Whistleblower Provisions in the Wall Street Reform Act

Commentators are talking about the somewhat under-the-radar whistleblower provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, recently signed into law by President Obama. This massive law is a sweeping overhaul of the financial system, and it includes a number of provisions expanding opportunities and increasing protections for whistleblowers. The National Whistleblower Center has compiled the sections of the act pertaining to whistleblowers and has posted it here.

Significant provisions include:

• Qui tam provisions for commodities and securities fraud
• Allowing whistleblowers reporting commodities and securities fraud to remain anonymous―even to the government
• Extending the statute of limitations for wrongful discharge claims under the False Claims Act to 3 years

Eamon Javers, from CNBC, in an article notes that under the new qui tam provisions, whistleblowers who alert the Securities and Exchange Commission (SEC) to fraud will be entitled to collect between 10 and 30 percent of any money recovered by the government, which could turn a new wave of whistleblowers into millionaires.

In another article, David Savage of the Los Angeles Times notes that the Madoff Ponzi scheme provided the impetus for the new regulation, as Harry Markopolos, an outside investigator who tried to alert the SEC to the scheme, advocated for empowering whistleblowers. But, as Savage notes, some see a downside to the new provisions. Specifically, some are concerned that the act will discourage employees from attempting to fix a problem internally and instead will incentivize them to simply go to the SEC in the hopes of recovering a bounty. Walter Olson, a scholar at the Cato Institution who was quoted in the article, suggests that we could end up with a society of paid informants.

But what no one can dispute is that the act opens significant avenues for a new wave of whistleblowers to take action against financial fraud and collect a significant reward in the process.

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