For corporate whistleblowers, the Securities and Exchange Commission (SEC) may no longer be the only game in town. New York Attorney General Eric T. Schneiderman recently announced plans to introduce the Financial Frauds Whistleblower Act, a whistleblower program that will provide monetary incentives for who report financial misconduct.
“New York has a unique opportunity to set the gold standard for states seeking to expose and hold individuals accountable for financial crimes. This law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets,” Schneiderman said in a press statement. Attorney General Schneiderman’s proposed whistleblower statute is modeled after the SEC’s bounty program. As previously discussed on the Scarinci Hollenbeck Business Law Blog, the SEC whistleblower program is going strong. The agency received 3,620 whistleblower tips in FY 2014, which represents a more than 20 percent increase in the number of whistleblower tips in just two years. Last September, the SEC authorized its largest payout to date, an award of more than $30 million to a whistleblower who provided key original information that led to a successful enforcement action.
The proposed New York whistleblower program would specifically provide financial compensation to whistleblowers who voluntarily report fraud in the banking, insurance, and financial services industries, and whose tips lead to more than $1 million in penalties or settlement proceeds. Whistleblowers would be eligible to receive 10-30 percent of the money obtained.
As with similar whistleblower programs, the proposed law would also guarantee the confidentiality of the whistleblower’s information. In addition, current and prospective employers would be expressly prohibited from discharging, demoting, suspending, or otherwise harassing employees who report suspicious or fraudulent activity to supervisory or internal compliance staff.
With regard to logistics, a Financial Services Whistleblower Awards program would be created within the State’s Department of Financial Services to reward whistleblowers for tips to that agency. Payments to whistleblowers would be funded from monetary recoveries paid by wrongdoers and not from state funds.
In order to be implemented, the New York State legislature must approve the bill. We will be closely tracking the status of the proposal and will provide updates as they become available.
Dissolving Your Business: Essential Legal Steps to Protect Your Interests
If you’re considering closing your business, it’s crucial to understand that simply shutting your doors does not end your legal obligations. Unless you formally dissolve your business, it continues to exist in the eyes of the law—leaving you exposed to ongoing liabilities such as taxes, compliance violations, and potential lawsuits. Dissolving a business can seem […]
The Role of Corporate Restructuring in Mergers & Acquisitions
Contrary to what many people think, corporate restructuring isn’t all doom and gloom. Revamping a company’s organizational structure, corporate hierarchy, or operations procedures can help keep your business competitive. This is particularly true during challenging times. Corporate restructuring plays a critical role in modern business strategy. It helps companies adapt quickly to market changes. Following […]
Crypto Enforcement: A Former Prosecutor’s Warning to Criminals and the Public
Cryptocurrency intimidates most people. The reason is straightforward. People fear what they do not understand. When confusion sets in, the common reaction is either to ignore the subject entirely or to mistrust it. For years, that is exactly how most of the public and even many in law enforcement treated cryptocurrency. However, such apprehension changed […]
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
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