Casey on "Dodd-Frank’s Missed Opportunity on Whistleblower Law"

Dodd-Frank’s Missed Opportunity on Whistleblower Law
Anthony J. Casey and Anthony Niblett
The CLS Blue Sky Blog
March 29, 2013

One of the highest-profile provisions of the Dodd-Frank Act is Section 922. That provision provides protection and monetary awards for whistleblowers. To qualify, the whistleblower must provide information to the Securities and Exchange Commission that leads to the recovery of monetary sanctions. While many have argued that this provision does not go far enough in providing incentives for whistleblowers, the reality is that it goes too far. By providing protection and compensation for whistleblowers without imposing any costs, Section 922 attracts both low- and high-quality tips without providing the SEC with any means of differentiating the two. This will lead to an increase in the amount of tips received. But it will also lead to a decrease in the average quality of those tips. Because the SEC is resource constrained, this is likely to lead to less effective enforcement and ultimately to a reduction in fraud deterrence.

Anthony J. Casey