Whistleblower Law for Banking and Finance – Protection and Award Provisions

Overview of Federal Government Awards by FY 2008-2015[1]

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Protection Provisions

Statute & Citation Coverage Remedies
Sarbanes-Oxley Act Employee Protection, 18 U.S.C. § 1514A

 

Employees who work for publicly traded companies or companies that are required to file certain reports with the Securities and Exchange Commission (SEC) are protected from retaliation for reporting alleged mail, wire, bank, or securities fraud; violation(s) of SEC rules and regulations; or violation(s) of Federal law relating to fraud against shareholders.[9] Preliminary reinstatement (if favorable investigation), permanent reinstatement, back pay with interest, restore benefits, and compensation for special damages, attorney’s fees, expert witness fees, and litigation costs.

 

Dodd-Frank Act Employee Protection, 15 U.S.C. § 78u-6 Persons who provide lawfully obtained information to the SEC are protected when they– initiate, testify, or assist in an SEC investigation or judicial or administrative action related to the information; or make disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), including section 10A(m) of such Act (15 U.S.C. 78f(m)), section 1513(e) of title 18, United States Code, and any other law, rule, or regulation subject to the jurisdiction of the Commission.

Note: There is currently a split in the courts regarding whether a whistleblower is required to disclose her concerns to the SEC in order to be protected under this law.   Thus, whether internal reporting is protected under this law must be evaluated on a case-by-case basis.

 

Reinstatement with the same seniority status that the individual would have had, but for the discrimination; 2 times the amount of back pay otherwise owed to the individual, with interest; and compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.

The SEC may also take administrative action under Dodd-Frank to address retaliation against a whistleblower that provides a tip to the Commission by providing an enhanced reward.[10]

 

Consumer Finance Protection Act Employee Protection, 12 U.S.C. § 5567 Workers in the consumer financial product and service industries are protected from retaliation for reporting violations of the CFPA or any other provision of law that is subject to the jurisdiction of the Consumer Financial Protection Bureau (CFPB).[11]

 

Preliminary reinstatement (if favorable investigation), permanent reinstatement, back pay with interest, restore the terms, conditions, and privileges associated with employment, attorney’s fees, expert witness fees, and litigation costs.

 

FDIC Depository Institutions Employee Protection, 12 U.S.C. § 1831j There are two areas of coverage under this provision.

(1) Employees of FDIC insured depository institutions are protected when they provided information to any Federal banking agency or to the Attorney General regarding–(A) a possible violation of any law or regulation; or (B) gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety; by the depository institution or any director, officer, or employee of the institution.

(2) Employees of Federal banking agencies,[12] Federal home loan bank, Federal reserve bank, or are employed by any person who is performing, directly or indirectly, any function or service on behalf of the FDIC are protected when they provided information to any such agency or bank or to the Attorney General regarding any possible violation of any law or regulation, gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety by- (A)  any depository institution or any such bank or agency; (B)  any director, officer, or employee of any depository institution or any such bank; (C)  any officer or employee of the agency which employs such employee; or (D)  the person, or any officer or employee of the person, who employs such employee.

The court may reinstate the employee to the employee’s former position; pay compensatory damages; or take other appropriate actions to remedy any past discrimination.

 

SEC regulations, 17 C.F.R. § 240.21F-17 SEC rules prohibit employers from taking measures through confidentiality, employment, severance, or other type of agreements that may silence potential whistleblowers before they can reach out to the SEC.[13] SEC may take formal action or negotiate an agreement with a violating employer to cease and desist. In addition, SEC may order or negotiate the payment of a penalty.[14]
Financial Institution Employee Protection, 31 U.S.C. § 5328 Employees of financial institutions or nonfinancial trade or business organizations are protected when they provide information to the Secretary of the Treasury, the Attorney General, or any Federal supervisory agency regarding a possible violation of any provision of this subchapter [31 USCS §§ 5311 et seq.] or section 1956, 1957, or 1960 of title 18, or any regulation under any such provision, by the financial institution or nonfinancial trade or business or any director, officer, or employee of the financial institution or nonfinancial trade or business.

Note: Employees covered by 12 U.S.C. §§ 1790b or 1831j are not covered by this provision.

The court may reinstate the employee to the employee’s former position; pay compensatory damages; or take other appropriate actions to remedy any past discrimination.

 

Credit Union Employee Protection, 12 U.S.C. § 1790b Employees of credit unions are protected when they provide information to the National Credit Union Administration Board or the Attorney General regarding any possible violation of any law or regulation by the credit union or any director, officer, or employee of the credit union. The court may reinstate the employee to the employee’s former position; pay compensatory damages; or take other appropriate actions to remedy any past discrimination.

 

Reward Provisions

Statute & Citation Coverage Remedies
SEC rewards program, A person who voluntarily provides the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur. The information provided must lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million. One or more people are allowed to act as a whistleblower, but companies or organizations cannot qualify as whistleblowers. You are not required to be an employee of the company to submit information about that company.[15] The SEC’s Whistleblower Program was created to provide monetary incentives for individuals to come forward and report possible violations of the federal securities laws to the SEC. Under the program eligible whistleblowers are entitled to an award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by other regulatory and law enforcement authorities.[16]
CFTC rewards program, 7 U.S.C. § 26 The CFTC’s whistleblower program allows for the payment of monetary awards to eligible whistleblowers, and provides anti-retaliation protections for whistleblowers who share information with or assist the CFTC.[17]

Only information that was first submitted to the CFTC after July 21, 2010 – the date of enactment of the Dodd-Frank Act – is eligible for a whistleblower award. The information, however, can be about conduct that happened at any time.

The CFTC will pay awards to eligible whistleblowers who voluntarily provide us with original information about violations of the Commodity Exchange Act that lead us to bring an enforcement action that results in more than $1 million in monetary sanctions.

The CFTC can also pay whistleblower awards based on monetary sanctions collected by other authorities in actions that are related to a CFTC enforcement action, and are based on information provided by a CFTC whistleblower.

The total amount of a whistleblower award will be between 10 and 30 percent of the monetary sanctions collected in either the CFTC action or the related action.[18]

IRS rewards program, IRC § 7623 The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.[19] The law provides for two types of awards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000.

The IRS also has an award program for other whistleblowers – generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less than $200,000. The awards through this program are less, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court.[20]

Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), 12 U.S.C. § 4201, et seq.

 

Any person may file a declaration of a violation with the Attorney General of the United States giving rise to an action or civil penalties under section 951 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 [12 U.S.C. § 1833a] affecting a depository institution insured by the Federal Deposit Insurance Corporation or any other agency or entity of the United States. The information provided in the declaration must contain at least 1 new factual element necessary to establish a prima facie case of a violation under FIRREA that was unknown to the Government at the time of filing.

 

When the United States acquires funds or assets pursuant to the execution of a judgment, order, or settlement and the Attorney General determines that the judgment, order, or settlement was based in whole or in part on the information contained in a valid declaration the declarant shall be entitled to 20 to 30 percent of any recovery up to the first            $1,000,000 recovered, 10 to 20 percent of the next $4,000,000 recovered, and 5 to 10 percent of the next $5,000,000 recovered.
FDIC rewards, 12 U.S.C. § 1831k

 

The Comptroller of the Currency, the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation, with the concurrence of the Attorney General, may pay a reward to a person who provides original information which leads to–recovery, of a criminal fine, restitution, or civil penalty under certain banking laws or Criminal Code provisions. An appropriate Federal banking agency may not pay a reward of more than 25 percent of the amount of the fine, penalty, restitution, or forfeiture or $100,000, whichever is less.
Treasury Dept. rewards, 31 U.S.C. § 5323 Individuals who provides original information which leads to a recovery of a criminal fine, civil penalty, or forfeiture, which exceeds $ 50,000. Individuals who provide qualified information may be entitled to an award of 25% of the net amount of the fine, penalty, or forfeiture collected or $ 150,000, whichever is less.

[1] Kenneth J. Robinson, Federal Reserve Bank of Dallas, Savings and Loan Crisis 1980-1989, available at: http://www.federalreservehistory.org/Events/DetailView/42 (last viewed 9/23/2015).

[2] N.Y. Times, Two Financial Crises Compared: The Savings & Loan Debacle and the Mortgage Mess, April 13, 2011, available at http://www.nytimes.com/interactive/2011/04/14/business/20110414-prosecute.html (last viewed 9/23/2015). Two Financial Crises Compared: The Savings and Loan Debacle and the Mortgage MessTwo Financial Crises Compared: The Savings and Loan Debacle and the Mortgage MessTwo Financial Crises Compared: The Savings and Loan Debacle and the Mortgage Mess

[3] See, e.g., (1) The Economist, Enron: The real scandal, January 17, 2002, available at http://www.economist.com/node/940091 (last viewed 9/23/2015); (2) Simon Romero & Riva Atlas, WorldCom’s Collapse, N.Y. Times, July 22, 2002, available at http://www.nytimes.com/2002/07/22/us/worldcom-s-collapse-the-overview-worldcom-files-for-bankruptcy-largest-us-case.html (last viewed 9/23/2015); and (3) USA Today, Timeline of the Tyco International Scandal, June 17, 2005, available at http://usatoday30.usatoday.com/money/industries/manufacturing/2005-06-17-tyco-timeline_x.htm (last viewed 9/23/2015).

[4] See footnote 3.

[5] Congressional Budget Office, Report on the Troubled Asset Relief Program—March 2015, March 18, 2015, available at https://www.cbo.gov/publication/50034 (last viewed 9/23/2015).

[6] Financial Crisis Inquiry Commission Final Report, January 2011, at p. xxii, available at: http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf (last viewed 9/23/2015).

[7] See footnote 6.

[8] Barron’s, Interview with William Black, Associate Professor, Economics and Law, University of Missouri, Kansas City, April 13, 2009, available at http://www.barrons.com/articles/SB123940701204709985 (last viewed 9/23/2015).

[9] Source: OSHA Fact Sheet (https://www.osha.gov/Publications/osha-factsheet-sox-act.pdf) (last viewed August 26, 2015). See, also, 29 C.F.R. Part 1980.

[10] See, In the Matter Of Paradigm Capital Management, Inc. and Candace King Weir, 2014 SEC LEXIS 2104, 2014 WL 2704311 (SEC June 16, 2014); SEC Announces Award to Whistleblower in First Retaliation Case, SEC Press Release 2015-75 (providing $600,000 to the whistleblower) available at: https://www.sec.gov/news/pressrelease/2015-75.html (last reviewed 9/24/2015).

[11] Source: OSHA Fact Sheet (https://www.osha.gov/Publications/OSHA3720.pdf) (last viewed August 26, 2015). See, also, 29 C.F.R. Part 1985.

[12] “Federal banking agency” means the FDIC, the Board of Governors of the Federal Reserve System, the Federal Housing Finance Agency and the Comptroller of the Currency.

[13] Source: SEC Announces First Whistleblower Protection Case Involving Restrictive Language, SEC Press Release 2015-54 available at: https://www.sec.gov/news/pressrelease/2015-54.html (last reviewed 9/24/2015); 17 C.F.R. § 21F-17.

[14] See, e.g., In the Matter of KBR, Inc., 2015 SEC LEXIS 1207 (SEC April 1, 2015).

[15] Source: SEC web site- https://www.sec.gov/about/offices/owb/owb-faq.shtml#P5_1383 (FAQ #2) (last reviewed 9/24/2015); see, also, 17 C.F.R. § 21F-2.

[16] Source: SEC web site- https://www.sec.gov/about/offices/owb/owb-faq.shtml#P5_1383 (FAQ #1); see, also, 15 U.S.C. § 78u-6(b) – (f).

[17] Source: CFTC web site: http://www.cftc.gov/ConsumerProtection/WhistleblowerProgram/index.htm (last viewed 9/23/2015).

[18] See footnote 17.

[19] Source: IRS web site: http://www.irs.gov/uac/Whistleblower-Informant-Award (last viewed 9/23/2015).

[20] See footnote 19.

Taking the Next Step

If you believe that you have evidence or information indicating bank or finance fraud or illegality, contact us for a free assessment of your case. Similarly, if you have been subjected to retaliation for investigating or reporting fraud or illegality, we would welcome the opportunity to talk with you.