Dodd-Frank Whistleblower Protections and Rewards

• Under the Dodd-Frank Act, whistleblowers may anonymously report various financial frauds or foreign corruption to regulatory agencies to receive a monetary award from between 10 to 30 percent.
• Foreign and U.S. whistleblowers are eligible for a reward if the reported fraud violates securities or commodities laws or involves foreign bribery or money laundering.
• As part of the Dodd-Frank Act, the SEC implemented new rules that enabled the SEC to take legal action against employers who retaliate against whistleblowers.

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:

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 schemes, 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.

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.

The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) share enforcement authority over the Foreign Corrupt Practices Act (FCPA). 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.

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.

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.

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:

1. With the Dodd-Frank Act, whistleblowers must provide information that is not publicly known but can also submit information using public data and information.
2. 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.
3. 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.

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.

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.