Last week, New York Attorney General Eric Schneiderman said he would float new proposals in Albany to protect and reward employees who report bad behavior in the financial services industry.
The program is modeled after the whistleblower programs at the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission established by the 2010 Dodd-Frank financial overhaul. The commission said it received 3,620 whistleblower tips in its 2014 fiscal year.
The state of New York does not currently have a law to protect or incentivize whistleblowers who report securities and other financial frauds. The bill rewards tipsters with up to 30 percent of the amount of penalties recovered if the information leads to monetary sanctions (with sanctions of more than $1 million). The bill would also guarantee the confidentiality of the whistleblower’s information, and make it illegal for any employer to retaliate in response.
The bill, which would have to clear the state legislature to take effect, would overlap with and plug certain holes left by federal whistleblower programs. There are some state security law violations that may not technically be in the SEC’s jurisdiction, said said Jordan Thomas, partner at Labaton Sucharow and chair of the firm's whistleblower representation practice.
“Historically, New York has been a leader in new initiatives around financial regulation, so it wouldn’t surprise me if others states were to follow suit,” said Thomas.