President Obama’s July signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act brings increased oversight to an industry that many feel recklessly brought about “The Great Recession” and sent the economy into a tailspin. The stated aims of the new law include improving transparency and accountability in the financial system, ending bailouts by American taxpayers, putting an end to the idea that any institution is “too big to fail,” and protecting consumers from improper financial services practices.
One important strategy is the extension of incentives and protections to financial industry whistleblowers. One securities fraud expert commented in Forbes magazine that the president essentially “deputized hundreds of thousands of employees in Wall Street brokerage firms, hedge funds, mutual funds, and all other public companies to be the new eyes and ears of the Securities and Exchange Commission and the Commodities Futures Trading Commission.” Senate Banking Committee Chairman Chris Dodd put it this way: “After today, regulators will no longer be able to ignore emerging threats to the economy.”
To accomplish these goals, the law provides significant incentives for a wide range of securities industry personnel – everyone from brokers, branch managers, compliance officers, quantitative analysts and data system programmers to senior management and board members. Any individual who discloses “original information” that leads to a securities law conviction will be eligible to receive as much as 30% of the total sanctions recovered by the CFTC or SEC. These provisions went into effect immediately with the bill’s signing.
This is an extremely potent tool to encourage insiders to expose large scale fraud and irregularities. To put it all in perspective, the SEC’s recent half-billion dollar settlement with Goldman Sachs over charges that the firm misled investors about a subprime mortgage product could have resulted in an award of well over $100,000,000 to an eligible whistleblower. Section 1057 provides that employees who can prove retaliation for whistleblowing will also be able to sue for reinstatement, double back pay, costs and legal fees.
The new law also has important implications for plaintiffs who file for legal protection under the False Claims Act. Section 1079B states that the statute of limitations on retaliation claims is three years, clarifying an ambiguity left behind by a 2005 Supreme Court decision. In addition, it expands the definition of protected conduct to include “lawful acts done by the employee, contractor, or agent or associated others” to stop violations of the False Claims Act. The new legislation also strengthens the whistleblower protections of the Sarbanes-Oxley Act by broadening its scope and increasing the statute of limitations.
Complex Claims Require Swift and Prudent Action
Employees who need to discuss the possibility of any whistleblower, false claims or Qui Tam action are well advised to seek counsel from an experienced employment law attorney as soon as possible. Prompt advice about the legalities of the alleged violation, preservation of evidence, and strategies for protecting a hard-earned career are crucial to the successful execution of civil justice.