federal preemption under dodd-frank's whistleblower award program
DESCRIPTION
This research project examines whether lawyers -- like other corporate insiders -- are able to take advantage of the financial incentives that are available under the Securities and Exchange Commission (SEC)’s Dodd-Frank whistleblower program. Under that program, whistleblowers can be awarded 10-30% of the sanctions that the SEC obtains in enforcement cases. These financial incentives are working, as demonstrated by 3000 whistleblower tips that the SEC receives each year – not just from the United States but also from more than 50 nations. This presentation focuses on the interplay of state and federal authorities in regulating the disclosure options available to securities lawyers.TRANSCRIPT
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Federal Preemption under
Dodd-Frank’s Whistleblower Award Program
Kathleen ClarkWashington University in St Louis
6th International Legal Ethics Conference (ILEC-VI) London
10 June 2014
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Lawyer-Whistleblowers: Silence, Loyalty &
Federal Financial Rewards
Kathleen Clark& Nancy Moore
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3Federal
WhistleblowerRewardStatutes
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False Claims Act
Tax Relief & Health Care Act of 2006
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
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False Claims Act
Tax Relief & Health Care Act of 2006
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
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False Claims Act
Tax Relief & Health Care Act of 2006
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
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whistleblower
rewardsv.
protection
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- voluntarily provides- original information- successful enforcement action- monetary sanctions > $1 million
Dodd-Frank
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whistleblower receives
10 – 30 %of
sanctions
Dodd-Frank
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SEC sanctions > $ 1 million
“Notices of Covered Action”
90 days
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3000 tips / year
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6 awards
largest: $14 million
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Can lawyers take advantage
of these whistleblower awards
?
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Dodd-Frank
statutorysilence
re: lawyers
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Dodd-Frank
SECregulations
re: lawyers
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Dodd-Frank SEC regs
Can’t use information:
-subject to A-C privilege or-gained thru legal representation . . . unless . . .
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Dodd-Frank SEC regs
. . . unless permitted by: - applicable state professional rules - SEC SOX regulation - “otherwise”
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Professional Rules
confidentiality exceptionsfor client fraud
varystate-to-state
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SOX regulation
disclose to: • prevent material violations
• rectify consequences of material violation – if lawyer’s services were used
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SOX regulation
confidentiality exceptionsbroader
thanmost states
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SOX regulation
asserts federal
preemption
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Supremacy Clause
laws of the United States made in pursuance of
Constitution shall be supreme law of the land
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Preemption
Has Congress exercised
this power?
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expresspreemption
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impliedpreemption
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regulationexpresslyasserts
preemption
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impliedpreemption
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obstacleor
frustrationpreemption
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§ 307 of Sarbanes Oxley Actrequired SEC to issue rules
minimum standards of professional conduct for
attorneysincluding
internal whistleblowing
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§ 307 of Sarbanes Oxley Actrequired SEC to issue rules
minimum standards of professional conduct for
attorneysincluding
internal whistleblowing
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SOX regulation
• requires internal whistleblowing• created additional confidentiality
exceptions
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SOX regulation
asserts conflict
preemption
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SOX regulation
resistance fromWashington state
&California
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SOX regulation
applies to lawyers who“appear or practice”
before SEC
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“appear or practice”
communicatewith SEC
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SOX regulation
applies to lawyers whoblow the whistle
to the SECunder Dodd-Frank
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SOX regulation
displacesmore restrictive
stateconfidentiality rules
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SOX regulation
does not displace state rules
on other issues
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adequately inform clientMR 1.4
conflicts of interestMR 1.7(a)(2)
MR 1.8(a)
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obligations tocurrent
v.former clients
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Dodd-Frank
protectsconfidentiality of whistleblower’s
identity
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Federal Preemption under
Dodd-Frank’s Whistleblower Award Program
Kathleen [email protected]
6th International Legal Ethics Conference (ILEC-VI) London
10 June 2014