Whistleblowers Coming Forward Due To New Law

 

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The new financial reform law, entitled the Dodd-Frank Wall Street Reform and Consumer Protection Act, has made expectations a reality.  When the Act passed, news sources, including our own (see “Whistleblowing Opportunities Increase Under New Law” and “New Financial Reform Law Provides Incentives for Whistleblowers”), reported that more and more whistleblowers were expected to come forward to expose fraud.  In the past weeks since the signing, lawyers around the U.S. and the Securities and Exchange Commission (SEC) have experienced an influx of whistleblower cases.

The new law allows the SEC to reward those who expose securities fraud. Under the law, numerous types of securities fraud can be reported, including “‘manipulation of a security’s price and volume, Ponzi schemes, insider trading, theft, bribery of foreign officials, and more.’”  According to John Heine, a spokesperson for the SEC, the new act has brought about more quality reports on fraudulent activity and the Commission is expecting “‘a significant increase in complaints.’” The reward percentage still applies as in other whistleblowing cases: if the case totals a recovery of $1 million or more, the whistleblower is entitled to a mandatory minimum of 10 percent of the recovery, and up to 30 percent.

Despite the increase in whistleblowing cases, there are still some parts of the whistleblowing process to be worked out.  The SEC will have nine months from when the Act was passed to figure out the rules for whistleblowing and the process of reporting a claim and moving forward with it.  Regardless, those now filing claims will be rewarded if their case totals more than $1 million in recoveries and is found to be truthful and reliable.

Besides the SEC, lawyers around the country are experiencing an increase in the number of whistleblowers coming forward.  Rebecca Katz, a partner at Bernstein Liebhard, former senior counsel in the enforcement division of the SEC, claims that in the last three weeks she has had more whistleblowing cases reported than in the past three years.  Due to the new law, many more people are questioning what the legislation will do and how it will affect them as whistleblowers.  As more people find out about their potential rewards for being a whistleblower, even more whistleblowers may come forward.

Source: Reisinger, Sue. “Firms Witness Sudden Rush of Whistleblower Claims.” The Legal Intelligencer. 10 September 2010. http://www.law.com/jsp/pa/PubArticlePA.jsp?id=1202471865471.

 

 
 
 

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