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NEW YORK — Despite President Donald Trump’s professed antagonism toward the Dodd-Frank Wall Street Reform and Consumer Protection Act, he is unlikely to shut down the U.S. Security and Exchange Commission’s whistleblower program, experts say.
“It’s been wildly successful, so I think it will be difficult for folks to take apart,” said Jordan A. Thomas, a partner and whistleblower chair at Labaton Sucharow L.L.P. in New York and a former SEC assistant director who helped develop the whistleblower program, which was created in 2010’S Dodd-Frank law.
He spoke during a discussion on whistleblowers at the Professional Liability Underwriting Society’s directors and officers symposium Wednesday in New York.
Last week, President Trump signed an executive order that, without naming Dodd-Frank, gives the U.S. Treasury Department the authority to restructure major provisions of the law, which he has called a “disaster.”
Under rules adopted by the commission in 2011, individuals who voluntarily report information to the SEC that results in a successful enforcement action in which the agency collects more than $1 million in sanctions are eligible for 10%-30% of the amount collected.
According to the SEC’s 2016 annual report to Congress on the whistleblower program, the agency has awarded more than $111 million to 34 whistleblowers, including $57 million in fiscal year 2016.
Mr. Thomas said whoever is named as SEC chairman and director of enforcement will be judged on the number of enforcement actions and sanctions they bring. Neither of these officials, he said, will want to be known as the ones who caused a drop in the program.
Sean X. McKessy, a former chief of the SEC whistleblower office who left that post last year and is now a partner with Phillips & Cohen L.L.P. in Washington, added, “It’s very hard to construct a narrative that if elements of Dodd-Frank are problematic, difficult to implement or harmful,” the whistleblower program should be included among them. “All of this kind of lines up in favor of maintaining the program,” he said.
“It’s good to have friends in high places,” said Mr. McKessy, adding that Sen. Charles Grassley, R-Iowa, tweeted after the election that the whistleblower program should be left alone.
If there are problems with Dodd-Frank, “I think it’s going to take a long time … before the SEC’s whistleblower program ends up in the crosshairs,” Mr. McKessy said.
In discussing his whistleblower practice, Mr. Thomas said that among the factors considered in order to accept a whistleblower as a client are whether they are insiders or outsiders, if there is a securities violation and, if so, how significant. “It needs to be significant matter,” he said.
“We definitely meet with people in most cases,” and it is common for them to bring documents, some of which are corporate documents, he said.
“It can take two or three months of work” by the law firm, involving in-house investigators, external experts and forensic accountants, before the SEC is approached about a whistleblower, he said.
Asked about the length of time between the whistleblower’s first phone call and a check, Mr. Thomas said, “Less than five years would be a good outcome.”
Despite all the potential hardships they may face, “it’s remarkable how many whistleblowers … still want to move forward,” and the reason is not the financial reward at the end of the process, but because they are unhappy about working for a company that is “not doing things the right way,” Mr. McKessy said.
Their attitude is “I just can’t abide this going on in the company I’ve signed up with,” Mr. McKessy said.
The U.S. Securities and Exchange Commission said Friday it has awarded more than $5.5 million to a whistleblower who provided critical information that helped the agency uncover an ongoing scheme.