Dodd-Frank Whistleblower Working Group INDUSTRIES

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 expertise 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.