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Whistleblowing – What you need to know about the Dodd-Frank Act

Whistleblowing – What you need to know about the Dodd-Frank Act

by Toby Lucich on September 10, 2010

If your organization isn’t already offering incentives to ferret out inappropriate behaviors, the new Dodd-Frank Act and whistleblowing rewards just might (and could make your company the next public spectacle).

Deloitte’s “Whistleblowing and new Race to Report” offers a very useful orientation to the impact of this new act. From their site,

The Dodd-Frank Wall Street Reform and Consumer Protection Act has created rewards of 10 to 30 percent of monetary sanctions for whistleblowers who report to the Securities and Exchange Commission (SEC) original information leading to securities law enforcement actions that recover more than $1 million. 

Press releases announcing settlements by the SEC in the first seven months of 2010 show how large future rewards for whistleblowers could be.

In addition, proposed changes to U.S. Federal Sentencing Guidelines may lead to a reduction in organizational sentences when the organization has an effective compliance and ethics program that incorporates direct reporting obligations from the head of the compliance program to the board of directors or audit committee.

{ 1 comment… read it below or add one }

George Lekatis May 26, 2011 at 10:17 am

For months we read in blogs and some newspapers that the Sarbanes Oxley Act is dead, or that it is not important any more, as there are other laws and regulations that matter. Well, they are all wrong.

The Sarbanes Oxley Act has become much more important. It is a fact.

The two most important reasons for that are:

1. The new US financial regulatory reform, the Dodd Frank Act, amends some sections of the Sarbanes Oxley Act. SOX is part of the new regulatory reform. They did not delete the SOX provisions, they have made them more strict and clever.

For example, whistleblowers now have a monetary incentive to report matters to the SEC (they may be entitled to as much as 10 percent to 30 percent of the monetary sanctions imposed).

Management should clearly explain to all employees the importance of prompt reporting of violations.

Public companies should do much more for complaints submitted to audit committees or employee hotlines to address areas of potential concern.

The Dodd-Frank Act also provides an employee with remedies against the employer that has violated the whistleblower provisions of the Dodd-Frank Act.

These remedies include reinstatement with the same seniority status that the individual would have had, two times the amount of back pay otherwise owed to the individual, with interest, and even compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.

Does it look like the end of Sarbanes Oxley? No, it is Sarbanes Oxley on steroids.

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