By providing significant new protections and incentives for whistleblowers, the government recognizes the important role everyday citizens can—and should—play in rooting out securities fraud.
Who can be a whistleblower under the new program?
A whistleblower is any individual who, alone or jointly with others, provides information to the SEC, in accordance with its procedural rules, about possible violations of the federal securities laws, that have occurred, are ongoing, or are about to occur. While whistleblowers are often employees of organizations engaged in wrongdoing, the program is open to anyone with information about a possible violation—even if that person doesn’t have first-hand knowledge. Whistleblowers can submit information gained from their communications and observations in their business and social interactions or through their independent analysis of publicly available data.
Virtually any individual or group of individuals, regardless of citizenship, can make a protected whistleblower submission. However, to be eligible for awards consideration, there are a few exclusions. Many of these excluded parties, such as compliance personnel and auditors, can become eligible if certain exceptions apply. The most common exceptions are: to prevent the relevant entity from engaging in conduct that is likely to cause substantial injury to the financial interest or property of the entity or investors; the relevant entity is engaging in conduct that will impede an investigation of misconduct; or at least 120 days have elapsed since the whistleblower reported the information internally. Since the eligibility rules for monetary awards can be complicated and the facts and circumstances of each case are different, potential whistleblowers are strongly encouraged to consult with a lawyer or carefully review the relevant SEC rules.
What types of securities violations qualify for the new program?
Any violation of the federal securities laws qualifies. While it is common to associate the financial services industry with SEC regulations, the SEC has broad jurisdiction over a wide range of industries and entities—both public and private. A successful enforcement action can be brought against any entity or individual that violates the federal securities laws. Common violations that may lead to SEC investigations and related enforcement actions include: misrepresenting or omitting important information about securities, manipulating the market prices of securities, stealing customer funds or securities, violating broker-dealers’ responsibility to treat customers fairly, engaging in insider trading, selling unregistered securities, and bribing foreign officials.
For awards consideration, the best whistleblower submissions will relate to possible securities violations that lead the SEC to open a new investigation, re-open a previously closed investigation or pursue a new line of inquiry in connection with an ongoing investigation, and the SEC brings a successful enforcement action based at least in part on that information. However, whistleblowers may also be eligible for an award if their information relates to an ongoing examination or investigation, if the information the whistleblower provides significantly contributes to the success of the SEC’s resulting enforcement action.
What employment protections are available for whistleblowers under the new program?
The Dodd-Frank Wall Street Reform and Consumer Protection Act makes it unlawful for any employer to discharge, demote, suspend, threaten or harass, directly or indirectly, a whistleblower because of any lawful act by the whistleblower, including: providing information to the Securities and Exchange Commission; initiating, testifying in or assisting in a SEC investigation or related enforcement action; and making any disclosures required or protected by law. As long as a whistleblower reasonably believes that the information provided to the SEC relates to a possible violation of the federal securities laws, the whistleblower is protected from retaliation – regardless of whether the requirements, procedures and conditions to qualify for an award have been satisfied. If whistleblowers are retaliated against in violation of the law, they may be entitled to reinstatement, double back pay, attorney fees, and other litigation related expenses.
What monetary awards are available to whistleblowers under the new program?
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, eligible whistleblowers are entitled to an award of between 10-30% of the monetary sanctions collected in actions brought by the SEC and related actions by other regulatory and law enforcement authorities. Due to the size of monetary sanctions in many SEC cases and related enforcement actions, whistleblowers may be eligible for substantial monetary awards. While the exact percentage received by a whistleblower is in the sole discretion of the SEC, the SEC will consider a variety of positive and negative factors. Accordingly, to maximize any potential monetary award, whistleblowers are encouraged to consult with a lawyer familiar with the guidelines or carefully review the relevant SEC rules before making their whistleblower submission.
Are whistleblowers permitted to report possible securities violations anonymously?
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, whistleblowers are permitted to submit information about violations of the securities laws to the SEC anonymously. However, to do so, whistleblowers are required to be represented by an attorney who must verify their identity before the information is submitted to the SEC. After a successful SEC enforcement action and prior to receiving any monetary award, for eligibility and other reasons, whistleblowers must disclose their identity to the SEC.
To learn more about the SEC Whistleblower Program or to request a case evaluation, potential whistleblowers may contact our Whistleblower Representation Team in any number of ways – by telephone, email, or electronic submission through this website. All initial legal consultations and case evaluations are free and confidential. Potential whistleblowers may also request anonymity. For international whistleblowers, language translation services are available upon request.