A pair of Democrat legislators has introduced a bill that aims to close loopholes in the Dodd-Frank Act, reinforce whistleblower protections, and boost awards for those who risk their careers to call out fraud and other misconduct in the financial industry.
Senator Tammy Baldwin (D-Wis.) and Rep. Elijah Cummings (D-Md.) say the Whistleblower Augmented Reward and Non-Retaliation Act of 2016 is needed to shore up and expand vital whistleblower protections in a time when the current rules, introduced by the Dodd-Frank Act of 2010 to combat rampant financial fraud, are being declawed by Wall Street, banks, and other financial firms.
“When we in Congress passed the Dodd-Frank Act, we put in place protections for whistleblowers that are now being undermined by financial firms,” Rep. Cummings said. “Our bill would address these abuses and create stronger protections for whistleblowers who shine a light on corporate malfeasance.”
If passed, the bill will prohibit financial sector employers from gagging their employees by forcing them to waive their rights and barring them from discussing internal investigations with external authorities or other parties as a condition of employment.
In April, the Securities and Exchange Commission (SEC) took its first enforcement action over these confidentiality agreements against global technology and engineering firm KBR Inc., which used restrictive language in employee confidentiality agreements that could have effectively barred any potential whistleblower from sharing information about securities law violations, fraud, or other misconduct with SEC regulators.
The bill would also extend protections from retaliation to whistleblowers at the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and other banking regulators that are currently not covered by Dodd-Frank protections.
The bill would also standardize whistleblower awards among various statutes, allowing all financial whistleblowers to receive awards of 10 to 30 percent of any recovery or penalty the government makes as a result of the whistleblower tips. This would apply to the Federal Deposit Insurance Act and the Financial Institutions Reform, Recovery and Enforcement Act, which are capped so low that they actually discourage potential whistleblowers from speaking out against corporate misconduct.
The legislation would also open up new avenues for whistleblowers to substantiate their claims with new legal procedures and evidentiary standards. If passed, the bill will also provide civil remedies and punitive damages for whistleblowers who experience retaliation.
In short, the bill would empower whistleblowers and help prevent another economic meltdown like the one that overtook the U.S. in 2007-2008.
“The middle class has paid a steep price for the irresponsible actions of others, yet only one top banker went to jail for the financial crisis,” Sen. Baldwin said. “If we strengthen and empower whistleblowers in the financial industry, we can do a better job of holding Wall Street accountable. These reforms will help us do that.”