Everything is Coming Up Whistleblowers

Good news, whistleblowers: The Supreme Court just gave you a huge victory. Even better, the robed justices aren’t the only arm of the government looking to protect whistleblowers.

A decision last week from the highest court in the land affirmed safeguards for whistleblowers spanning a broad range of sectors. According to the unanimous ruling in favor of a former UBS employee, the Sarbanes-Oxley Act of 2022 guarantees whistleblowers protections from retaliation by their employers and doesn’t require them to prove their employers intended to retaliate against them. Instead, the Supreme Court found whistleblowers must simply show their actions contributed to personnel decisions employers made against them. The ruling led some experts to label Sarbanes-Oxley “…one of the most employee-friendly whistleblower-protection statutes in the nation.”

Meanwhile, a new program spearheaded by the U.S. Attorney’s Office for the Southern District of New York is seeking to bring even more whistleblowers out of the woodwork in the nation’s hotbed of white-collar litigation. The pilot program is offering leniency to nonviolent offenders who voluntarily aid in bringing new cases to the authorities and participate in the prosecutions. The objective is to finger perpetrators of financial crimes such as investment fraud and bilking government funds.

“Our message to the world remains: ‘Call us before we call you,’” said U.S. Attorney Damian Williams in announcing the program as part of his office’s priorities for 2024.

The Securities and Exchange Commission is getting in on the act, too. Last year, the financial cops filed the most enforcement actions tied to protecting whistleblowers since 2016. The agency announced settlements and sanctions in September alone against a trio of companies for $225,000, $375,000 and $10 million. The companies were tagged for violating Rule 21F-17 connected to conditions of employees’ work and/or separation agreements.

The SEC kept the ball rolling in 2024. In January, the commission settled with J.P. Morgan Securities for $18 million, representing one of the largest fines it has ever collected for the violation of rules protecting whistleblowers. The SEC alleged the investment house deterred clients and brokerage customers from reporting potential violations of securities laws by asking them to sign confidentiality agreements. Notably, the SEC charged that even though the agreements issued by J.P. Morgan Securities allowed signees to respond to inquiries from authorities, they prohibited signees from voluntarily reporting potential violations.

There’s no sign of the SEC slowing down its whistleblower work any time soon. In an analysis of trends in enforcement, attorneys from Bond Schoeneck & King pointed out that even disclaimers in an employment agreement won’t save companies if regulators determine an agreement “otherwise impedes an individual’s ability to communicate securities violations” to the authorities. In fact, they said, the language in Rule 21F-17 is “intentionally broad” to enable greater flexibility for the SEC to protect whistleblowers.

Ultimately, the message from the federal government to people with information about financial misdeeds seems clear – put your lips together and blow.

Latest Articles

Frustrations Mount Over Differing Climate Disclosure Rules

The long slog to implementing sustainability-related disclosure rules for companies in the United States reached something of a conclusion last month. While issuers are coming to t...

Read More

Study: Women Lose Ground in C-Suite for First Time in Two Decades

In what researchers say could represent an “alarming turning point,” the number of women holding executive corporate leadership roles is now declining, according to a study publish...

Read More

Trump’s Loose Lips Risk Running Afoul of SEC

Restraint has never been Donald Trump’s strong suit. The former President seemingly lashes out at any perceived slight within earshot, leading to countless public feuds with everyo...

Read More