Those on the frontlines of the next financial crisis lack critical safeguards, lawmakers said, as they introduced new legislation that enhances protections and rewards for conscientious disclosures.
Sen. Tammy Baldwin (D-Wisc.) and Rep. Elijah Cummings (R-Md.) on Thursday unveiled the Whistleblower Augmented Reward and Non-Retaliation Act, or WARN Act. The bill would target Wall Street employers that attempt to worm their way out of enhanced whistleblower laws established in 2010.
The Dodd-Frank Act gave bankers safe avenues through the Securities and Exchange Commission (SEC) and the Commodities Future Trading Commission (CFTC) to report internal financial crimes. The provisions did not, however, prevent firms from finding other ways to gag their workers.
“Companies may force employees to sign agreements that prohibit them from receiving whistleblower awards. Or, after whistleblowers come forward, companies may try to sue them for theft of property, revoke their professional licenses, or disbar attorneys who defend whistleblowers,” Rep. Cummings said during Thursday’s press briefing.
“These actions are shameless and unconscionable. The WARN Act would make them illegal,” he added.
The bill would also expand the definition of a protected disclosure to include information about the bank’s “safety and soundness.”
And it would seek to shield financial sector employees from retaliation for refusing to participate in activities they believed were illegal. In cases where employers are found to have retaliated, a worker would be entitled to “civil remedies and punitive damages” under the legislation.
Also included in the proposal were clarifications to ensure that financial crimes whistleblowers are entitled to between 10 and 30 percent of any penalties or funds recovered as a result of revealing wrongdoing.
“The WARN Act is a much-needed makeover to modernize primitive laws, establish consistent financial whistleblower standards, and address lessons learned from recent experience,” said Shanna Devine, Legislative Director at the Government Accountability Project. “This is good government legislation at its best.”
The bill enjoys the support of other organizations—both on and off the prudential regulation beat. Backers include the Communication Workers of America, the AFL-CIO, and Americans for Financial Reform (AFR).
“It’s incredibly difficult for would-be whistleblowers to overcome the culture of secrecy that permeates large financial firms, in large part because of the fear of retaliation,” said Alexis Goldstein, the Senior Policy Analyst at AFR.
Earlier this month, the International Business Times noted Wall Street informants are regularly confronted with hostilities, despite Dodd-Frank’s advancements.
“In 2012, the Ethics Resource Center reported the incidence of employees facing retaliation had nearly doubled. And studies have found workers in the financial sector are among the least likely in any field to report on wrongdoing for fear of recrimination,” the outlet reported.
Incentivizing bankers to report crimes could help regulators prevent another financial meltdown, particularly when roughly a third of the banking regulations called for in Dodd-Frank have yet to be enacted, and others that were have gaping loopholes.
“If we strengthen and empower whistleblowers in the financial industry, we can do a better job of holding Wall Street accountable. These reforms will help us do that,” Sen. Baldwin said in a statement.