Provisions of the Dodd-Frank Act are designed to encourage whistleblowers to come forward and report securities laws violations, but ambiguities in the interpretation of the law are making it difficult for individuals to know which way to turn.
The new provisions provide protection in the form of job retention, preventing employers from firing employees who step up to report violators. Some of the protections include reinstatement if the employee has been fired, special damages and double back pay. These incentives and others were created to encourage individuals to report those who are breaking the law, despite the threat of retaliation. While there are protections already on the books for whistleblowers, including job retention, the incentives were not as strong prior to the new ones coming online.
Two recent court cases tested the provisions, and both had two very different outcomes. Each case was similar in that the whistleblowers reported violations of the Foreign Corrupt Practices Act (FCPA), a statute that makes the act of bribing officials in foreign companies for business purposes illegal. The whistleblowers in both cases reported internally to supervisors as opposed to going to the Securities and Exchange Commission (SEC). Both whistleblowers were terminated from their positions for speaking up. At issue was whether both individuals were covered under the Dodd-Frank Act.
One federal court made the decision that the protections could only apply to the whistleblowers who reported the lawbreakers internally, while the other court found that internal reporting was not sufficient, and that the SEC needed to be notified as well. Neither court made a final decision on the question, as both cases were thrown out due to other reasons, but leaves the question of proper reporting up in the air.
Source: American Banker, “Dodd-Frank Provisions Cause Whistle-Blower Dilemma,” Gordon Schnell and Marlene Koury, September 11, 2012
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