Dodd-Frank Whistleblower Working Group SECURITIES

Preparing clients to successfully face the challenges introduced by the whistleblower rules signed into law with the 2010 Dodd-Frank Act.


WilmerHale’s Dodd-Frank Whistleblower Working Group—consisting of 22 lawyers spanning our Securities, Litigation and Transactional Departments—closely monitors the developments surrounding evolving whistleblower rules. We are poised to help clients navigate the uncharted territory created by these new regulations. A full-service team approach offers clients the benefit of not only members of this Group but also other attorneys at the firm, providing a broad range of knowledge in areas including securities litigation and enforcement, investigations and criminal litigation, financial regulation, labor and employment and corporate law. We help clients review their current legal, compliance and audit systems, we counsel them on response policies and procedures relating to potential or actual violations, and we advise on implementing anti-retaliation policies.

History and Approach

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which introduced sweeping financial regulatory reforms. Included in the Dodd-Frank Act are new whistleblower provisions and proposed rules that create powerful incentives for whistleblowers to discover and report potential and actual violations of the federal securities laws.

After months of anticipation on Wall Street, the Securities and Exchange Commission released the final Dodd-Frank Whistleblower Rules on May 25, 2011. The final rules were adopted by a narrow 3-2 vote, with the two dissenting Commissioners echoing comments from the corporate community that objected to the lack of an internal reporting requirement that might encourage employees to “completely bypass” company compliance procedures. However, the rules allow the whistleblower’s voluntary participation in a company’s internal compliance program to be considered as a factor that could increase the amount of the reward.

Both public and private companies need to familiarize themselves with the new rules, consider the positive and negative implications of the whistleblower incentives, and possibly prepare to defend against potential litigation. We recommend that companies review their current legal, compliance and audit systems to ensure that they are reasonably designed, among other things, to encourage appropriate and timely inquiry into and reporting of potential and actual securities law violations. In addition, companies would be well-advised to develop or reconsider policies and procedures relating to management and board of director responses to potential or actual violations and to have anti-retaliation policies in place.

Statute, Regulations and Guidance

Final Rules

Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934

The Commission is adopting rules and forms to implement Section 21F of the Securities Exchange Act of 1934 ("Exchange Act") entitled "Securities Whistleblower Incentives and Protection." The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010 ("Dodd-Frank"), established a whistleblower program that requires the Commission to pay an award, under regulations prescribed by the Commission and subject to certain limitations, to eligible whistleblowers who voluntarily provide the Commission with original information about a violation of the federal securities laws that leads to the successful enforcement of a covered judicial or administrative action, or a related action. Dodd-Frank also prohibits retaliation by employers against individuals who provide the Commission with information about possible securities violations.

Click here to read full text of the final whistleblower rules.

Additional Resources

February 7, 2012

Appeals Court Ruling in Fidelity Case: Whistleblower Law Doesn't Apply to Mutual Funds

December 15, 2011

House Subcommittee Approves Bill Mandating Whistleblower Internal Reporting

 

Additional WilmerHale information related to the Dodd-Frank Wall Street Reform and Consumer Protection Act is available here.



Publications & News

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January 3, 2017

SEC Settles Two More Whistleblower Protection Cases

Continuing its efforts to bring enforcement actions for violations of whistleblower protections, the Securities and Exchange Commission recently settled two more cases. Both cases involved severance agreements that contained provisions that, the SEC asserted, expressly prohibited former employees from communicating with the government about possible violations of law. This WilmerHale Client Alert was republished by Law360.

December 20, 2016

Whistleblowers to Remain Prominent Fixtures in Securities Regulation

In this article published by The Hill, Bill McLucas discusses the emergence of whistleblowers and advises public companies to not ignore employees who speak up about corporate misdeeds.

May 27, 2016

WilmerHale Lawyers and Practices Recognized in 2016 Edition of Chambers USA

Chambers USA: America's Leading Lawyers for Business announced its final rankings for the 2016 edition, with WilmerHale ranking among the nation's best in 47 practice area categories. Chambers also ranked 82 WilmerHale lawyers as leaders in their respective fields.

January 26, 2016

2015 CFTC Year-in-Review, and a Look Forward

CFTC continues to bring high-profile, large-penalty enforcement cases; begins bringing cases to enforce Dodd-Frank Act implementing regulations; and embarks on post-Dodd-Frank Act regulatory initiatives.

November 24, 2015

Four Things Companies Should Know About the SEC’s 2015 Whistleblower Report

The SEC recently published data showing significant increases in tips received under its Dodd-Frank Whistleblower Program. Released on November 16, the 2015 annual report also provided important guidance to companies on the SEC’s whistleblower-related priorities through fiscal year 2016.

September 15, 2015

Second Circuit Allows Whistleblower Retaliation Protection Without Reporting to SEC

In a 2-1 decision in Berman v. Neo@Ogilvy LLC, the US Court of Appeals for the Second Circuit ruled that whistleblowers who report securities law violations internally but not to the US Securities and Exchange Commission are protected under the Dodd-Frank Act from employer retaliation.

April 28, 2015

SEC Applies Whistleblower Interference Rule to Corporate Confidentiality Requirement

On April 1, the US Securities and Exchange Commission issued—in a settled administrative proceeding—a cease-and-desist order in In the Matter of KBR, Inc., directing that the respondent cease violating Commission Rule 21F-17(a).

February 27, 2015

SEC Probes Corporate Interactions with Whistleblowers

According to a February 25, 2015 Wall Street Journal report, in recent weeks the SEC has sent requests to a number of companies seeking years of nondisclosure agreements, employment contracts and other documents as part of an agency probe into the potential silencing of corporate whistleblowers.

October 24, 2014

Partner Mary Jo Johnson Recognized Among Massachusetts Lawyers Weekly Top Women of Law

Massachusetts Lawyers Weekly has named Partner Mary Jo Johnson to its annual list of Top Women of Law, which honors women in the legal industry who have made inspiring contributions in their fields.

July 14, 2014

Understanding the Global Reach of U.S. Whistleblower Anti-Retaliation Protections

An article by William McLucas, Laura Wertheimer and Arian June, published in the July 2014 edition of Bloomberg BNA's World Securities Law Report, Vol. 20, No. 7.