A Game-Changer for Corporate Accountability
In the wake of the 2008 financial crisis, the U.S. Congress passed the Dodd-Frank Act, a landmark piece of legislation designed to reform the American financial system. Signed into law on July 21, 2010, it introduced sweeping changes, but none have been more impactful for transparency and justice than its revolutionary whistleblower provisions.
The Act established a powerful framework: it requires key federal agencies to both protect and reward individuals who provide original information about corporate fraud and misconduct. These provisions have been extraordinarily successful. To date, enforcement actions based on whistleblower information have resulted in over $2.5 billion in financial remedies, with more than $500 million returned to defrauded investors.
For individuals with knowledge of financial wrongdoing, the Dodd-Frank Act provides two essential pillars: a clear path to a substantial monetary award and ironclad legal protection against employer retaliation.
The Whistleblower Programs Mandated by Dodd-Frank
While there isn’t a single “Dodd-Frank Whistleblower Program,” the Act mandated that specific agencies create robust whistleblower offices. The two most prominent programs are managed by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
1. The Securities & Exchange Commission (SEC) Whistleblower Program
Under Section 922 of the Dodd-Frank Act, the SEC Office of the Whistleblower was formed in 2010. This program has become the gold standard for combating securities fraud. To be eligible for an award, a whistleblower must voluntarily provide original, non-public information that leads to a successful enforcement action with sanctions exceeding $1 million.
If the criteria are met, the SEC must pay an award of between 10% and 30% of the money collected. The program covers a vast range of fraudulent activities, including:
- Market Manipulation: Artificially inflating or deflating the price of a security.
- Investment Schemes: Ponzi schemes, pyramid schemes, and other fraudulent investment offerings.
- Insider Trading: Trading securities based on material, non-public information.
- Corporate Accounting Fraud: Falsifying financial statements and company records.
- Foreign Bribery: Violations of the Foreign Corrupt Practices Act (FCPA), such as bribing foreign officials.
- Crypto and Digital Asset Fraud: Illicit activities involving cryptocurrencies and other digital assets.
2. The Commodity Futures Trading Commission (CFTC) Whistleblower Program
Section 748 of the Dodd-Frank Act created a parallel program at the CFTC to police the U.S. derivatives markets, which include futures, options, and swaps. Since issuing its first award in 2014, the CFTC has awarded approximately $120 million to whistleblowers.
Like the SEC program, the CFTC offers awards of 10% to 30% for original information leading to successful enforcement actions with over $1 million in sanctions. Common violations reported to the CFTC include:
- Price manipulation in commodities markets.
- Illegal off-exchange trading.
- False reporting of market data.
- Failure by registered firms to supervise their employees.
- Misappropriation of customer funds.
How Dodd-Frank Strengthened Whistleblower Protections
The Dodd-Frank Act provides some of the strongest anti-retaliation protections available to employees in the private sector. It is illegal for an employer to fire, demote, harass, suspend, or otherwise discriminate against an employee for engaging in protected whistleblower activity.
These protected activities include:
- Providing information about a potential violation to the SEC or CFTC.
- Assisting in any investigation or legal action related to such a violation.
- Making disclosures that are protected under other laws, like the Sarbanes-Oxley Act (SOX).
Crucially, the Act also empowers whistleblowers to report anonymously and confidentially, provided they are represented by an attorney. This allows individuals to expose wrongdoing without immediately putting their careers at risk.
The Act also enhanced existing laws like the Sarbanes-Oxley Act (SOX) by increasing the statute of limitations for filing a retaliation claim and allowing whistleblowers to file their lawsuits directly in federal court.
Key Differences from Other Whistleblower Laws
The provisions in the Dodd-Frank Act were inspired by the highly successful False Claims Act (FCA), but there are critical differences in how cases are handled.
- No Private Right of Action: Unlike the FCA, Dodd-Frank does not allow a whistleblower to file a lawsuit on behalf of the government. You must file your tip with the appropriate agency (e.g., the SEC or CFTC). If the agency chooses not to act, the claim does not move forward.
- Information Source: Dodd-Frank whistleblowers can base their claims on non-public knowledge or on an original analysis of publicly available information.
- Multiple Whistleblowers: Under Dodd-Frank, multiple whistleblowers who provide valuable information can potentially qualify for an award from the same enforcement action, unlike the FCA’s strict “first-to-file” rule.
Our Landmark Experience with Dodd-Frank
Navigating the complexities of a Dodd-Frank submission requires deep expertise. Our firm has been at the forefront of whistleblower law for over 35 years and has played a pivotal role in shaping its application.
In the landmark Supreme Court case Digital Realty Trust v. Somers, our founding partner Stephen M. Kohn filed an amicus brief arguing for the broadest possible interpretation of whistleblower protections. While the court’s final ruling narrowed the definition of who is protected from retaliation, it sent a clear message: whistleblowers seeking Dodd-Frank protections must report directly to the SEC.
Our track record of success includes securing major awards for our clients, such as:
- A $30 Million Award for a client exposing widespread misconduct.
- A $13.5 Million Award for an SEC whistleblower in 2021.
Take the Next Step with Confidence
The rules and deadlines for filing a whistleblower claim are strict. Failure to follow the correct procedures can result in forfeiting your right to an award and crucial legal protections.
Our attorneys have an unparalleled understanding of this complex process. If you have information about financial fraud or corruption, contact us for a free and completely confidential case evaluation.
