Proposed Legislation to Gut Whistleblower Provisions of Dodd-Frank
Last week, Representative Michael Grimm (R,C-NY) along with House Financial Services Capital Markets Subcommittee Chair Scott Garrett (R-NJ), Rep. John Campbell (R-CA), and Rep. Steve Stivers (R-OH) introduced new legislation to amend the whistleblower provisions of the Dodd-Frank Act. The proposed bill, entitled the Whistleblower Improvement Act of 2011 (H.R. 2483) would make it more difficult for whistleblowers to report corporate misconduct, and decrease protection and rewards for those that do so.
The Project on Government Oversight along with other groups representing consumers, investors, taxpayers, employees, and whistleblowers wrote a letter to the House Financial Services Committee and the Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, calling the bill “an extreme approach that would silence would-be whistleblowers, endanger critical inside informants, undermine investigations, hamstring enforcement at the SEC and CFTC, and provide lawbreaking financial firms with an escape hatch from accountability”.
Ironically titled, Grimm’s bill would seriously dam the channels through which whistleblowers may come forward; forcing them first to report the fraud within the company before a claim can be brought before the SEC. The bill would favor corporations who deal with fraud internally. It would also eliminate the minimum reward given for those who provide information leading to successful civil or criminal penalties of more than $1 million. Lastly, it would allow for retaliation against those who contact the SEC by stripping whistleblower protections.
On his website, Rep. Grimm says the bill is an improvement to Dodd-Frank, because it will “[preserve] the internal reporting standards used by companies to catch criminal activity early, before it spirals out of control” and that an already overburdened SEC will benefit from the improvements to the whistleblower provisions which at the moment “have the potential to cause more harm than good.”
Resulting from a May 11th hearing of the House Financial Services Committee, a draft of the bill was revised to eliminate a provision that would have banned whistleblowers from obtaining representation on a contingency basis.
The full text of the bill can be found here.
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