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SEC rejects whistleblower claims for failing to follow Dodd-Frank rules

If you’re looking to be a whistleblower, make sure you fully know the extent of Dodd-Frank

With whistleblower rewards shooting sky high, everyone wants a piece of the action — perhaps even lawyers. However, two recent Securities and Exchange Commission (SEC) cases serve as a reminder that not all attempted whistleblowers will see high rewards.

As revealed by The Wall Street Journal, the SEC finalized two rejections in March of whistleblower cases that began years ago. In both cases, the attempted whistleblowers did not abide by the strict criteria that set forth for whistleblowers through 2010’s Dodd-Frank financial reform law.

In the first case, the individual attempted to collect on information in 2008 that revealed stock inflation of microcap firm Anscott Industries Inc. The individual attempted to collect part of the $21 million penalties ordered against Anscott in the case. However, the SEC denied the claim, saying that the individual “failed to submit the claim for award within 90 days” and “failed to provide original information to the Commission” after the institution after the Dodd-Frank law.

The second case revolves around Countrywide Financial, which is now owned by Bank of America. An unnamed woman claimed to have aided the government’s case against Countrywide officials following misdeeds during the 2008 financial crisis. However, on March 9, the government rejected her request as well, saying that because the woman first provided the information to the Department of Housing and Urban Development and the Federal Bureau of Investigation rather than the SEC, her information did not qualify as “original information” under Dodd-Frank.

So what are the lessons to be learned here? If you’re looking to be a whistleblower, make sure you fully know the extent of Dodd-Frank before filing any claims. The claim must be made in a timely fashion, and all information must first go to the SEC. And if you’re in-house counsel fighting against whistleblowers, the message rings clear: The SEC is holding to the literal interpretation of Dodd-Frank, and attempted whistleblowers may be rejected due to details in the filing.


For more whistleblower news, check out these InsideCounsel articles:

Whistling an ethical tune

Five former Madoff employees found guilty of fraud

SEC whistleblower program still in its infancy

SEC to investigate KBR’s fraud-cover-up practices

Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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