Whistleblowing Under Dodd-Frank and the Foreign Corrupt Practices Act

On Behalf of | December 8, 2017 | Whistleblower Law

Foreign nationals often play a critical role in providing information necessary to successful enforcement actions. This role is particularly important as the United States seeks to crack down on the American corporations engaging in bribery and corruption while doing business abroad. One of the primary tools the United States Government uses to fight corruption is the Foreign Corrupt Practices Act, which prohibits issuers of stock or “domestic concerns” from providing, promising to provide, or offering to provide, anything of value to a foreign official with the intent to influence. 15 U.S.C. §§ 78dd–1(a) and 2(a). Given the FCPA’s focus on payments and gifts to foreign officials, it is clear that people located in the same territory as the foreign officials themselves would be likely to have particularized knowledge of the circumstances surrounding illicit payments. For example, foreign nationals may have knowledge of the manner in which these payments and gifts are regularly facilitated in their home countries, may know specific individuals locally known to facilitate illicit payments and gifts, or may have a generally better understanding for the context of the payments and whether the payments or gifts could potentially fall into one of the FCPA’s few exceptions[1].

Additionally, since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), foreign nationals have a significant financial incentive to provide the United States Government with information on illicit payments to foreign officials. Dodd-Frank provides that the SEC shall pay an award totaling between ten and thirty percent of the amount collected in monetary sanctions imposed to claimants “who voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action.” 15 U.S.C. §78u-6(b)(1). Since Dodd-Frank, and the information sought from whistleblowers, relate to violations of federal securities law, violations of the FCPA fall squarely within these bounds, and SEC whistleblower claims providing information related to FCPA violations are eligible for awards.

Furthermore, the SEC has embraced the “international breadth” of the whistleblower program and actively seeks to utilize tips from whistleblowers throughout the world to bring corrupt organizations to justice. Though some courts have limited foreign whistleblowers’ ability to sue under certain anti-retaliation provisions, the SEC has taken the position that there is a “sufficient U.S. territorial nexus” when a claimant’s information leads to a successful enforcement action brought in the United States concerning violations of United States securities laws. According to the SEC, “[w]hen these key territorial connections exist, it makes no difference whether, for example, the claimant was a foreign national, the claimant resides overseas, the information was submitted from overseas, or the misconduct comprising the U.S. securities law violation occurred entirely overseas.” Over the years, the SEC has backed up its statements by paying foreign claimants significant whistleblower awards. The largest SEC whistleblower award to date is a $30 million award given to a foreign national in 2014. Just this week, on December 5, 2017, the SEC announced a $4.1 million award for a foreign national who filed a tip related to a recent SEC action.

Foreign nationals with information relating to foreign bribery specifically, or securities fraud in general, should contact an attorney with experience in securities fraud to assess their rights under the American legal regime. Additionally, companies looking to prevent bribery and corruption within their ranks should seek legal advice about how they can comply with American securities laws.


[1] Exceptions include “facilitating or expediting payment[s]” whose sole purpose is to “expedite or to secure the performance of a routine governmental action by a foreign official, political party, or party official.” 15 U.S.C. § 78dd-1(b). The FCPA further provides that it shall be an affirmative defense if the payment, offer, or promise of payment was “lawful under the written laws and regulations of the foreign official’s, political party’s, party official’s, or candidate’s country” or if the payment, offer, or promise of payment was “a reasonable and bonafide expenditure, such as travel and lodging expenses incurred by or on behalf of a foreign official, party, party official, or candidate and was directly related to … the promotion, demonstration, or explanation of products or services; or … the execution or performance of a contract with a foreign government or agency thereof.” Id. at 78dd-1(c).