New York Attorney General Eric Schneiderman announced yesterday that he plans to propose legislation to protect and reward employees who voluntarily report fraud in the banking, insurance, and financial services industries. The bill also would provide whistleblowers with explicit legal protection from retaliation by current or prospective employers.
Currently, no law exists in New York State to protect or incentivize whistleblowers who report securities and other financial frauds. The proposed Financial Frauds Whistleblower Act would provide financial compensation to whistleblowers who voluntarily report fraud in their industry, and whose tips lead to more than $1 million in penalties or settlement proceeds.
“New York has a unique opportunity to set the gold standard for states seeking to expose and hold individuals accountable for financial crimes,” said Schneiderman. “This law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets.”
The bill would guarantee the confidentiality of the whistleblower’s information, and make it illegal for any employer to retaliate in response. The rewards paid to whistleblowers will be drawn from monetary recoveries paid by those who commit wrongdoing, and not out-of-state funds.
The bill also would:
Provide monetary rewards to individuals who voluntarily provide original information, not previously known to the Attorney General, which leads to monetary sanctions for financial fraud or misconduct in the securities industry. Whistleblowers would receive 10 to 30 percent of the money obtained in a securities fraud case.
Preserve the confidentiality of the whistleblower.
Create a Financial Services Whistleblower Awards program within the state’s Department of Financial Services to reward whistleblowers for tips to that agency.
Strengthen existing labor protections to make it explicitly unlawful for employers to discharge, demote, suspend, or otherwise harass employees who report suspicious or fraudulent activity to supervisory or internal compliance staff.
“Providing incentives and protections for people to report financial frauds to the Attorney General is essential for detecting and prosecuting a wide array of financial frauds,” the Attorney General’s office said. “Monetary rewards and anti-retaliation protections for whistleblowers will help authorities find and stop large financial frauds against the public, and minimize the damage caused by ongoing frauds to individuals, companies and the government.”