Originally published on Choate Hall & Stewart LLP's website.
Republished with permission.
On September 23, 2019, Senator Chuck Grassley (R-IA), along with Senators Ernst (R-IA), Baldwin (D-WI), and Dubin (D-IL), introduced the Whistleblower Programs Improvement Act (WPIA). The WPIA expands the definition of a whistleblower and modifies the timeline for processing applications for whistleblower awards at the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
What You Need to Know
The bipartisan bill comes on the heels of similar legislation, the Whistleblower Protection Reform Act of 2019 (WPRA), which passed nearly unanimously in the House by a vote of 410-12 in July. Both the House version of the WPRA and the WPIA signal a potential return to an era of expanded whistleblower rights and remedies as was seen during the Obama Administration.
Specifically, the WPIA clarifies the definition of a whistleblower under the anti-retaliation provision of the Dodd-Frank Act. Prior to 2018, courts were divided as to whether internal whistleblowers were covered under the anti-retaliation provision of Dodd-Frank. In Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018), the U.S. Supreme Court resolved the split, holding that the definition of a whistleblower requires that an individual actually report the alleged securities law violation to the SEC to qualify for protection under the Act. The WPIA amends the SEC and CFTC provisions of Dodd-Frank to broaden the definition and provide protection for internal whistleblowers who report the alleged violations to their employers.
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Congress has authorized these agencies to provide monetary awards to individuals who provide high-quality original information that leads to an enforcement action.
The information and assistance provided by whistleblowers about possible securities law violations is an essential component of the SEC and CFTC’s ability to investigate and take action against unlawful conduct. Congress has authorized these agencies to provide monetary awards to individuals who provide high-quality original information that leads to an enforcement action. When a whistleblower reports a violation to the SEC, it often takes years for the agency to investigate and decide whether to bring an enforcement action. If the SEC brings an enforcement action, it can take another two to four years before it determines whether the whistleblower will receive an award.
To promote prompt payments of awards, the WPIA imposes deadlines to ensure timely processing of whistleblower award applications. The WPIA would require the SEC and CFTC to issue an initial award determination within one year of the deadline to apply for an award. The deadline can be extended for good cause, such as if the award claim is “sufficiently complex or involves more than one whistleblower.”
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Given the overwhelming support for the WPRA in the House, it is likely that the Senate will pass the bipartisan WPIA without issue.
After being introduced in the Senate, the WPIA has been referred to committee and no further action has been taken to date. However, given the overwhelming support for the WPRA in the House, it is likely that the Senate will pass the bipartisan WPIA without issue.
What You Need to Do
Congress’ decision to expand and strengthen whistleblower protections comes in the wake of heightened awareness of the role of whistleblowers in Washington. If the Senate enacts the WPIA, it will be a major expansion of whistleblower rights and remedies. Employers should monitor these recent legislative actions and be prepared to implement any necessary changes in their existing reporting mechanisms should the bills be enacted into law.
As always, it is recommended that employers engage in best practices for monitoring, training, and reporting possible violations of securities laws.