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Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.

Dodd-Frank Act Impacts Whistleblowers | Hodgson Russ

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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 brings a new round of sweeping reform to our nation’s financial system. Under the Dodd-Frank Act, a whistleblower who provides “original information” to the U.S. Securities Exchange Commission (SEC) or the U.S. Commodity Futures Trading Commission (CFTC) is eligible to receive a portion of the proceeds recovered by the government as a result of a successful enforcement action.

The information provided by whistleblowers can relate to traditional securities violations, such as inaccurate financial disclosures, improper accounting practices, and insider trading. However, the new whistleblower provisions also cover violations of the Foreign Corrupt Practices Act (FCPA), which prohibits bribery of foreign officials. The FCPA is an enforcement tool that has been used with increasing frequency in the pharmaceutical, medical device, and health care industries because, compared to other industries, these companies have a large number of contacts with foreign officials. For example, government approvals are needed to open offices, obtain licenses, and import goods. In addition, since many foreign health care institutions are owned or controlled by local and national governments, FCPA violations routinely arise around incentives for product sales to foreign hospitals.

Under the new whistleblower program, it may be far easier for whistleblowers to seek rewards. Unlike the False Claims Act (FCA), whistleblowers will not be required to file and maintain lawsuits in federal court. Therefore, individuals will not incur the significant financial burdens that FCA whistleblowers and their counsel incur under the FCA. The procedures and format for participation in the new whistleblower program will not be finalized until April 2011. However, in November 2010, the SEC proposed Section 21F, which sets forth some of the details. The main aspects of the new whistleblower program are as follows:

  • Whistleblower rewards: Ten to 30 percent of the monies the SEC, CFTC, and other prosecuting authorities collect based on the whistleblower’s information if more than $1 million is collected. Certain factors, including 1) the significance of the information provided, 2) the assistance provided by the whistleblower and the whistleblower’s attorney, and 3) the “programmatic interest” of the SEC “in deterring violations of the securities law ” will be considered to determine the whistleblower’s reward.
  • Job protection: The law specifically states that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. Whistleblowers who suffer from employment retaliation may sue for reinstatement, back pay, and any other damages that occurred.
  • Confidentiality: Whistleblowers may report fraud anonymously, as long as they have retained a lawyer to represent them. In some cases, their identities may remain unknown even to the SEC and the CFTC until the time comes for the payment of a reward.

Michelle Merola is a partner in the Business Litigation Practice at Hodgson Russ LLP. You can reach her at

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Hodgson Russ is one of only a few major law firms that represents both whistleblowers and companies accused by whistleblowers of wrongdoing. This unusual perspective means we are exceptionally well positioned to advise whistleblowers about potential claims.

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