internal reporting

Inside-Out: CFTC Enhances Whistleblower Award For Internal Reporting

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On May 6th, the Commodity Futures Trading Commission (“CFTC”) announced that it made a whistleblower award of approximately $1.5 million to an individual whistleblower. The individual provided information that assisted in the successful prosecution of a CFTC action and a related action brought by another federal regulator.  In particular, the CFTC recognized that the whistleblower initially sought to report his or her concerns internally prior to reporting to the CFTC, and it enhanced the individual’s award as an incentive.

In making the announcement, the Director of CFTC’s Whistleblower Office Christopher Ehrman explained, “While there is no requirement that a whistleblower report internally before approaching the Commission, today’s award demonstrates that the Commission may pay enhanced awards to those that do – that is one of the positive factors set out in our rules for the Commission to consider in making its award determination.”  Furthermore, the CFTC recognized that the information the claimant provided “was directly incorporated into strategy involving witness interviews, and his/her early assistance saved Commission resources through his/her explanation of a complex scheme.”

Since the beginning of the CFTC’s whistleblower program in 2014, the agency has awarded more than $85 million to whistleblowers.

Can You Hear The Whistle Now? SEC Proposes New Rule Amendments To Bolster the Bounty Program

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On June 28, the Securities Exchange Commission (“SEC” or “Commission”) voted to propose amendments to its whistleblower program. As SEC Chair Jay Clayton explained, the proposed changes would “strengthen the whistleblower program by bolstering the Commission’s ability to more appropriately and expeditiously reward those who provide critical information that leads to successful enforcement actions.” The SEC issued a press release outlining the proposed rules, which would: (1) provide the Commission with additional tools in making whistleblower awards; (2) clarify the requirements for anti-retaliation protection under the whistleblower statute; (3) provide interpretive guidance to help clarify the meaning of “independent analysis”; (4) increase efficiencies in the whistleblower claims review process; and (5) clarify various miscellaneous policies and procedures. READ MORE →

Take It Outside: Supreme Court Unanimously Holds That Internal Reporting Is Not Protected Under Dodd-Frank

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In the Supreme Court’s first decision interpreting Dodd-Frank’s whistleblower retaliation provisions, the Court unanimously held that internal whistleblowing is not protected under Dodd-Frank.  The highly anticipated ruling resolves a circuit split between the Second and Ninth Circuits, which held that such reporting was protected, and the Fifth Circuit, which held that it was not.  The Court sided with the Fifth Circuit’s textual reading and held that no Chevron deference to the SEC’s interpretation of the statute was warranted because the statutory definition of “whistleblower” was clear. READ MORE →

CEO’s Whistleblower Claims “Rest On Feet Of Clay”: Seventh Circuit Affirms Dismissal Of SOX and Dodd-Frank Case

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Earlier this month, the Seventh Circuit affirmed dismissal of a CEO’s whistleblower retaliation claims in a decision that should provide corporate defendants ammunition to fight SOX and Dodd-Frank whistleblower cases going forward.

In Verfuerth v. Orion Energy Systems, Inc., No. 16-3502 (7th Cir. Jan. 11, 2017), the plaintiff, founder and former CEO of Orion, claimed that Orion’s Board of Directors terminated him for cause in retaliation for making whistleblower complaints about perceived fraud on SEC reports and other managerial decisions.  Orion asserted that it terminated Verfuerth for numerous legitimate reasons, including falling stock prices, Verfuerth’s intimidating leadership style, high rates of senior management turnover, and other business disagreements such as reimbursement for Verfuerth’s costly divorce. READ MORE →