Our attorneys have substantial experience representing corporate, finance, and banking industry whistleblowers under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the Sarbanes-Oxley Act (SOX), and other laws. Whether you are looking to disclose securities fraud, bank fraud, or other financial crimes for a reward or fighting to protect your career from illegal retaliation, we can help.
The Dodd-Frank Act is the home of many of the most powerful protections for corporate, finance, and banking industry whistleblowers. The Act was a massive 848-page piece of legislation enacted in response to the finance and banking crisis of the mid to late 2000s.
The Dodd-Frank Act contains several provisions directly addressing and encouraging corporate, finance, and banking industry whistleblowers by providing monetary rewards and protection for whistleblowers.
Whistleblowing to the Securities and Exchange Commission
One of the best-known provisions of the Dodd-Frank Act is Section 922, which provides lucrative rewards for disclosing securities fraud. Under this provision, SEC has paid whistleblowers as rewards as high as $50 million.
Codified at 15 U.S.C. § 78u-6, Section 922 revised the Securities Exchange Act of 1934 by creating a new Section 21F, titled “Securities Whistleblower Incentives and Protections.” Under Section 922, Congress directs the SEC to pay rewards to whistleblowers who voluntarily provide original information to the SEC if the information leads the SEC to take an enforcement action that recovers at least $1 million. The rewards paid to whistleblowers are between 10 and 30 percent of the recovery.
Importantly, Section 922 created new whistleblower protections, codified at 15 U.S.C. § 78u-6(h). Under this provision, no employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of their employment because of any lawful action taken by the whistleblower:
(i) in providing information to the [SEC] in accordance with [Section 922];
(ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the [SEC] based upon or related to such information; or
(iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.),” and “any other law, rule, or regulation subject to the jurisdiction of the [SEC].”
Employees who suffer from illegal retaliation in violation of Section 922 can bring an action in federal court seeking reinstatement, double back pay with interest, and reimbursement for attorneys’ fees and costs. It’s important to note that Section 922 of the Dodd-Frank Act only protects external complaints to the SEC – it does not protect employees if they make internal disclosures to their management team. Commentators hotly debated the issue of internal vs. external disclosures under the Dodd-Frank Act until a 2018 Supreme Court decision. In Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018), the Supreme Court found that despite the rather ambiguous language defining protected conduct, courts should interpret the law as not overlapping with protections provided by SOX, discussed in more detail below.
Whistleblowing to the Commodities Futures Trading Commission
Similar to Section 922, Section 748 of the Dodd-Frank Act also created new financial incentives and protections for whistleblowers who report wrongdoing to the Commodities Futures Trading Commission (CFTC) by adding a new Section 23 to the Commodity Exchange Act.
Under Section 748, codified at 7 U.S.C. § 26, whistleblowers who voluntarily disclose original information to the CFTC that leads to an enforcement action recovering at least $1 million are entitled to a reward of 10 to 30 percent. Section 748 protects employees who provide information to the CFTC or otherwise “assist in any investigation, judicial, or administrative action of the [CFTC] based upon or related” to the information disclosed by the employee. Employees who suffer from illegal retaliation in violation of Section 748 can bring an action in federal court seeking reinstatement, double back pay with interest, and reimbursement for attorneys’ fees and costs.
The Consumer Financial Protection Act aka Dodd-Frank Act Title X
Title X of the Dodd-Frank Act, better known as the Consumer Financial Protection Act, created a litany of new consumer protections, starting with the establishment of the Consumer Financial Protection Bureau (CFPB). Title X transferred consumer financial protection functions of several different government agencies to the CFPB, including those previously performed by the Federal Reserve, Federal Reserve, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, and National Credit Union Administration. Additionally, Title X transferred enforcement of the consumer financial protection under the Real Estate Settlement Procedures Act (RESPA), Secure and Fair Enforcement for Mortgage Licensing Act of 2008, and the Interstate Land Sales Full Disclosure Act from the Department of Housing and Urban Development to the CFPB.
Section 1057 of the Dodd-Frank Act, codified at 12 U.S.C. § 5567, protects employees who report violations of consumer finance laws internally to their employers or externally to any government agency. Employees who assist in government investigations and those who refuse to carry out illegal instructions are protected as well. Specifically, Section 1057 prohibits employers from retaliating against an employee because the employee has:
(1) provided, caused to be provided, or is about to provide or cause to be provided, information to the employer, the [CFBP], or any other State, local, or Federal, government authority or law enforcement agency relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of, any provision of [Title 12 of the United States Code] or any other provision of law that is subject to the jurisdiction of the [CFPB], or any rule, order, standard, or prohibition prescribed by the [CFPB];
(2) testified or will testify in any proceeding resulting from the administration or enforcement of any provision of [Title 12 of the United States Code] or any other provision of law that is subject to the jurisdiction of the [CFPB], or any rule, order, standard, or prohibition prescribed by the [CFPB];
(3) filed, instituted, or caused to be filed or instituted any proceeding under any Federal consumer financial law; or
(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of, or enforceable by, the [CFPB].
Employees suffering from illegal retaliation for their complaints relating to the laws enforced by the CFPB must file a complaint with the Department of Labor’s Occupational Safety and Health Administration (OSHA) within 180 days of their employer’s adverse acts. OSHA will assign an investigator who will investigate the claims and make a recommendation to the Secretary of Labor regarding the case. The OSHA investigator will follow the procedures laid out in the OSHA Whistleblower Investigations Manual. Here is a copy of the manual, current as of January 28, 2016: (host this on our site: https://www.osha.gov/OshDoc/Directive_pdf/CPL_02-03-007.pdf). If the Secretary of Labor finds that an employer engaged in illegal retaliation, the Secretary must issue an order granting relief, which can include reinstatement, back pay, compensatory damages, exemplary damages, and attorneys’ fees.
Both the employee and employer may contest the order and request a hearing before an administrative law judge at the Department of Labor’s Office of Administrative Law Judges (OALJ). From there, OALJ decisions can be appealed to the Administrative Review Board and later to federal court.
In addition to permitting an employee to seek relief from the Department of Labor, an aggrieved employee may also request a jury trial in federal district court if their case has been pending before the Department for at least 210 days, or within 90 days of the issuance of findings by the Secretary.
In March 2020, the CFPB proposed the creation yet another whistleblower rewards program to incentivize whistleblowers to come forward with information about violations of consumer finance laws. Similar to the SEC and CFTC rewards programs, the proposed legislation would provide rewards of 10 to 30 percent for voluntary disclosures of information to the CFPB that result in the recovery of at least $1 million.
Protections Under Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514a
The Dodd-Frank Act also enhanced and broadened the whistleblower protections of the Sarbanes-Oxley Act of 2002, known as SOX. SOX was enacted to combat corporate fraud following the Enron and WorldCom scandals. Realizing that corporate fraud is best fought from the inside, Congress provided robust protections for corporate whistleblowers in SOX Section 806.
Following the amendments to SOX made by Section 922 and Section 929A of the Dodd-Frank Act, SOX now protects employees of all publicly traded companies, as well as employees of contractors, subcontractors, and subsidiaries of publicly traded companies, and employees of nationally recognized statistical rating organizations such as A.M. Best and Moody’s.
Specifically, SOX 806 defines protected conduct as providing information relating to mail fraud, wire fraud, bank fraud, securities fraud, or any violation of a rule or regulation of the SEC, or any federal law relating to fraud against shareholders to “a person with supervisory authority over the employee” or any federal regulatory or law enforcement agency or Congress. As with most whistleblower statutes, SOX generously protects an employee even if their disclosure relates to a reasonable, but mistaken belief.
Employees suffering from illegal retaliation in violation of SOX 806 follow procedures nearly identical to those under Section 1057 of the Dodd-Frank Act. However, SOX whistleblowers may seek a jury trial in federal court after they have been before the Department of Labor for 180 days, instead of the 210 days specified under Section 1057 claims.
The above are just a few of the many robust laws protecting whistleblowers who take a courageous stand against fraud. Whether you are contemplating blowing the whistle and fear retaliation, already blew the whistle and were fired, or simply want to know how to obtain the maximum possible reward for disclosing criminal activity, you should seek legal advice as soon as possible. Our experienced whistleblower attorneys can guide you through treacherous waters and help you protect your career.