Whistleblower Protection Under the Dodd-Frank Act: When and How to Report Retaliation to the SEC
Financial fraud has long been a problem in the United States. Recognizing that whistleblowers are instrumental in rooting out schemes and assisting the government with recovering lost funds, Congress implemented the Dodd-Frank Act in 2010 to incentivize individuals to report fraud and provide a mechanism for them to do so. Dodd-Frank also contains protections for whistleblowers, such as allowing them to remain anonymous if represented by counsel, and it prohibits retaliation against those reporting violations.
What is prohibited by Dodd-Frank?
Codified at 15 U.S.C. § 78u-6, Dodd-Frank provides that “[n]o employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against a whistleblower in the terms and conditions of employment” because of a “lawful act” performed by a whistleblower in connection with one of the following:
– Providing information to the SEC in accordance with Dodd-Frank;
– Initiating, testifying in, or assisting in any investigation or judicial or administrative action of the SEC based upon or related to the information; or
– Making disclosures that are required or protected under the Sarbanes Oxley Act of 2002 (15 U.S.C. 7201 et seq.), Dodd-Frank, and any other law, rule, or regulation subject to the jurisdiction of the SEC.
What requirements must a whistleblower meet to qualify for retaliation protections?
Whistleblowers must meet certain criteria to qualify for retaliation protections under Dodd-Frank. First, the individual must qualify as a “whistleblower,” which means he or she provided the SEC with written information about possible violations of federal securities laws that have occurred, are ongoing, or are about to occur.[1] Importantly, a whistleblower must have provided the SEC with written information before the alleged retaliation occurred, which makes it all the more important for a whistleblower to not delay in reporting suspected fraud.[2] Second, the whistleblower must reasonably believe that the information he or she provided to the SEC relates to a possible violation of securities laws.[3] Finally, the whistleblower must have performed one of the lawful acts described above (e.g., initiating an investigation), and the lawful act must relate to the subject matter of the whistleblower’s submission to the SEC.[4]
How do I report fraud and retaliation to the SEC?
The SEC’s rules regarding its whistleblower program lay out the specific procedures that must be followed when reporting fraud. It is very important that the procedures are followed to the letter, as failure to do so may give the SEC grounds to deny the whistleblower an award later.
Whistleblowers can submit information regarding violations of securities laws and retaliation associated with a lawful act to the SEC either by mail or electronically through the SEC’s online portal. Electronic submissions are preferred, as the whistleblower receives a submission number and immediate confirmation that the tip has been received.
What relief does Dodd-Frank provide a whistleblower?
Dodd-Frank contains a provision which allows whistleblowers to sue their employer in federal court. The statute of limitations for retaliation claims is six years, but the time to file suit could be up to ten years if certain criteria are met.[5] It is important to consult with an attorney as soon as possible to determine when your case must be filed to be considered timely.
Dodd-Frank provides the following relief for whistleblowers who prevail in their retaliation cases:
– Reinstatement with the same seniority status that the individual would have had if their employer had not retaliated against them;
– Two times the amount of back pay owed to the individual, plus interest; and,
– Compensation for litigation costs, expert witness fees, and reasonable attorney’s fees.[6]
Conclusion
Whistleblowers must report potential securities violations to the SEC in writing before the employer retaliates in order to get the relief afforded by the anti-retaliation provisions in Dodd-Frank. It is important to act fast if you suspect that your employer has violated securities laws, especially if you think your employer may retaliate against you for doing so.
[1] 15 U.S.C. § 78u-6(a)(6).
[2] See 15 U.S.C. § 78u-6(h)(1); 17 C.F.R. § 240.21F-2.
[3] 17 C.F.R. § 240.21F-9.
[4] 15 U.S.C. § 78u-6.
[5] 15 U.S.C. § 78u-6(h)(1)(B)(iii).
[6] 15 U.S.C. § 78u-6(h)(1)(C).
