Corporate Lawyers as Whistleblowers

At one time, attorneys’ duty to maintain corporate clients’ confidences, even in the face of anticipated or ongoing corporate wrongdoing, was thought to be virtually absolute. But that changed over time, as relevant rules and laws gave lawyers greater discretion to make public disclosures to avert corporate clients’ misconduct. And now, following the enactment of the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), attorneys will sometimes have not only discretion but a financial incentive to blow the whistle, as well as anti-retaliation protections when they do so.

Under Dodd-Frank, the SEC is required to pay monetary awards, between 10 and 30 percent of the total monetary sanctions collected by the SEC and in other related enforcement actions, to individuals who voluntarily provide the SEC with original information leading to an enforcement action in which the agency obtains at least $1 million in sanctions. The statute also provides robust employment protections that prohibit retaliation against an employee who provides information about possible securities violations to the SEC in accordance with the program’s implementing rules. In the event retaliatory action is taken, it establishes significant remedies including reinstatement with equivalent seniority, two-times back pay with interest, attorney fees, and other related expenses. Significantly, whistleblowers may report possible violations anonymously if represented by counsel. Attorneys are eligible to participate in this important investor protection program.

In a recent Corporate Counsel Magazine article, Professor Bruce Green, a nationally recognized ethics professor and the Director of the Louis Stein Center for Law and Ethics at Fordham Law School, and I explore the interplay between the SEC Whistleblower Program and attorney conduct rules, both state and federal.