Posted by Kristin Graham Koehler and Kaitlyn Findley
On February 26, 2015, New York Attorney General, Eric Schneiderman, announced that he would propose state legislation to “protect and reward employees who report information about illegal activity in the banking, insurance, and financial services industries.” Attorney General Schneiderman’s proposed bill—The Financial Fraud Whistleblower Act—would both incentivize whistleblowers to report suspected securities and other financial frauds and protect them for doing so. In particular, the bill would provide compensation to individuals whose tips lead to more than $1 million in sanctions and would guarantee the confidentiality of whistleblowers’ information. Finally, the bill would provide whistleblowers with explicit legal protection from retaliation by current or prospective employers in response to their participation in New York’s whistleblower program.
This forthcoming legislation appears to be closely modeled after the provision in the Dodd-Frank Act that created the whistleblower program at the U.S. Securities and Exchange Commission (SEC). Similar to the SEC’s program, New York’s program would pay whistleblowers 10% to 30% of the penalties or settlement proceeds recouped by the government if their tips lead to sanctions worth more than $1 million. The Attorney General’s proposed legislation could create a competition between the SEC program and the anticipated New York whistleblower program because both programs would cover essentially the same industries in New York, and as such, would be competing for the same tips. As a result, if the New York whistleblower program is implemented, both SEC and New York likely will strive to make their programs more attractive to potential whistleblowers by increasing the reward amounts offered and expediting the payment of those amounts.
Despite these similarities, Attorney General Schneiderman indicated in his press release that the proposed legislation would go beyond SEC’s current regulations, stating that “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.”