SEC Charges Hedge Fund Adviser with Whistleblower Retaliation under Dodd-Frank

On June 16, 2014, the SEC issued its first-ever charge of whistleblower retaliation under section 922 of the Dodd-Frank Act, charging a hedge fund advisor and its owner with “engaging in prohibited principal transactions and then retaliating against the employee who reported the trading activity to the SEC.” Read More

U.S. Commodity Futures Trading Commission Issues First Whistleblower Award

On Monday, May 19, 2014, the U.S. Commodity Futures Trading Commission (“CFTC”) issued its first award to a whistleblower under its Dodd-Frank bounty program.

The Commission will pay $240,000 to an unidentified whistleblower who “voluntarily provided original information that caused the Commission to launch an investigation that led to an enforcement action” in which the judgment and sanctions exceeded $1 million. The heavily redacted award determination on the CFTC’s website does not reveal the name of the implicated company, the nature of the wrongdoing involved, the percentage of bounty the whistleblower received (which is required to be between 10 and 30 percent pursuant to the statute), or the factors considered in determining the percentage of the bounty.

Prior to this first grant of an award to a whistleblower under the CFTC’s Dodd-Frank bounty program, there were 25 denials of award claims. The reasons for the denials primarily fell into one or more of several categories:

  1. the individuals provided information before the passage of Dodd-Frank;
  2. they did not file a form TCR as required by the regulations;
  3. they did not provide information “voluntarily” but rather in response to a Commission request; and/or
  4. the information did not cause the Commission to open or expand an investigation or significantly contribute to a success of a Commission matter.

Time will tell whether this first award will have any effect on the number of whistleblowers who report to the CFTC or the quality of information the Commission receives.

Bon Voyage! Dodd Frank Whistleblower Claim Shipped to Arbitration

In Murray v. UBS Securities, LLC, Judge Failla in the Southern District of New York compelled arbitration of a Dodd-Frank whistleblower retaliation claim, holding that nothing in the anti-retaliation provision, 15 U.S.C. 78u-6(h), precludes the arbitration of these claims. Read More

Moving Right Along: The Office of Whistleblower Issues Its 2013 Annual Report

The SEC released its Fiscal Year 2013 Annual Report   (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on  November 15, 2013.  The Report analyzes the tips received over the last twelve months by the SEC’s Office of the Whistleblower (“OWB”) and provides additional information about the whistleblower award evaluation process. Read More

SEC Issues Huge Bounty Award of $14 Million to Whistleblower under Dodd-Frank

Today the SEC announced that it is issuing a whistleblower award of over $14 million to a whistleblower who provided information that resulted in the recovery of investor funds. The significant whistleblower award comes after many critics have questioned the success of the SEC’s whistleblower award program which, to date, has only issued two much smaller awards since the program’s inception in 2011. The first award payment was issued in August 2012 for approximately $50,000. The second award, paid to three whistleblowers for information that stopped a sham hedge fund, has paid out approximately $25,000 with an expected total payout of $125,000. Read More

Fifth Circuit Defines “Whistleblower” Narrowly Under Dodd-Frank

On July 17, 2013, the Fifth Circuit issued the first circuit court decision interpreting Dodd-Frank’s anti-retaliation provision.  In Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit held that, to be protected under Dodd-Frank’s anti-retaliation provision, an individual must be a “whistleblower,” which is defined by the statute as an individual who has made a report to the SEC. Notably, this holding directly conflicts with the SEC’s regulations interpreting the Act, as well as five district court decisions that had all held that employees who make internal reports to company management are protected under Dodd-Frank even if they did not make reports to the SEC. Rejecting these analyses, the Fifth Circuit based its decision on the plain wording of the statute, which it found to be unambiguous in protecting only “whistleblowers” as defined by the Act. Read More

Will the Latest Opinion by A District Court Adopting a Broad Definition of Who is a Whistleblower Encourage More Internal Reporting?

In May, another New York federal district court ruled that an employee need not report a disclosure directly to the Securities and Exchange Commission (“SEC”) to be afforded the protections under the anti-retaliation provisions of the Dodd-Frank Act, but that internal disclosures within a company are covered. Read More

Federal Court Decisions Permit Two Dodd-Frank Whistleblower Cases to Proceed

 

Two federal district courts recently issued decisions adopting a broad interpretation of the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and allowed Dodd-Frank whistleblower claims to proceed past motions to dismiss. Significantly, these cases stand for the proposition that to be protected as a whistleblower under the retaliation provision of Dodd-Frank, an individual does not have to meet the definition of a whistleblower for purposes of obtaining a bounty under Dodd-Frank and in particular, does not necessarily have to make a disclosure to the Securities and Exchange Commission (the “SEC”) in the manner required in connection with the bounty provision of the statute. While the issue is far from settled as Dodd-Frank retaliation cases are just beginning to work their way through the federal courts, these decisions could contribute to further increases in the number of Dodd-Frank whistleblower retaliation claims filed against employers. Read More

Department of Treasury Proposes Rule Aimed To Ensure Diversity In Its Contractor Workforce

Consistent with the mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Treasury Department issued a proposed rule that would require contractors doing business with the agency to confirm their commitment to equal opportunity in employment and contracting. The rule would amend the Department of the Treasury Acquisition Regulation to require any entity entering a contract with the agency to insert a statement in each contract that it has made affirmative efforts to include women and minorities in its workforce. If the contractor in turn enters into a subcontractor arrangement to carry out the government contract, the contractor must include the same provision in any such subcontract that has a monetary value of more than $150,000.

In addition to the specific contractual provisions, the proposed rule would provide the Treasury Department with an opportunity to request information from the contractor to demonstrate that the contractor has made a “good faith effort” to satisfy its commitment to diversity. The proposed regulation explains that the documentation that may be requested to demonstrate this “good faith effort” can include: (1) an EEO-1 report of the contractor’s employees, detailing the number of employees and the number of minority and women employees; (2) a list of subcontract awards under the contract at issue, including the dollar amount of such subcontract award, the date of the award, and the subcontractor’s race, ethnicity and gender; (3) EEO-1 data for subcontractors performing work under the contract; and (4) the contractor’s plan to ensure that minorities and women “have appropriate opportunities to enter and advance within its workforce, including outreach efforts.” Failing to comply with these obligations can result in loss of the contract. Read More