CFTC Director Says Corporate Compliance Employees Should Have Comprehension of Dodd-Frank Whistleblower Requirements’Anti-Retaliation Provisions

Speaking at Compliance Week’s yearly conference, Commodity Futures Trading Commission’s Whistleblower Office Director Vincente Martinez said that personnel in corporate compliance should have an understanding of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act’s anti-retaliation provisions that are part of its whistleblower requirements. Martinez noted that while companies are not mandated to explain the way the whistleblower program works to employees, the “quality of information” that compliance personnel choose to offer in response to whistleblowers wondering whether to bring information to the CFTC could make a company liable if an anti-retaliation claim were to be later brought. “Prudence” must therefore be exercised by compliance staff when dealing with such inquiries.

Under Dodd-Frank, eligible whistleblowers may be entitled to 10-30% of money sanctions when agencies are awarded over $1 million in penalties. These informants are also provided with significant protections against employer retaliation for their decision to step forward. Unlike the 2002 Sarbanes-Oxley Act’s whistleblower anti-retaliation provisions, which requires that an anti-retaliation complaint is first submitted to the Department of Labor, under Dodd-Frank, not only can a whistleblower go straight to federal court, but also jury trials for CFTS and Securities and Exchange Commission whistleblower retaliation claims are allowed.

Also speaking at the conference was SEC Enforcement Division Whistleblower Office deputy chief Jane Norberg. She made clear that foreign whistleblowers have the same anti-retaliation protections under Dodd-Frank even if they are located overseas. Norberg did, however, note that for foreign whistleblowers anti-retaliation process could be impacted by both the courts in that jurisdiction and whether or not the whistleblower submitted the claim in US federal court.

The SEC official said that her office has no formula for determining a whistleblower reward. Norberg, however, did say that the circumstances and facts impact a bounty and the Commission must approve every reward.

Also commenting on Dodd-Frank’s whistleblower regulations was Judge Jed Rakoff from the Southern District of New York. He expressed concerns about rewarding informants.

Rakoff said that seeing as 90% of whistleblower claims tend to be “unmeritorious,” per the experience of federal judges, he believes many of the more recent whistleblower claims would not have been brought without the promise of a potential payout. He questioned whether having just 10% of “real” cases was worth dealing with the costs involved in dealing with the remaining 90%. However, Rakoff also praised whistleblowers, saying that they were “heroes” taking the risk of possibly becoming “pariahs.”

Institutional and individual investors that have been the victims of securities fraud may be able to recoup their losses sustained due to the negligence of an investment firm, a broker, or an investment adviser. Contact Shepherd Smith Edwards and Kantas, LTD, LLP today.

Regulators Provide Details on SEC, CFTC Whistleblower Programs, Compliance Week, June 12, 2012

Consumer Financial Protection Act of 2010 (CFPA), Section 1057 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 12 U.S.C.A. §5567, Whistleblower.gov

Office of the Whistleblower, SEC

Whistleblower Program, CFTC

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SEC Institutional Round Up: Whistleblower Bounty Program May Be Reviving Internal Fraud Reporting Mechanisms and Investor Advocacy Group Wants Ban on Accounts Allowing Dually Registered Advisers and Brokers to Give Advice, Institutional Investor Securities Blog, April 20, 2012

Whistleblower Sues SEC and FBI for Documents Into Commission’s Probe of Sempra Energy, Stockbroker Fraud Blog, May 22, 2012

SEC’s Office of the Whistleblower Received 334 Tips During FY 2011, Stockbroker Fraud Blog, December 8, 2011