FCPA Alert: Congress Enacts Bounty Provision for FCPA Whistleblowers

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Under this law, whistleblowers in FCPA and securities fraud cases can claim as a bounty anywhere from 10 percent to 30 percent of sanctions imposed by the SEC or by the DOJ and other agencies in "related actions".  In a June 2010 alert, we described the Senate's proposed bounty provisions and the impact that the law could have on FCPA prosecutions and compliance.  A copy of that alert can be found at www.jonesday.com/fcpa_alert_whistleblowers. 

 

Now that the law has been enacted, these monetary awards will likely increase the number of whistleblower claimants and spawn new enforcement actions.  As we noted in our earlier alert, increased incentives for whistleblowers may not result in better compliance.  Instead, such rewards may create an incentive for employees to hide ongoing violations and report them externally, rather than take proactive measures to stop ongoing violations.  In addition, offering witnesses a financial stake in enforcement actions could undermine the legitimacy and reliability of complaints, fostering spurious reports that drown out the voices of legitimate whistleblowers.

The Dodd-Frank Act contains thousands of pages of legislation in addition to the bounty provisions, including many that are relevant to securities fraud enforcement.  For example, it establishes aiding and abetting liability in SEC enforcement actions for those who "recklessly" assist in securities violations and provides the SEC with the authority to issue industry-wide collateral bars.  Jones Day has published a comprehensive summary of the legislation, which can be found at www.jonesday.com/financial_reform_dodd-frank.  The bounty provisions are described at pages 69-71; aiding and abetting liability at page 71; and the expanded authority for collateral bars at pages 71-72.

R. Christopher Cook
Partner

Washington
+1.202.879.3734
christophercook@jonesday.com

Marc D. Ricchiute
Associate
Washington
+1.202.879.7656
mdricchiute@jonesday.com