During the Global Financial Crisis of 2008, Americans learned first-hand how Securities Fraud could have ripple effects through the entire world economy. Institutional investors and average Americans alike were impacted by frauds ranging from Bernie Madoff’s shockingly straight-forward Ponzi scheme to the complicated trades involving credit default swaps which crippled some of the world’s largest banks when the subprime mortgage market collapsed. The only people who emerged unscathed from the meltdown were the investors who bet that the system would collapse. Regulators and politicians vowed to investigate how it all happened and to find ways to make sure it would not happen again.
After years of investigation into the causes of the collapse, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and brought sweeping changes to many areas of financial regulation. A key feature of Dodd-Frank was the creation of two new whistleblower programs modeled after the False Claims Act, the government’s most powerful weapon for fighting fraud on the government. Congress created the new whistleblower programs in part because evidence emerged that the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) missed or ignored information that could have prevented some aspects of the collapse, including tips from whistleblowers. Lawmakers concluded that the massive crisis could have been averted, or at least better contained, if the SEC and CFTC had better systems in place to follow up on whistleblower tips. With Dodd-Frank, Congress directed the creation of those systems to insure that whistleblowers would play a vital role in preventing future securities fraud.
Dodd-Frank did this by amending two existing laws that cover virtually everything bought, sold or traded in the United States economy, the Securities Exchange Act (SEA) and the Commodity Exchange Act (CEA). The SEA regulates all trades conducted on various stock exchanges, including stocks and bonds. The CEA governs the sale and futures trading of energy (oil, coal), natural resources (gold, water), agricultural products (grain, fruit, sugar, coffee, animal products), and financial commodities (foreign currencies and securities) among other things. By adding incentivized whistleblower programs to these two laws similar to the qui tam provisions in the False Claims Act, Congress created powerful new tools for enforcing the securities and commodities laws.
While elements of these new programs draw from the False Claims Act, Dodd-Frank whistleblower actions are different from False Claims Act lawsuits in important ways. Anyone considering becoming a Dodd-Frank whistleblower should first Understand How Dodd-Frank Whistleblower Programs Work.
If you believe someone has knowingly committed securities fraud and you would like to learn more about or would like to be a Dodd Frank whistleblower, the securities whistleblower lawyers at Keller Grover LLP can help you. The lawyers at Keller Grover understand whistleblower laws, including provisions to protect the whistleblower, and strive to achieve the best possible results for their clients.