Foreign Corrupt Practices Act Implications of Dodd-Frank Wall Street Reform and Consumer Protection Act

On Wednesday, July 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The law provides sweeping new consumer protections in the form of ending certain predatory consumer lending and providing stricter regulatory oversight of consumer credit mortgages.  Further, the new law seeks to halt “over the counter” derivatives and limit banks’ trading for profit.

Another more obscure provision of the bill is a whistleblower provision that provides greater cash incentives to whistleblowers who provide the Securities and Exchange Commission with information that leads to the successful prosecution of securities laws violations.  Specifically, the provision authorizes a minimum award by the SEC of 10% and a maximum of 30% of the recovery of any amount over $1,000,000 that is secured as a result of information provided by the whistleblower, even if some of that information is already widely known.

Some believe that this new provision will have significant impact in the context of the Foreign Corrupt Practices Act, which prohibits companies from engaging in certain practices, including bribery, in foreign countries.  Recent settlements by the SEC with international corporations have demonstrated the possibility of FCPA settlements in the hundreds of millions of dollars.  Whistleblowers contemplating the new SEC whistleblower provisions of the Wall Street Reform Act will have a huge new financial incentive to come forward with allegations of wrongdoing, in both domestic markets and abroad.

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