On July 21, 2010, the President signed into law the Dodd-Frank Act, bringing sweeping changes to America’s financial regulatory system. Among the Act’s many provisions are two with potentially major ramifications in the FCPA enforcement arena.
First, new whistleblower provisions provide for significant rewards to those who report securities and commodities law violators to the SEC or the Commodities Futures Trading Commission (CFTC). The FCPA is part of the securities laws. Whistleblowers who provide original truthful information leading to a recovery of $1 million or more are entitled to 10 to 30 percent of the total amount collected in resulting actions, including settlements, by the SEC or CFTC, and in “related actions” by the U.S. Department of Justice, State Attorneys General, or certain other regulatory authorities. The legislation applies to all “monetary sanctions,” which is defined to mean “any monies, including penalties, disgorgement, and interest” – in other words, any monies collected in resulting law enforcement actions. The action must result from a whistleblower tip providing “original information,” which is defined to mean information derived from “independent knowledge or analysis” that is not known to the SEC and is “not exclusively derived from an allegation” in another action, government investigation, or news report. While the SEC and CFTC have wide discretion in determining the amount of any award (within the 10 to 30 percent range), they are expressly prohibited from considering the effect on the balance of the fund for such payments when awarding bounties. A whistleblower may not receive an award if they are an employee of certain government agencies, are convicted of a related criminal violation, or if they gain the information through the performance of a required financial audit where submission would be contrary to the requirements of Section 10A of the Exchange Act.
Second, the Act provides broad protections against retaliation for whistleblowers who offer information under the Act, as well as information that is “required or protected under” Sarbanes-Oxley, the Exchange Act, or 18 U.S.C. § 1513(e). Section 1513(e) applies to “providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense,” thus including FCPA violations. The Act’s anti-retaliation protections apply to any “employer” and are not limited, for example, to public companies. All forms of retaliation, including discharge and lesser harassment and discrimination, are prohibited. The Act provides a private right of action in federal district court for whistleblowers subject to retaliation and states that relief “shall” include reinstatement, double back pay with interest, and litigation costs including attorney’s fees. The statute of limitations varies from 3-10 years depending on the circumstances.