Whistleblower Update: Keys to Corporate Compliance, Limiting Risk, and Stopping Fraud

Listen Now!

Employers who violate SEC regulations face the Dodd-Frank Act's newly enacted Rule 21F. It gives employees a greater incentive to blow the whistle, resulting in a minimum reward of up to $300,000 based on monetary sanctions imposed for the violation.

But what if your organization hasn't done anything wrong and an employee still contacts authorities? HR's reaction to this common event can prove to be a major problem for organizations of all sizes.

Although the final rule has only been in affect since August, there are already some scary numbers for employers:

  • The SEC filed a total of 735 enforcement actions in 2011, a single-year record.
  • The Investor Protection Fund is set to pay out $450 million in whistleblower bounties in the coming months to demonstrate the program's value
  • On average, under the new Rule 21F, the whistleblower bounty is $60 million

With such monetary incentives now in play, employees may feel compelled to report any conduct they think violates federal regulations -- whether it does or not. Dodd-Frank opens the door for more claims, and regardless of the validity, the additional scrutiny by the DOL and EEOC will cost you time and money.

This latest reform also contains additional whistleblower protection, anti-retaliation, and federal contractor/diversity provisions, including:

  • The law explicitly prohibits retaliating against whistleblowers who provide information to the SEC or make disclosures protected under various laws within the agency’s jurisdiction.
  • In contrast to other whistleblower laws, Dodd-Frank allows employees to file a complaint in federal court immediately without first exhausting administrative remedies.
  • In addition, the statute of limitations for filing a claim are extremely generous; Dodd- Frank gives employees six years after the date on which the violation occurred or not more than three years after the date on which he should have known the material facts related to retaliation to file a claim.
  • Retaliatory relief under Dodd-Frank also includes two times the amount of back pay owed to the individual (with interest) and compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.
  • Federal contractors, subcontractors, and service providers could face more regulatory review of their current diversity programs and practices, especially for minority- and women-owned businesses.

This is a game-changer for organizations,  so it's important to not only understand whistleblowing risks but also how to develop a plan to identify and manage the problem to protect your organization.