The Dodd-Frank Act and Whistleblower Reward Programs
There is no Dodd-Frank Act Whistleblower Program per se. There are, however, provisions and rules that require certain agencies such as the SEC, CFTC, and DOJ to take legal action against a violator of securities or commodities law, based on original information provided by a whistleblower.
The Dodd-Frank Act offers enhanced protections for whistleblowers, prohibiting employers from engaging in whistleblower retaliation or impeding reporting. Below are the programs which fall under the Dodd-Frank Act:
1. Securities & Exchange Commission (“SEC”)
Section 922 of the Dodd-Frank Act requires the Securities and Exchange Commission to establish a whistleblower program that awards whistleblowers for their information about securities fraud. On July 21, 2010, the SEC Office of the Whistleblower was formed, enforcing the SEC Whistleblower Program.
This program rewards qualified whistleblowers who report violations to the SEC. The types of violations include securities manipulation, pyramid, and Ponzi schemes, insider trading, naked short selling, money laundering, foreign bribery, and other forms of market manipulation.
To be eligible for a reward, whistleblowers must provide original information about a violation of securities law that leads to a successful enforcement action. This action must result in monetary penalties exceeding $1,000,000. SEC whistleblower awards range between 10 and 30 percent when the monetary sanctions collected exceed 1 million.
2. Commodities Foreign Trade Commission (“CFTC”)
Section 748 of the Dodd-Frank Act requires the Commodities Foreign Trade Commission to establish a whistleblower program.
Since issuing its first award in 2014, the CFTC has awarded approximately $120 million to whistleblowers. The CFTC’s Whistleblower Program allows whistleblowers to report a wide range of commodities frauds. This includes disruptive trading practices, misappropriation, price manipulation, false reporting, or failure to make required reports. Also included are illegal off-exchange activity, registrants’ failure to supervise, and other types of market manipulation.
Whistleblowers who submit original information to the CFTC Whistleblower Office may be eligible to receive an award. This award may be between 10% and 30% of the monetary sanctions collected in a CFTC enforcement action or a Related Action. In order to be eligible to receive an award, a whistleblower must have voluntarily provided original information that led to the successful enforcement of the CFTC action or the Related Action.
3. Foreign Corrupt Practices Act (“FCPA)
The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) share FCPA enforcement authority. They are committed to fighting foreign bribery through robust enforcement. Rewards are given to those who report international frauds and financial schemes, such as creating false company records and money laundering.
4. Sarbanes-Oxley Act (“SOX”)
There are also provisions for whistleblowers that enhance Sarbanes-Oxley Act (“SOX”) protections, including an increased statute of limitations, larger awards for damages, and the ability to file a lawsuit directly in federal court.
Filing a SOX whistleblower case does not necessarily qualify a whistleblower for reward. Through the Dodd-Frank Act program, whistleblowers must also apply for compensation for non-pecuniary damages, such as emotional distress or loss of reputation damages.
Since the program’s inception, the SEC has ordered wrongdoers in enforcement matters involving whistleblower information to pay over $975 million in total monetary sanctions, including more than $671 million in disgorgement of ill-gotten gains and interest, the majority of which has been…returned to harmed investors.
Dodd-Frank Act Whistleblower Protections
The Dodd-Frank Act prohibits employers from retaliating against whistleblowers, whether by terminating, threatening, demoting, suspending, harassing, or otherwise discriminating against the whistleblower. The Dodd-Frank Act protects whistleblowers regardless of whether the employer knows about the reporting or not.
The types of whistleblower activities protected under the Dodd-Frank Act include:
- Providing original information to an enforcement agency
- Participating in investigations by enforcement agencies
- Provided required disclosures
- Protected under the Sarbanes-Oxley Act of 2020
- Protected under other relevant laws and regulations
Whistleblowers may report their concerns anonymously and confidentially. However, they must hire a whistleblower attorney to do so.
Dodd-Frank Act Provisions
Legislators have generally based the provisions of the Dodd-Frank Act after the False Claims Act (“FCA”). The FCA is one of the strongest whistleblower laws protecting whistleblowers who report government contract fraud and other types of fraud against the US government.
In contrast, the Dodd-Frank Whistleblower provisions are not based on fraudulent activity committed against the government but rather against SEC, CFTC, FCPA, and SOX violators.
Therefore, unlike the FCA, where you file a formal complaint in federal court, Dodd-Frank whistleblowers must file with the appropriate agency (e.g., SEC, CFTC, DOJ).
There are key differences in the Dodd-Frank Act Provisions versus the False Claims Act. Below are a few examples of these differences:
- With the Dodd-Frank Act, whistleblowers must provide information that is not publicly known but can also submit information using public data and information.
- Unlike the False Claims Act, where the first whistleblower to report a fraud, in which the government intervenes, is the one and only one who qualifies for a reward. With the Dodd-Frank Act, all whistleblowers who come forward about a violation are rewarded.
- Dodd-Frank does not provide a “private right of action” to whistleblowers, which prevents them from bringing a lawsuit on behalf of the U.S. government. If the government decides not to act on a TCR, that is the end of the whistleblower’s claim. With the False Claims Act, if the government chooses not to intervene, a whistleblower can continue the qui tam lawsuit without the government’s assistance.
Report to the SEC or CFTC
There are varying statutes of limitations. Failure to act quickly or follow the correct provisions or filing procedures may result in the loss or forfeiture of an award and even the loss of crucial protections. Hiring an attorney will increase the likelihood of you remaining anonymous, and increase the chances of you receiving an award in a timely manner.
Our Dodd-Frank whistleblower attorneys know exactly how to navigate the complex process of filing for rewards. If you’d like assistance with your case, get in touch for a free and confidential case evaluation. We are the world’s top whistleblower attorneys with over 35 years of experience defending, protecting, and winning for clients – internationally and in the U.S.
Landmark Dodd-Frank Act Cases
Digital Realty Trust v. Somers Landmark Case
On behalf of the National Whistleblower Center, founding partner Stephen M. Kohn filed an amicus brief before the Supreme Court of the United States in Digital Realty Trust v. Somers (No. 16-1276). The Kohn, Kohn & Colapinto lawyers vigorously fought for the protection to protect internal whistleblowers, but the Supreme Court rejected these arguments. However, the ruling of the Supreme Court sent a clear message that SEC whistleblowers filing under the Dodd-Frank Act should report directly to the SEC to avoid retaliation.
On Friday, October 15, 2021, the Securities and Exchange Commission (SEC) Office of the Whistleblower quietly posted the SEC’s final order granting our client a whistleblower award.
In addition to the SEC enforcement action, our client's information resulted in numerous successful prosecutions, including several criminal convictions. One of the principal fraudsters was sentenced to 20 years in federal prison and is currently serving time.
Kohn, Kohn & Colapinto represented an anonymous whistleblower, who on May 17, 2021, received a whistleblower award of almost $13.5 million. The SEC Issues More Than $31 Million in Whistleblower Awards related to this case, which involved securities law violations.
Founding partner KKC Stephen M. Kohn commended this whistleblower for his or her courage, perseverance, and determination for speaking out against the fraudster. The whistleblower was compensated for the years of sacrifice and suffering, and will continue seeking full justice.
Awards such as these further demonstrate that the Dodd-Frank Act whistleblower laws covering securities, commodities and foreign bribery crimes work. They deter crime, put fraudster in jail, recover billions for investors, and protect the integrity of the markets. The SEC has created the safest reporting system ever devised to incentivize the disclosure of fraud.
SEC Dodd-Frank Act Confidential Informant. Protecting the confidentiality of Wall Street whistleblowers is among the most important breakthroughs in federal whistleblower law. Under the Dodd-Frank Act, whistleblowers can file anonymous cases, and everything about their case, including who they sued, remains secret.
Our SEC whistleblower law firm has prevailed in significant cases, including one of the largest SEC awards granted to date. To maintain the secrecy of this whistleblower, we can only report that he or she obtained a reward within the top-five ever given by the SEC – a whistleblower informant award of over $30 million.
Foreign Corrupt Practices Act
If you choose to file a report on your own, purchase The New Whistleblower Handbook, which contains extensive information on the Dodd-Frank Act protections.
Frequently Asked Questions
The Dodd-Frank Act requires certain regulatory agencies, such as the SEC, CFTC, and DOJ to take legal action against any person or entity in violation of a law, all based on the original information provided by a Dodd-Frank whistleblower.
The Dodd-Frank Act offers whistleblower protections, which prohibit any employer from (a) engaging in retaliation, or (b) impeding reporting. The agencies with programs that fall under the Dodd-Frank Act include the SEC, CFTC, and FCPA.
The reward amount depends on the quality of information provided by the whistleblowers and the program in which the claim falls under. Under the Dodd-Frank, the SEC and CFTC reward programs pay 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million.