleblowing regimes.

The U.S. Laws Can Be Used Today!

Whenever a major corruption scandal is exposed by a whistleblower it is absolutely necessary to screen that case and determine whether the whistleblower may be covered under the major U.S. whistleblower reward laws, such as the Foreign Corrupt Practices Act, the False Claims Act, the Internal Revenue Act, the Securities Exchange Act and the Commodity Exchange Act. These U.S. laws have expansive extraterritorial application. However, the ability of foreign nationals to qualify for a reward under U.S. law is not widely understood. This can cause whistleblowers to lose the opportunity to obtain multi-million-dollar rewards and stifle the ability of law enforcement officials to obtain access to the evidence they need to hold fraudsters accountable.

The U.S. laws also present a model for other nations to follow. It is incumbent upon anyone with information on frauds and corruption to understand how these laws work, how they can safely report large scale economic crimes.

Protect Yourself! Learn U.S Laws

Overview from: justice.gov

The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. (“FCPA”), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.

Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons and certain foreign issuers of securities. With the enactment of certain amendments in 1998, the anti-bribery provisions of the FCPA now also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States.

The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. See 15 U.S.C. § 78m. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (b) devise and maintain an adequate system of internal accounting controls.

Overview from: sec.gov

With this Act, Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of the securities industry. This includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation’s securities self regulatory organizations (SROs). The various securities exchanges, such as the New York Stock Exchange, the NASDAQ Stock Market, and the Chicago Board of Options are SROs. The Financial Industry Regulatory Authority (FINRA) is also an SRO.

The Act also identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and persons associated with them.

The Act also empowers the SEC to require periodic reporting of information by companies with publicly traded securities.

Corporate Reporting

Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC’s EDGAR database.

Proxy Solicitations

The Securities Exchange Act also governs the disclosure in materials used to solicit shareholders’ votes in annual or special meetings held for the election of directors and the approval of other corporate action. This information, contained in proxy materials, must be filed with the Commission in advance of any solicitation to ensure compliance with the disclosure rules. Solicitations, whether by management or shareholder groups, must disclose all important facts concerning the issues on which holders are asked to vote.

Tender Offers

The Securities Exchange Act requires disclosure of important information by anyone seeking to acquire more than 5 percent of a company’s securities by direct purchase or tender offer. Such an offer often is extended in an effort to gain control of the company. As with the proxy rules, this allows shareholders to make informed decisions on these critical corporate events.

Insider Trading

The securities laws broadly prohibit fraudulent activities of any kind in connection with the offer, purchase, or sale of securities. These provisions are the basis for many types of disciplinary actions, including actions against fraudulent insider trading. Insider trading is illegal when a person trades a security while in possession of material nonpublic information in violation of a duty to withhold the information or refrain from trading.

Registration of Exchanges, Associations, and Others

The Act requires a variety of market participants to register with the Commission, including exchanges, brokers and dealers, transfer agents, and clearing agencies. Registration for these organizations involves filing disclosure documents that are updated on a regular basis.

The exchanges and the Financial Industry Regulatory Authority (FINRA) are identified as self-regulatory organizations (SRO). SROs must create rules that allow for disciplining members for improper conduct and for establishing measures to ensure market integrity and investor protection. SRO proposed rules are subject to SEC review and published to solicit public comment. While many SRO proposed rules are effective upon filing, some are subject to SEC approval before they can go into effect.

The Commodity Exchange Act (CEA) regulates the trading of commodity futures in the United States. Passed in 1936, it has been amended several times since then. The CEA establishes the statutory framework under which the CFTC operates. Under this Act, the CFTC has authority to establish regulations that are published in title 17 of the Code of Federal Regulations.

  • CFTC regulations are found at Title 17 Chapter I of the Code of Federal Regulations (CFR) and are available at the U.S. GPO Access website.
  • Prior to promulgation and inclusion in the CFR, CFTC proposed and final regulations are published in the Federal Register.
  • CFTC Unified Agenda of Regulatory and Deregulatory Actions – Semiannual Unified Agenda of Regulatory and Deregulatory Actions from Reginfo.gov

The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code (USC). It is organized topically, into subtitles and sections, covering income tax in the United States, payroll taxes, estate taxes, gift taxes, and excise taxes; as well as procedure and administration. Its implementing agency is the Internal Revenue Service.

Ireland, We’re Here For You

Kohn, Kohn & Colapinto, LLP believes that its recommendations are compatible with Ireland’s current anticorruption regime, which is uniquely strong within the EU. In Ireland, whistleblowers are protected by a fairly comprehensive series of laws that include, amongst other subjects, persons reporting: breaches of the Ethics Acts; violations of competition law; matters relating to workplace health & safety issues; corruption or malpractice amongst police; threats to the welfare of patients in health care; threats to consumers; breaches relating to chemicals; and violations of charities law.

Kohn, Kohn & Colapinto, LLP looks forward to a fruitful partnership with the country of Ireland founded on mutual goals of protecting whistleblowers and providing for the public welfare through the detection and disgorgement of fraud.

Additional EU Directive Resources

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