Final Dodd-Frank Whistleblower Rules Do Not Mandate Internal Reporting; May Dramatically Reshape FCPA Enforcement

more+
less-
more+
less-

On May 25, 2011, a divided Securities and Exchange Commission (SEC) approved final rules to implement the SEC whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Because the SEC and the Department of Justice (DOJ) share responsibility for enforcing the Foreign Corrupt Practices Act (FCPA), the SEC’s whistleblower program is likely to dramatically reshape FCPA enforcement which, to date, has been heavily dependent on voluntary self-reporting by companies.

Under the final rules, to be considered for an award, a whistleblower must voluntarily provide the SEC with original information that leads to the successful enforcement by the SEC of a federal court or administrative action in which the SEC obtains monetary sanctions totaling more than $1 million.

The whistleblower provisions almost certainly will result in a significant increase in the number of FCPA investigations initiated by current and former employees through allegations related to bribery of foreign officials. In recent years, some of the highest SEC recoveries have been in FCPA books and records cases, including, in recent months, settlements of $77 million, $137 million, and $218 million. Whistleblowers, who stand to obtain awards of 10% to 30% of those amounts, are protected against retaliation and will be highly incentivized to report allegations of the books and records provision of the FCPA, which the SEC enforces through civil enforcement proceedings.

Although many parties had urged the SEC to require potential whistleblowers to first report information through their companies’ internal compliance programs, the SEC instead made changes to the final rule that would encourage—but not require—internal reporting.

Among other things, the final rules do the following...

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.