Showing posts with label Whistleblower. Show all posts
Showing posts with label Whistleblower. Show all posts

Wednesday, August 11, 2010

EMPOWERMENT OF WHISTLEBLOWERS – PART – II

The first part of this article was published on 14th March 2010. To read the full article Click Here.
Public Interest Disclosure (Protection of Information) Bill - 2010

It is heartening to know, after a long wait of around seven years of the first brutal killing of an engineer Mr. Satyendra Dubey in November 2003, who had blew the whistle in the case of unbridled corruption in NHAI’s Golden Quadrilateral project, and two years later by atrocious killing of an IOC officer Mr. Manjunath Shanmugam and to present many other Right to Information activists by anti-socials and vested interests; that the Cabinet has recently cleared the Public Interest Disclosure (Protection of Information) Bill - 2010, and is likely to be tabled during ongoing session of the Parliament.

India all these years does not have any law to protect and reward whistleblowers. Several countries worldwide have already put in place laws to protect whistleblowers. However, the level of protection and the way in which the law operates differs from country to country. For instance, the US was one of the earliest to have the Whistleblower Protection Act of 1989, while the UK has the Public Interest Disclosure Act of 1998, and Norway has a similar law in place since January 2007.

Shockingly, the issue of protection of whistleblower in India had been dragging for all these years, as the country leisurely debated and struggled with the problem of resolving the contradiction of a whistleblower’s law with the provisions of the Official Secrets Act; unfortunately the whistleblowers continued to be atrociously coerced, intimidated, threatened, victimized, and being cruelly killed in retaliation by the perpetuators of frauds, powerful, imperious and Machiavellians individuals and company heads/CEOs, mafias, to satiate their unbridled greed. In the latest incident of last month, activist Mr. Amit Jethwa was shot outside the high court in Ahmedabad, while he had exposed illegal mining in the Gir forest area in the state of Gujarat.

The proposed law has provisions to prevent victimization or disciplinary action against those who expose corruption in the government and will cover central, state and public sector employees. As per the bill, the onus will be on the Central Vigilance Commission (CVC), who would be designated as the competent authority for complaints, would have the powers of a civil court, including powers to summon anybody, order police investigation and provide security to the whistleblower and to protect the identity of the citizens who provide information about the misuse of governmental authority and funds. It is expected to encourage disclosure of information in public interest. According to the bill, if a person making a disclosure is victimized and his or her identity is revealed, the whistleblower’s superiors will be held liable. There are provisions for a fine and other penalties — a punishment is set at up to 3 years in prison or a fine of up to Rs. 50,000 or both; if a whistleblower is found to be “punished” for exposing wrongdoing. These penalties and imprisonments could possibly have been higher so as to have efficacy of high deterrence, along the lines of the Sarbanes-Oxley Act (SOX) and Dodd- Frank Act-2010.

However, the proposed law neither has provisions for encouraging whistle blowing by providing for financial incentives; nor deals with corporate whistleblowers and does not extend its jurisdiction to the private sector. India Inc ought to have learned lessons after the experience of the massive fraud at Satyam as was outlined in my article: “Satyam Lessons and Corporate Governance Reforms”. To read the full article Click here.

“Dodd-Frank Wall Street Reform and Consumer Protection Act -2010”

The recently enacted “Dodd-Frank Wall Street Reform and Consumer Protection Act -2010” in USA, however, creates an elaborate new system of financial incentives to encourage whistleblowers to come forward to the SEC with information about securities law violations.

The new incentive offered to whistleblowers in this Act is the opportunity to obtain a substantial cash reward in the event that information they provide leads to an enforcement action in which the SEC obtains a monetary sanction (defined to include penalties, disgorgement and interest) totaling at least $1 million. The Section 922 provides that the SEC “shall pay an award” to the whistleblower of between 10 and 30 percent of the monetary sanctions imposed in the SEC enforcement action

Awards payments are to be made from a newly created “Securities and Exchange Commission Investor Protection Fund.” The Fund is to be built up (to a ceiling of $300 million) by depositing monetary sanctions obtained by the Commission in its enforcement actions generally, to the extent that those funds are not distributed to victims. In addition to paying awards to whistleblowers, this $300 million will also be available to fund the activities of the SEC’s Inspector General.

The Section 922 also provides significantly enhanced remedies for whistleblowers who believe they have suffered retaliation by their employers, including expanded private rights of action and the ability to obtain awards of back pay. In view of these provisions, the Act will allow as most effective deterrent for companies to prevent any mistreatment of whistleblowers. Strong protections for whistleblowers will be more important than ever, in light of the anti-retaliation provisions of Section 922.

In the post-Enron era, whistle blowing – the act of exposing fraud, waste, abuse or other misbehavior in a company or organization – is on the rise. In the United States, for example, more than US $8 billion has been recovered as a direct result of whistleblowers’ actions. Whistle blowing can be an effective tool to deter and detect corruption both in the private and public sectors and it provides better information flows, which increase the chances of successful prosecutions in corruption cases. But in order for whistle blowing to be an effective tool to fight corruption, legislation and clear processes are essential.

The whistle blowing, as an internal control mechanism is yet to come of age in our country. Whistle blowing, in India, still continues to be perceived by many as acts; which are not constructive, a matter of personal vendetta or revenge, intention to embarrass the organization, and so on so forth. On the other hand, the whistleblowers have often faced reprisal, greatly suffered and endured, often for many years, after the complaints have gone unheeded. One of the reasons attributable to this is poor levels of confidence in the ability of the legal and regulatory environment to ensure promised protection against retaliation.

For developing a better governance practices in the country, it is imperative to empower and encourage the whistle blowers, the policy concerning them need to be comprehensive rather than applicable to one set of people only and be made mandatory for one and all, with clear guidelines for prosecuting intimidation of or retaliation against the complainants, including imposition of fines/ penalties for frivolous or mischievous complaints and fast-track disposal of cases.

References: Whistleblower Bill 2010 http://persmin.nic.in/EmployeesCorner/Acts_Rules/DisclosureBill/DisclosureBill_2010_Eng.pdf
EMPOWERMENT OF WHISTLEBLOWERS – PART – IISocialTwist Tell-a-Friend

Saturday, July 3, 2010

Wall Street Reforms and Consumer Protections Act 2010

There was an eruption of financial crisis in 2007-08, which originated in the USA and spread to other advanced economies. The financial crisis has seriously affected the growth prospects of emerging market and developing economies, also resulting in recession or slows down in growth in almost all economies of the world. Many of them are still struggling to roll back on tracks, despite the efforts of the central banks and governments of these countries. US had faced the worst financial crisis since the Great Depression of 1930. Millions had lost their jobs, businesses had failed, housing prices had dropped, and savings were wiped out.
The current economic crisis has eroded public and investor confidence in the governance. American corporations and the government had to take swift action to restore the public trust and to restore responsibility and accountability in their financial system to give them confidence that there is a system in place that works for and protects them.

With the foregoing premises in mind, the Obama government took various initiatives and recently, U.S. House and Senate lawmakers released the final text of sweeping financial regulatory legislation which has been dubbed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” after the chief negotiators for each chamber, Senator Christopher Dodd and Rep. Barney Frank.
The Wall Street Reform and Consumer Protection Act include the following major provisions:

Consumer Protections: Creates the Consumer Financial Protection Agency (CFPA), a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services.

Financial Stability Council: Creates an inter-agency oversight council that will identify and regulate financial firms that are so large, interconnected, or risky that their collapse would put the entire financial system at risk. These systemically risky firms will be subject to heightened oversight, standards, and regulation.

Dissolution Authority and Ending “Too Big to Fail”: Establishes an orderly process for dismantling large, failing financial institutions like AIG or Lehman Brothers in a way that ends bailouts, protects taxpayers, and prevents contagion to the rest of the financial system.

Executive Compensation: Gives shareholders a “say on pay” – an advisory vote on pay practices including executive compensation and golden parachutes. It also enables regulators to ban inappropriate or imprudently risky compensation practices, and it requires financial firms to disclose any compensation structures that include incentive-based elements.

Investor Protections: Strengthens the SEC’s powers so that it can better protect investors and regulate the nation’s securities markets. It responds to the failures to detect the Madoff and Stanford Financial frauds by ordering a study of the entire securities industry that will identify needed reforms and force the SEC and other entities to further improve investor protection.

Reward Tipsters and Protect Whistleblowers: A new Investor Protection Fund will create incentives to identify wrongdoing in the securities markets and reward individuals whose information leads to successful enforcement actions. This fund will also pay for educational initiatives designed to help investors protect themselves against securities fraud. Whistleblowers will be better protected from retaliation as well.

Regulation of Derivatives: Regulates, for the first time ever, the over-the-counter (OTC) derivatives marketplace. Under the bill, all standardized swap transactions between dealers and “major swap participants” would have to be cleared and traded on an exchange or electronic platform. The bill defines a major swap participant as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions create such significant exposure to others that it requires monitoring.

Mortgage Reform and Anti-Predatory Lending: Would incorporate the tough mortgage reform and anti-predatory lending bill the House passed earlier this year. The legislation outlaws many of the egregious industry practices that marked the subprime lending boom, and it would ensure that mortgage lenders make loans that benefit the consumer. It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.

Reform of Credit Rating Agencies: Addresses the role that credit rating agencies played in the economic crisis, and takes strong steps to reduce conflicts of interest, reduce market reliance on credit rating agencies, and impose a liability standard on the agencies.

Hedge Fund, Private Equity and Private Pools of Capital Registration: Fills a regulatory hole that allows hedge funds and their advisors to escape any and all regulation. This bill requires almost all advisers to private pools of capital to register with the SEC, and they will be subject to systemic risk regulation by the Financial Stability regulator.

Office of Insurance: Creates a Federal Insurance Office that will monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis and undermine the entire financial system."

"After losing eight million jobs and trillions of dollars in wealth, the American people are finally getting the Wall Street reform they have demanded from Washington," the Congressman Tim Bishop voted the bill and said. "Reforming financial services is a critical step in our ongoing effort to create jobs and build a sound economy that rewards healthy risk-taking and long-term growth."


The Act was passed by a bipartisan vote of 237 to 192. The legislation is now under consideration in the Senate and it is hoped that the stage is all set for the Senate to clear it.


Click Here for resource to the Wall Street Reforms and Consumer Protections Act: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/Financial_Regulatory_Reform062910.html
Keywords: Financial Reforms, Create a Sound Economic Foundation to Grow Jobs, Protect Consumers, Rein in Wall Street, End Too Big to Fail, Prevent Another Financial Crisis
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