Insider

Brazil’s Senate clears Dodd-Frank-inspired whistleblower program

Sergio Moro (standing) after approving his bill in the Senate's Constitution and Justice Committee. Photo: Saulo Cruz/Agência Senado

The Senate Constitution and Justice Committee on Wednesday approved a bill that provides financial rewards for whistleblowers who denounce crimes in publicly listed companies. The bill was authored by Senator Sergio Moro and is motivated by the scandal involving Lojas Americanas, the retail giant that admitted to the most significant fraud case ever in Brazil.

Mr. Moro wrote that the Americanas case demonstrates that current legislation “is precarious and insufficient” to prevent similar cases.

Mr. Moro was also inspired by the 2010 Dodd-Frank Act, enacted in the United States during the Obama administration. The legislation created a whistleblower program, under which the U.S. Securities and Exchange Commission (SEC) pays monetary awards to whistleblowers who submit information about a violation of the federal securities laws. The reward is equivalent to between 10 and 30 percent of monetary sanctions collected in the actions.

According to the SEC, by 2020 enforcement actions from whistleblower tips had resulted in more than USD 2.5 billion in ordered financial remedies, and “whistleblowers have received from the Commission awards totaling approximately USD 523 million.”

Mr. Moro used the Dodd-Frank Act as a benchmark for his bill: he proposed a reward for whistleblowers also from 10 to 30 percent, but calculated in different options, such as over the amount of fines imposed by CVM, Brazil’s equivalent to the SEC.

The bill also defines new financial crimes, such as accounting fraud, which was classified as “defrauding accounting or auditing, [by] including non-existent operations, inaccurate data or not including operations actually carried out,” with a sentence of 2 to 6 years in jail.

“I think it is an interesting bill, and I believe that we are moving forward with the protection of something that is very important for Brazil’s economic growth, which is the stock market”, Mr. Moro said at the committee today. “We thus protect shareholders, investors, and even those who surround these companies — suppliers and employees — when we create mechanisms to strengthen the integrity and transparency of our Stock Exchange.”

Approved in two rounds of voting, the bill bypassed the Senate floor and was submitted to the House.