Thursday, August 18, 2022

Bad news for bad actors

| February 23, 2021 7:00 AM

If you knew your employer was defrauding their customers, would you come forward? Would you risk termination or being blackballed? House Bill 64 will solve this issue by protecting consumers and preventing retaliation against whistleblowers.

In Montana, we do not provide protection for employees in the securities industry who come forward against employers who are defrauding consumers. Lack of protection is a significant issue hurting Montana families and perpetuating fraud by bad actors.

This legislative session our agency is sponsoring House Bill 64, the Securities Uniform Whistleblower Act to provide securities industry whistleblowers legal protection from retaliation by their employer. House Bill 64 also creates a monetary award for those who come forward to provide the Office of the Montana State Auditor with information that leads to fines and legal actions.

This type of legislation is already making meaningful impacts in other states.

One example in Utah occurred in May 2014. A registered financial adviser suspected an 88-year old widow might be the target of investment fraud. The advisor provided original information.

The Utah Securities Division investigated and discovered the victim was swindled out of $100,000. As a result of the investigation and subsequent criminal charges the victim, an elderly woman, was made whole. The Utah Securities Division received a $50,000 monetary sanction and awarded the whistleblower $15,000 of the sanction.

Indiana passed its Whistleblower Act in 2012. In late 2016, a whistleblower contacted the Indiana Securities Department with information outlining numerous disclosure violations by JP Morgan. That case ultimately resulted in a $950,000 monetary sanction. The whistleblower was awarded 10 percent of the sanction, a $95,000 reward to one whistleblower.

In the bill this agency is sponsoring, 4.5 percent of the fines will be allocated to securities fraud victims to help recoup some of their losses. This increased funding is meaningful to the victims of securities fraud.

This legislation provides our agency the authority to award the whistleblower 10 to 30 percent of the resulting fines. The award is an essential feature because it gives a financial incentive to come forward. The remaining money goes to the Montana General Fund to help pay for schools, law enforcement and general government functions.

This bill will protect Montanans by encouraging whistleblowers to come forward and shine a light on bad actors.

House Bill 64 is a win for fraud victims, Montana families, and investors.

The author is the Commissioner of Securities and Insurance, Montana State Auditor. Commissioner Downing is a two-tour combat veteran, businessman, and entrepreneur.