Nearly one year ago, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. Congress regarded Dodd-Frank as a comprehensive effort to address certain market activities regarded as pernicious, in part through expansion of the role and powers of the Securities and Exchange Commission (SEC). The whistleblower provision in Dodd-Frank was intended to improve the SEC’s ability to identify and react promptly to fraudulent activity in the securities market by encouraging whistleblowers—increasing bounties and offering protections against retaliation.

In the last month, two important developments—one judicial and one regulatory—have applied both the anti-retaliation and bounty aspects of the whistleblower law expansively in favor of whistleblower employees. First, on May 4, 2011, the Southern District of New York issued the first federal decision interpreting the scope of the Dodd-Frank anti-retaliation provisions. In Egan v. TradingScreen Inc., 2011 WL 1672066 (SDNY May 4, 2011), Judge Leonard B. Sand construed the anti-retaliation provisions to cover whistleblowers who provide information not only directly to the SEC, but also a host of other types of disclosures. Then, on May 25, 2011, the SEC issued its long-awaited final rules implementing the whistleblower provisions of Dodd-Frank. Resisting appeals to require whistleblowers to make reports up through companies’ internal compliance programs before going to the SEC, the commission instead offered a compromise, which provides some—but arguably ineffective—incentives to do so.

Whistleblower Provisions

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