SEC Whistleblower Program

The SEC Whistleblower Program, enacted under the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), provides whistleblowers with a mechanism to obtain an award for blowing the whistle on companies or individuals for securities fraud. Under the whistleblower program, eligible whistleblowers are entitled to receive between 10 and 30 percent of the civil recovery obtained by the SEC in an enforcement action against a party based on information provided by the whistleblower.

Types of securities fraud

Common types of securities fraud committed by companies and individuals include:

  • Ponzi or pyramid schemes
  • Misappropriation of funds or securities
  • Insider trading
  • Fraudulent or unregistered securities offering
  • Naked short selling
  • Bribery of foreign officials under the Foreign Corrupt Practices Act (“FCPA”)
  • False or misleading statements about a company in public documents and SEC filings

Eligibility for an award

Eligible whistleblowers under the whistleblower program include any person who voluntarily provides original information to the SEC about the commission of any violation of the securities laws. Whistleblowers need not be company insiders or even U.S. citizens to collect a whistleblower award under the program; however, the amount of the award will be based on the quality of information provided to the SEC, the amount of assistance provided to the SEC, and, the SEC’s interest in deterring the conduct making up the securities violation. In order for a whistleblower to collect an award, the recovery by the SEC must be in excess of $1 million.

Protections under the Whistleblower Program

In addition to the incentives provided to whistleblowers under the program, the Dodd-Frank Act provides unprecedented protections to whistleblowers seeking to blow the whistle on securities fraud, including:

  • Whistleblowers who are retaliated against for reporting securities fraud at their workplace are entitled to reinstatement to the same position they were in before the retaliation, two times the amount of back pay otherwise owed to them, and compensation for litigation costs;
  • The whistleblower provisions under the Dodd-Frank Act requires that SEC officers and employees maintain the confidentiality of the whistleblower until and unless disclosure of the whistleblowers identity is required by law.
  • Most critically, in an effort to remove the social stigma and fear of retaliation that has long kept whistleblowers from coming forward with information about fraud, the SEC Whistleblower Program allows whistleblowers to provide a submission to the SEC can anonymously, provided they are represented by an attorney. To do so, whistleblowers must provide a form to their attorney signed under penalty of perjury attesting to the accuracy of their submission to the SEC. The attorney then works with the SEC on behalf of the whistleblower throughout its investigation. The identity of the whistleblower need only be revealed to the SEC when it comes time to receive a monetary award for a successful action based on the information provided by the whistleblower.

To learn more about reporting securities fraud under the SEC Whistleblower Program or to request a free, confidential case evaluation contact Stone & Magnanini’s SEC Whistleblower Team.