The Dodd-Frank Wall Street Reform and Consumer Protection Act

This act is a federal statute that is a product of the financial regulatory reform agenda of the U.S. congress. Barack Obama signed it on July 21st 2010. It was proposed to the House of Representatives by Barney Frank and to the Senate Banking Committee by Chris Dodd in December of 2009. It was formed in response to the recent recession (which some blame on lax federal financial regulations) and is the most drastic transformation of the U.S. financial regulation system since the Great Depression. It affects every federal agency of financial regulation and many other facets of the financial services field.

The goal of the act is stated as follows "To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail', to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes." The act is divided into 16 titles. The changes promote transparency and transfer power from certain existing agencies, such as the U.S. Securities and Exchange Commission (SEC), Federal Reserve (known as the Fed)and teh Federal Deposit Insurance Corporation (FDIC). New agencies were created as part of the Act, including the Office of Financial Research and the Bureau of Consumer Financial Protection. There are no longer exemptions for investment advisers with small client bases seeking to escape regulation. Likewise, certain entities that aren't technically banks but act as such will be regulated as if they are banks. The Act's complete historical significance has not yet been fully realized, as it has been in effect for less than a year.

The Act has also increased the rights of whistleblowers. The US government loses millions of dollars annually to corporate fraud. It relies on brave employees or otherwise knowledgeable whistleblowers to step forward and report any deception to the SEC. This new provision in the Act applies only to individuals with knowledge concerning businesses that must report to either the SEC or the US Commodity Futures Trading Commission (CFTC). The reward given to these individuals ranges from 10 - 30% of any sum above $1 million collected from the wrongdoer in a judicial action. The whistleblower, in order to claim the reward, these three conditions must be true: 1.) the relator informed the SEC or CFTC with the details of fraud 2.) The knowledge must have been acquired through independent analysis or otherwise be unique to the whistleblower 3.) The government could not have been aware of the fraud through other avenues. At the conclusion of the case, the SEC or CFTC has the authority to determine the amount of reward for the whistleblower, based on the value of the information or amount of aid given. A further provision allows the whistleblower to conceal his or her identity until the reward is secured. In this case, he or she would file a claim through a lawyer and only be revealed once the recovery became certain. 

This provision in the Act was inspired by the False Claims Act, the original qui tam provision. However, there is a pertinent distinction to be made between the two acts. the False Claims Act pertains only to financial fraud perpetrated with injury to the government. The Dodd-Frank Act, on the other hand, is much more broad, applying to financial fraud by a business that reports to the SEC or CFTC. Additionally, the Dodd-Frank Act allows individuals with many more relationships to the company to report a whistleblowing claim (i.e. employees, suppliers, board members or even customers).