SEC Whistleblowing
In July 2010, Congress responded to the global financial crisis by enacting the Dodd-Frank Wall Street Reform and Consumer Protection Act which established the SEC Whistleblower Program. This innovative program offers eligible SEC whistleblowers significant monetary awards, employment protections and the ability to report possible securities violations anonymously.
We have extensive experience representing clients in “Dodd-Frank” SEC whistleblower submissions. In some SEC whistleblower cases we draw upon our strategic partnerships with other law firms to supplement our team with lawyers who have extensive experience with securities laws (including the Foreign Corrupt Practices Act).
With few exclusions, any individual or group of individuals, regardless of citizenship, can be an SEC whistleblower. In fact, while most of our clients are in senior roles at financial firms and public companies, SEC whistleblowers need not be employed by the firm or company that is the subject of their SEC whistleblower complaint.
To qualify for an award, an individual or group of individuals must voluntarily provide the SEC with original information about a possible violation of the federal securities laws that results in a successful enforcement action in which the SEC collects over $1 million in sanctions. Depending on various factors, whistleblower bounties range between 10-30% of collected sanctions, with the exact percentage at the agency’s discretion.
An SEC whistleblower may report any violation of the federal securities laws that has occurred, is ongoing, or is about to occur. The reported misconduct may occur anywhere in the world. In most cases, SEC enforcement actions involve manipulative and deceptive practices associated with the purchase or sale of a security. Beyond stocks and bonds, the federal securities laws have interpreted “security” broadly to include investment contracts, notes and other non-traditional investments.
SEC Whistleblowers Can Remain Anonymous
The ability to report possible misconduct anonymously is one of the most important pillars of the SEC Whistleblower Program. In the past, fear of retaliation and blacklisting deterred corporate whistleblowers from reporting wrongdoing in the workplace. Corporate cultures of silence and complicity intimidated those who spoke out against misconduct.
To anonymously report possible violations to the SEC, a whistleblower must be represented by an attorney and must provide counsel with a copy of the whistleblower submission signed under the penalty of perjury. The attorney will verify the identity of the whistleblower before submitting any information to the SEC; serve as an intermediary between the SEC and whistleblower during any investigation and related enforcement action; and advocate for the highest potential monetary award if the submission results in a successful SEC enforcement action. Prior to receiving any monetary award, for eligibility, tax and other reasons, whistleblowers must disclose their identity to the SEC. Over the years, the Commission has carefully guarded the anonymity of whistleblowers, and is required to make every effort to protect any sensitive identifying information.
SEC Whistleblowers Are Protected Against Retaliation by Employers
Employers may not, directly or indirectly, discharge, demote, suspend, threaten, harass, or in any way discriminate against whistleblowers who: provide information to the SEC; initiate, testify in, or assist in an SEC investigation or related enforcement action; or make any disclosures required or protected by law. These protections exist regardless of whether or not the alleged securities violations are proven or lead to a successful enforcement action, as long as whistleblowers reasonably believe that their tips relate to a possible violation of the federal securities laws.
If whistleblowers are subjected to retaliation in violation of the law, they have the right to immediately sue their employers in federal court, without having to exhaust the administrative process before filing. The types of remedies available include reinstatement with equivalent seniority, double back pay with interest, attorney fees, and reimbursement of other litigation related expenses.