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SEC Whistleblower Program

Eligibility for the SEC Whistleblower Program

With few exclusions or qualifications, any individual or group of individuals, regardless of citizenship, can participate in the program, potentially earning significant SEC whistleblower awards.

Knowing the Eligibility Rules is Critical

The SEC receives thousands of whistleblower tips each year and many are denied outright because the submissions fail to meet the eligibility requirements of the program. It really is mission critical to understand the eligibility provisions…and their nuances. The basics are pretty straightforward: With few exclusions or qualifications, any individual or group of individuals, regardless of citizenship, can participate in the program, potentially earning significant SEC whistleblower awards. An “eligible whistleblower” voluntarily provides the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur that leads to an enforcement action in which the SEC recovers at least $1 million in monetary sanctions. The whistleblower does not need to be employed by the company at issue.

Let’s play out various eligibility scenarios.

Do you live in London or work in Iceland or did you pick up some concerning information on a recent vacation in Morocco? You can reside in, or be a citizen of, any country in the world and be an SEC whistleblower. In fact, in 2014, the Commission paid out more than $30 million to a whistleblower living in a foreign country.

Do you know of an SEC violation that hasn’t happened yet, but the scheme will be rolled out soon? Report it. If you have a good faith belief that a violation of the securities laws is about to occur, that qualifies.

Is the SEC already in the know? This is tricky. The SEC whistleblower program is designed to encourage prompt reporting and, as such, rewards whistleblowers who report original information. Bottom line, get there first. That said, we have had clients supplement existing whistleblower reports and receive monetary awards. This can happen when subsequent whistleblowers provide information that significantly contributes to the success of the enforcement action.

Exceptions to the Rule?

Certain individuals, both employees and outside contractors, are typically excluded from participating in the program. These might include gatekeepers and those working in the audit, legal and compliance functions. Of course, there are exceptions to the exceptions. For instance, a generally ineligible whistleblower may be eligible to participate in the program if the misconduct the whistleblower reports is so significant that it would cause serious harm to the company or investors; or if the whistleblower is aware that the company is interfering with an internal or government investigation. Highlighting another carve-out to eligibility, we successfully represented the first corporate officer to serve as an SEC whistleblower, which is permissible if 120 days has passed since the company was alerted to the misconduct and failed to adequately address the issue. In these and other complex areas of eligibility, such as when a whistleblower is a culpable party, it is always a good idea to consult with a whistleblower attorney.

Although the difficult decision about whether, how, and when to blow the whistle will depend upon the unique facts and circumstances of each case, we have created a confidential and personalized eligibility calculator to help potential SEC whistleblowers better understand their eligibility for these important statutory whistleblower rights. Click below to try the calculator and, as always, feel free to give us a call.

Eligibility Calculator

Surveys say that while most professionals would report wrongdoing with protections and monetary incentives, many don’t know about the SEC Whistleblower Program or if they are eligible to participate. Do you?

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