As a follow-up to Tuesday's blog on the "incentive" provisions of Dodd-Frank Section 922 "Securities Whistleblower Incentives and Protection," today I will talk about the "protection" provisions in the SEC's proposed rules issued last week. Note that, even without the new statutory protections afforded to whistleblowers by Section 922, companies should recognize that it is a best practice to reflexively protect a whistleblower from retaliation and treat his or her claims seriously for purposes of an internal or independent investigation.
Section 922 significantly expands the breadth of the whistleblower protections created by the Sarbanes-Oxley Act, by:
- Creating a new private action for reinstatement, two times back pay and other relief for whistleblowers who allegedly suffer retaliation for their complaints;
- Increasing the statute of limitations; action may be brought within 10 years of an alleged violation;
- Extending the protection to employees of consolidated subsidiaries; and
- Granting whistleblowers the right to a jury trial.
Importantly, the proposed rules also provide that the whistleblower’s information need only relate to a "potential violation" of the securities laws. The protections against retaliation do not require an ultimate determination that the reported potential violation constituted an actual violation of the securities laws.
Finally, the proposed rules specify that a whistleblower may provide information to the SEC anonymously, if he or she is represented by an attorney who is identified to the SEC at the time of the submission and who certifies that he or she has verified the whistleblower’s identity