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Document Type

Article

Abstract

The Sarbanes-Oxley Act of 2002 (“SOX”) revolutionized the world of securities law whistleblowing. It encouraged employees to reveal corporate fraud by providing federal anti-retaliation protection to incentivize such reports. Securities law whistleblowing was transformed a second time in 2010 when Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Under Dodd-Frank, employees that report information to the Securities and Exchange Commission (“SEC”) are not only provided federal anti-retaliation protections but also are eligible for a hefty bounty. Two major differences separate these statutes: (1) SOX is limited to employees of companies who are subject to the reporting requirements of the Exchange Act, but Dodd-Frank is not; and (2) SOX provides federal anti-retaliation protection for internal reporting, but Dodd-Frank does not. As a result, employees of companies that are not subject to the reporting requirements of the Exchange Act (“private employees”) are now faced with the choice to either (1) report internally, receive no federal anti-retaliation protection, and be ineligible for a federal bounty; or (2) to report to the SEC, receive federal anti-retaliation protection, and also become eligible for a federal bounty of at least ten percent of sanctions imposed. Thus, a well-informed whistleblower is left with no choice--he should bypass internal reporting procedures and report directly to the SEC. This Article examines the problems associated with this “private company loophole” in more detail. In particular, it argues that if Congress provides a federal bounty and federal anti-retaliation protection to private employee whistleblowers that report to the SEC, it should also provide federal anti-retaliation protection to private employee whistleblowers that report internally.

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