Dodd-Frank Act

President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010. The Act, which Congress passed to in response to the reckless financial practices that caused the Great Recession in 2008, represented a multifaceted and comprehensive regulatory overhaul of the financial industry in the United States.  

Among the Dodd-Frank Act’s many provisions are the whistleblower incentives and protections of Section 922, which are intended to encourage people to provide the U.S. Securities and Exchange Commission (“SEC”) with “original information” demonstrating an apparent violation of any American securities law. Whistleblowers whose tips lead to enforcement actions in which the government collects more than $1 million are entitled under the Act to between 10 and 30 percent of the total recovered. The total amount includes the penalties recouped through the original prosecution as well as any related action(s) the government pursues as a result of the whistleblower’s original report. The SEC has wide discretion in deciding upon the whistleblower reward amount, but the three main factors appear to be:

  1. the significance of the information provided by the whistleblower to the success of the subsequent judicial or administrative action;
  2. the degree of assistance provided by the whistleblower in relation to the enforcement action; and
  3. the deterrent value of delivering the particular award to the whistleblower.

Under Dodd-Frank’s whistleblower program, whistleblowers may report violations of securities laws with or without identifying themselves. However, those wishing to report conduct anonymously must retain an attorney in order to do so. The whistleblower in such situations would remain anonymous to the federal enforcement agencies throughout the process, though the SEC may demand the whistleblower’s identity after the completion of a successful prosecution before paying out the relevant whistleblower reward from the sanctions collected.

Section 922 of the Dodd-Frank Act also protects whistleblowers from employer retaliation for reporting violations of securities law. Employers are thus barred from firing, demoting, suspending, harassing, or otherwise discriminating against whistleblowing employees. Section 922 allows whistleblowers who do suffer discrimination to sue the employer directly within certain enumerated time periods. A successful whistleblower is entitled to the following under Dodd-Frank’s anti-retaliation provision:

  1. reinstatement with the same seniority status the employee would have had if the retaliation had not occurred;
  2. twice the amount of back pay the employee is due, plus interest, for time missed as a result of the retaliatory conduct; and
  3. reimbursement for litigation costs, expert witness fees, and reasonable attorneys’ fees.

For additional information on reporting violations of U.S. securities law under Section 922 of the Dodd-Frank Act, please contact Adam Zapala at (650) 697-6000


Key Contacts