Dodd-Frank Act Whistleblower Provisions: Dodd-Frank Act Contains Several New and Expanded Whistleblower Provisions, Including Mandatory Rewards

Sullivan & Cromwell LLP - August 5, 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama on July 21, 2010, includes several new whistleblower protections available to employees and others:

• Mandatory Rewards.  In a unique new approach to encouraging whistleblowing activity, Dodd-Frank provides a mandatory reward to those who voluntarily provide original, independently derived information to the Securities & Exchange Commission (“SEC”) or the Commodity Futures Trading Commission (“CFTC”) relating to violations of the securities laws.

• Whistleblowing to the New Bureau of Consumer Financial Protection.  The Act also provides broad protection to employees who provide information or testimony to the newly created Bureau of Consumer Financial Protection within the Federal Reserve system.

• Extends SOX Protections.  Dodd-Frank extends the whistleblower provisions of Section 806 of the Sarbanes-Oxley Act of 2002 to cover employees of certain affiliates and subsidiaries of publicly traded companies.

• Extends False Claims Act Protections.  Finally, the Act amends and clarifies the False Claims Act (“FCA”) to provide a cause of action to “an employee contractor, agent or associated others” against whom an adverse employment action has been taken because of lawful actions undertaken to stop a violation of the FCA.

The new provisions also consistently state that a whistleblower’s rights under the law may not be waived, including pursuant to pre-dispute arbitration agreements.  This memorandum reviews the Act’s specific whistleblower provisions.  The Firm’s comprehensive memorandum regarding Dodd-Frank, released on July 2, 2010, can be found here.