The Impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on Whistleblower Protections

February 27, 2023

Introduction to the Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, was established to regulate the financial industry and protect consumers following the 2008 financial crisis. This comprehensive financial regulatory reform law established a new agency, the Consumer Financial Protection Bureau (CFPB), expanded the powers of existing agencies, and created a host of new laws and regulations designed to protect consumers especially with regard to risky financial and investment products, and to protect the housing market and the mortgage industry from another financial collapse. One of the key provisions of the Dodd-Frank Act was the strengthening of whistleblower protections for those who report securities law violations to the Securities and Exchange Commission (SEC).

The impact of the Dodd-Frank Wall street reform and consumer protection act on whistleblower protectionsThe Impact of the Dodd-Frank Act on Whistleblower Protections

Prior to the Dodd-Frank Act, whistleblowers were only protected from retaliation by their employer if they reported securities law violations directly to the SEC. The Dodd-Frank Act expanded the definition of a “whistleblower” to include individuals who report violations to their employer or to other government agencies, including both the SEC and the CFPB, and expanded the definition of “retaliation” to include any form of discrimination, harassment, or adverse employment action taken against a whistleblower as a result of their reporting.

Increased Financial Incentives for Whistleblowers 

The Dodd-Frank Act also established financial incentives for whistleblowers to come forward with information about securities and commodities law violations. Whistleblowers who provide information to the SEC that leads to a successful enforcement action are eligible for a reward of 10-30% of the money collected from the enforcement action that results in monetary sanctions of $1,000,000 or more. However, whistleblowers who obtained their information as a member or employee of a government or regulatory agency or through a financial audit required by the SEC, or are convicted of a crime related to the SEC’s regulatory enforcement action, are not eligible to receive any award. There are numerous other eligibility requirements for the whistleblower award, so you should consult an experienced whistleblower law firm like Brown, LLC to maximize your chances of obtaining an award and in the highest possible amount.

Similarly, the Dodd-Frank Act also amended the Commodities Exchange Act to create a whistleblower program under the Commodity Futures Trading Commission (CFTC), which oversees the U.S. derivatives markets, including futures, options, and swaps. CFTC’s whistleblower program and award process are similar to the SEC’s Whistleblower Program. So, the CFTC pays awards to whistleblowers who provide information to the CFTC resulting in a successful enforcement action with monetary sanctions of $1,000,000 or more. Eligible whistleblowers are entitled to receive between 10% and 30% of the amount of the monetary sanctions. 

Importantly, both the SEC and CFTC whistleblower programs allow whistleblowers to file their complaints anonymously through the use of a whistleblower attorney. 

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Strong Legal Protections for Whistleblowers 

The Dodd-Frank Act provides whistleblowers with the right to file a lawsuit against their employer if they are subject to retaliation for reporting securities law violations. The Act also allows whistleblowers to seek relief from the SEC if they are subject to retaliation, including reinstatement, double back pay, and reimbursement of legal fees. These protections ensure that whistleblowers can report illegal and unethical practices without fear of losing their job or facing other adverse employment actions.

These financial incentives and protections have been extremely successful in encouraging whistleblowers to come forward with information about securities law violations. In 2022, the SEC announced that approximately $229 million was whistleblowers that year, marking one of the highest years in terms of the whistleblower award amount. Since the inception of the SEC Whistleblower Program, more than $1.3 billion have been awarded to whistleblowers.

The Future of the SEC Whistleblower Program

The SEC Whistleblower Program, which was established by Dodd-Frank in 2010, is also being adapted to modern times, with the SEC investigating cutting edge issues and fraudulent schemes such as cryptocurrency fraud. For example, in 2022, of more than 12,000 SEC whistleblower complaints that the agency received, the third most common complaint category was in “Initial Coin Offering and Cryptocurrencies.” The SEC has seen significant success in this largely unregulated arena; just last year, crypto lender BlockFi agreed to pay the SEC $100 million to settle claims that it sold and offered unregistered securities and investment products. Moreover, as a result of the FTX collapse, the lack of regulation and agency oversight governing the cryptocurrency market has taken center stage in the minds of regulators and legislators. Congress and the SEC will be increasingly relying on whistleblowers to bring to light illegal activity and financial abuse that are harmful to investors and consumers alike.

The Role of a Whistleblower Attorney 

If you believe you have insider information regarding a securities law violation and are considering becoming a whistleblower, it is important to consult with an SEC whistleblower attorney who can provide guidance and support, as well as a thorough and accurate assessment of the strengths and weaknesses of your case, the pros and cons of filing a whistleblower claim, and walk you through the legal process. A whistleblower attorney can advise on the potential risks and rewards of reporting securities law violations, assist in the preparation of a report to the SEC, and represent whistleblowers during all steps of the SEC whistleblower process as well as potentially contact other Department of Justice entities to enhance your recovery.  At Brown, LLC, our experienced attorneys are dedicated to protecting the rights of whistleblowers and ensuring that they receive the full protection of the law.

The Dodd-Frank Wall Street Reform and Consumer Protection Act has had a significant impact on whistleblower protections, providing financial incentives for individuals to report potential securities violations and strong legal protections for whistleblowers who face retaliation as a result of their reporting. If you are considering becoming a whistleblower, it is important to work with an experienced whistleblower attorney like Brown, LLC who can help you understand your rights and navigate the process.