On January 11, 2018, Law No. 13,608 (“New Law”) was published in the Official Federal Gazette authorizing: (a) Brazilian states to establish hotlines to receive reports; and (b) the establishment, by any of the federal entities, of forms of reward for information that assists in the prevention, repression or investigation of crimes or administrative offenses.
The hotline should preferably be free of charge and can also be maintained by a private non-profit entity through a partnership agreement. If an informant chooses to be identified, the confidentiality of his or her personal data must be ensured by the entity that receives the report. The procedural aspects of such telephones services and the referral that will be given to the information received still depends on regulation. This is due to the fact that by authorizing the State to establish a telephone service to receive reports, the Law also necessarily delegates the regulation of such service. Issues such as the existence of a single standard to be followed, and whether the state entities will have the autonomy to create their own services and procedures, among others, will be dictated by the state regulation itself, which does not exist yet.
The New Law represents an incentive to encourage the reporting by the population, which has increasingly played an active role in the fight against several kinds of offenses, including those of an administrative and governmental nature.
In this sense, the New Law constitutes a notable progression in the control of the Public Administration control exercised by citizens, where three important aspects are worth highlighting: (a) the possibility of anonymous reports; (b) the confidentiality of the data of informants’ who choose to identify themselves; and (c) the possibility of federal entities offering a reward, in the form established by them, resulting from the provision of information useful for the prevention, repression or investigation of crimes and administrative offenses.
The reward to be offered to whistleblowers is innovative in the Brazilian legal system and builds expectations regarding its regulation. The reason for this is that the Dodd-Frank Act ("Dodd-Frank") is an international reference, having been regulated by the Securities and Exchange Commission ("SEC"), the U.S. agency responsible for financial and capital markets’ good standing.
The Dodd-Frank entered into force in 2010 as a response to the financial crisis faced by the United States in 2008 and established the basic criteria for the whistleblower figure, similar to the informant model provided in the New Law.
In order to encourage information sharing regarding irregularities involving companies and their representatives, the Dodd-Frank extensively addresses whistleblower incentives and protection, including establishing judicial tools for the protection of whistleblowers against possible retaliation – a guarantee without parallel to the informants in the New Law.
Correspondingly, some of the main definitions adopted by the Dodd-Frank and regulated by the SEC can be used as inspiration for the New Law: (a) definition of the informant figure; (b) classification of the information provided; (c) expected results of such information; (d) criteria to be followed to become a beneficiary of the reward offered; and (e) the value of the reward itself.
On the other hand, while the Dodd-Frank refers to cash value, the New Law does not determine the rewards’ payment method.
Although the New Law does not specify the requirements that would qualify informants to be entitled to the rewards set forth in proposed federal programs, they can presumably be considered as similar to those requirements expressed in the Dodd-Frank, namely: (a) the provision of information by the informant must be voluntary; (b) the information provided must be original, or at least complement other information previously provided by different informants; (c) the information provided must result in the filing of a judicial or administrative proceeding by the SEC; and (d) the SEC must obtain a favorable decision with payment of at least USD 1 million. As a general rule, only after meeting all of these requirements will the whistleblower be entitled to the reward, which ranges from 10% to 30% of the value of the conviction, according to the criteria established by the SEC.
Another crucial point to observe is that, by allowing the anonymity of the informant, the New Law delegates to the federative entities the task of handling the reward’s payment method. It is possible, therefore, that federal entities, inspired by the Dodd-Frank, institute a way to accept the anonymous report, but, in order to receive the reward, the whistleblower should: (a) be represented by a lawyer, who will be responsible for submitting its client’s information to the SEC, as well as requesting the receipt of the reward; (b) follow the procedures for submitting information anonymously, by means of a lawyer representing the whistleblower; and (c) before the payment of the due reward, the whistleblower must disclose his or her identity, which will be evaluated by the SEC for eligibility confirmation.
Finally, the potential usefulness of the New Law in the prevention, repression and investigation of crimes and administrative offenses should be recognized, but its regulation, which is still pending, should mainly address issues such as: persons able to provide information and receive rewards; forms of reward to be offered and the criteria for their receipt, as well as the type of information the federal entities will consider useful for the purpose of receiving the reward.