BILL NUMBER: S7494A
SPONSOR: GIANARIS
 
TITLE OF BILL:
An act to amend the general business law, the financial services law,
the state finance law and the executive law, in relation to enacting the
"government response to insider fraud and trading act" relating to secu-
rities fraud whistleblower incentives and protections
 
PURPOSE::
By establishing monetary incentives and strong anti-retaliation
protections for those who report financial frauds to the Office of the
Attorney General and the Department of Financial Services, this bill
would provide a critical tool for detecting and prosecuting a wide array
of financial frauds and for protecting investors and consumers.
 
SUMMARY OF PROVISIONS::
Section 1 provides the short title of the bill, the "government response
to insider fraud and trading act" or the "GRIFT Act."
Section 2 amends the general business law to add a new section 353-b, to
provide for awards to whistleblowers whose information serves as the
basis for successful securities fraud enforcement actions brought by the
Attorney General, in amounts between ten and thirty percent of monetary
sanctions that result from such actions. It also prohibits retaliation
by employers against individuals who act as whistleblowers or otherwise
assist with a securities fraud investigation.
Section 3 amends section 104 of the financial services law to define
terms related to the establishment of financial services whistleblower
awards.
Section 4 amends the financial services law to add new sections 410 and
411, to provide for awards to whistleblowers whose information about
violations of the Banking Law, Insurance Law, or Financial Services Law
serves as the basis for successful judicial or administrative actions
brought by the Department of Financial Services, in amounts between ten
and thirty percent of monetary sanctions that result from such actions.
It also prohibits retaliation by employers against individuals who act
as whistleblowers or otherwise assist with an investigation or judicial
or administrative action of the Department.
Section 5 amends section 4 the state finance law to provide for the
payment of whistleblower awards directly from monetary sanctions
obtained by the Attorney General or Department of Financial Services.
Section 6 amends section 63 the executive law to provide for the payment
of whistleblower awards directly from monetary sanctions obtained by the
Attorney General or Department of Financial Services.
Section 7 provides that the act shall take effect ninety days after it
shall have become a law.
 
JUSTIFICATION::
This legislation will strengthen the State of New York's capacity to
protect consumers and investors and take action against financial fraud.
In 2010, Congress established a whistleblower program for the
Securities and Exchange Commission (SEC), through which individuals who
report securities fraud can receive a portion of funds recovered through
resulting enforcement actions by the SEC. This program has been a
tremendous success. By the end of 2023, nearly 400 whistleblowers had
been awarded almost $2 billion - just a fraction of the total funds
recovered on behalf of those who have been defrauded.
At the same time, because a whistleblower program exists for the SEC but
not for the New York State Attorney General or Department of Financial
Services, there is a disincentive for whistleblowers to report fraud to
these State agencies even though they may be better positioned than the
SEC to robustly investigate and take enforcement action. This is all the
more concerning following the Supreme Court's decision in SEC v. Jarkesy
limiting the SEC's use of administrative tribunals, and in light of the
Trump Administration's lax posture toward financial fraud. It may now be
in a whistleblower's financial self-interest to report fraud to a feder-
al agency whose willingness and capacity to enforce the law is substan-
tially less than that of State agencies.
This legislation would end this perverse incentive structure by creating
whistleblower programs for the Office of the New York State Attorney
General and the Department of Financial Services and provide for the
payment of monetary awards, out of recovered funds, when whistleblower
reports result in successful enforcement actions by these agencies. It
would also prohibit retaliation against whistleblowers. As a result,
individuals with knowledge of financial fraud will have concrete incen-
tives - and necessary protections - to report the information to State
agencies that can, in turn, act to protect investors and consumers.
 
LEGISLATIVE HISTORY::
New Bill
 
FISCAL IMPLICATIONS::
TBD
 
EFFECTIVE DATE::
This act would take effect 90 days after it becomes law.

Statutes affected:
S7494: 104 financial services law, 104(a) financial services law, 4 state finance law, 4(11) state finance law, 63 executive law, 63(16) executive law
S7494A: 104 financial services law, 104(a) financial services law, 4 state finance law, 4(11) state finance law, 63 executive law, 63(16) executive law