On Wednesday this week, all nine justices agreed that the Dodd-Frank Act’s anti-retaliation provision does not extend to an individual who has not reported a violation of the securities laws to the Securities and Exchange Commission (“SEC”).  In other words, making only internal complaints does not shroud an employee in whistleblower protection under the Dodd-Frank Act.

Continue Reading SCOTUS: Whistleblowers Who Complain Only Internally to Employers Are Not Protected by Dodd-Frank

Last month, the Securities and Exchange Commission released new Compliance & Disclosure Interpretations (“C&DIs”) which provide guidance on the CEO pay-ratio rules.  As a reminder, the CEO pay-ratio rules were enacted in August of 2015 and generally require public companies to disclose the ratio of their CEO’s annual total compensation to that of the median annual total compensation of all other company employees.

The new C&DIs provide guidance on several aspects of these pay-ratio rules, including the determination of individuals to be included in the employee population and identification of the median employee.

For an overview of the pay-ratio rules, see this helpful post on the Securities Matters blog here.

The following provides an overview of the C&DIs:

Continue Reading SEC Releases Guidance on Pay Ratio Rules

Last month, consistent with their obligation under the Dodd-Frank Act, several federal agencies released for comment a joint proposed rule that would prohibit any incentive compensation that encourages inappropriate risk taking by a covered financial institution: (a) by providing an executive officer, employee, director or principal shareholder with excessive compensation; or (b) that could lead to material financial loss to the institution.  Companies that are not covered by this proposed rule should also be aware of the proposed rule because it could signal the future of incentive compensation rules for other industries.  While the full text and commentary of the proposed rule (all 700 pages of them) can be found here, this blog post is intended to highlight its contours and some of its key points. Continue Reading Federal Agencies Release Joint Proposed Rule on Financial Institution Incentive-Based Compensation

It’s been over five years since the signing of the Dodd-Frank Wall Street Reform and Consumer Act (“Dodd-Frank”) and we are still waiting for the U.S. Securities and Exchange Commission to finalize rules on several provisions related to executive compensation.  Below is a summary of the current landscape of Dodd-Frank as it relates to key executive compensation provisions. Over the coming months, we will be posting a series of blog posts addressing some of the nuances of these provisions.  Stay tuned for more.

Continue Reading Dodd-Frank and Executive Compensation – Part 1: Status Update

While the Dodd-Frank Act provides various protections to whistleblowers, federal courts have inconsistently interpreted who precisely qualifies as a whistleblower.  In a much-anticipated opinion, the Second Circuit Court of Appeals held, in Berman v. Neo@Ogilvy LLC, that whistleblowers who report wrongdoing internally – but not to the Securities and Exchange Commission – are protected from retaliation under the law.

Continue Reading Internal Whistleblowing Protected Against Retaliation Under Dodd-Frank, Says Second Circuit

Our colleague, Pam Greene, wrote an excellent post on our sister blog, Securities Matters, on the SEC’s final rule requiring public companies to disclose the ratio of their CEO”s annual total compensation to that of the median annual total compensation of all company employees. You can read that post here.

Written by Jessica Catlow

When most employers hear the word “whistleblower,” they think of their current employees and various anti-retaliation laws; however, under the SEC’s “Whistleblower Program,” the “whistleblower” may be a current or former employee. Indeed, as reported recently by The Wall Street Journal, retirees make up the largest group of individuals providing information under the Whistleblower Program.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in 2010, the Securities and Exchange Commission was tasked with establishing a “Whistleblower Program” to encourage individuals to report possible violations of the federal securities laws to the SEC. If the information reported leads to successful SEC action resulting in monetary sanctions (which is defined as including penalties, disgorgement, and interest) of at least $1 million, the individual is entitled to an award of between 10% and 30% of the monetary sanctions collected by the SEC against the company. According to The Wall Street Journal, to date, the Whistleblower Program has paid approximately $15 million to whistleblowers.

Under the program, an “eligible whistleblower” is a person who voluntarily provides the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur, and the person does not need to be employed by the company at issue. If the individual worked or works at a company that has an internal compliance and reporting process, and first reports the information internally, the individual is eligible for an award only if the individual reports the information to the SEC within 120 days of first reporting it internally.

What’s the moral of the story? First – to state the obvious – compliance is paramount. With the Whistleblower Program, employees, former employees and even industry observers and other outsiders are incentivized to help the SEC in its efforts to enforce securities laws. Second, it is important that all employers maintain comprehensive reporting and compliance systems that outline clearly the procedures to be followed in the case of suspected violations of securities laws and that encourage individuals to report the suspected violations or potential violations internally so that employers can address actual or potential violations early. Third, these policies should state clearly that employees may report violations or suspected violations both during and after employment. Finally, employers may consider including a copy of its compliance policy and internal reporting procedures with any paperwork given to employees upon separation.