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Deploying Countermeasures to the SEC's Dodd-Frank Whistleblower Awards

By Toby J.F. Bishop and Mohammed Ahmed
September 29, 2010

Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act created awards of 10%-30% of monetary sanctions for whistleblowers who report to the SEC original information leading to securities law enforcement actions that recover more than $1 million. This could change the dynamics of whistleblowing and self-reporting for organizations. We discuss below 10 actions organizations might take to help mitigate the increased regulatory risk this change may create.

With the SEC settling securities cases for as much as hundreds of millions of dollars, the new awards could at times reach the $10 million-$150 million range. This raises two major questions:

  1. How can organizations incentivize their employees to blow the whistle internally before, or instead of, going to the SEC?
  2. How will this impact the effectiveness of compliance and ethics programs and the potential credit for self-reporting or qualifying for a reduction in sentence under the Federal Sentencing Guidelines?

These tough questions reflect the size of the rock that the Dodd-Frank Act has launched into the compliance and ethics pond.

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