SEC Awards $7 Million to Whistleblower

Mar 9, 2020

The Securities and Exchange Commission (“SEC”) recently announced an award of more than $7 million to a whistleblower whose information and assistance were critically important to the success of an enforcement action. The whistleblower provided extensive and sustained assistance, such as identifying witnesses.  According to the SEC press release, “The whistleblower’s information and assistance helped the SEC staff devise an investigative plan, craft document requests, and ultimately bring an important enforcement action focusing on serious financial abuses.” Since its first award in 2012, the SEC’s Whistleblower program has awarded approximately $394 million to 73 individuals. This money is funded by an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.   Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  You May Have the Right to Recover as a Whistleblower. The Whistleblower provision was established by the Dodd-Frank Act which was passed in the wake of the great recession. Among the Act’s achievements are the creation of the SEC’s Whistleblower Office and the SEC Whistleblower Program. This program offers awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total civil penalties exceeding $1 million.  In order to recover as a whistleblower, your tip must provide original information which caused the staff to open an examination or investigation, or the original information significantly contributed to a successful enforcement action where the matter was already under examination or investigation Will I be able to submit a tip anonymously to the SEC Whistleblower Office?  The answer is yes, but only if you have an attorney represent you in connection with your submission. Hiring an attorney to represent you in connection with a whistleblower claim can help you through the process while maximizing the likelihood that your identity is not revealed to outside parties. As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose information that could reveal a whistleblower’s identity. It would be very difficult for the SEC to continue to receive the best tips on fraud if it did not take steps to protect whistleblowers’ confidentiality. As an example, in the most recent case, the SEC will often issue whistleblower awards and provide no information about the whistleblower or even the case number of the related enforcement action.  What employment protections are available for SEC whistleblowers?  Under Dodd-Frank, which created the SEC Whistleblower Program, employers cannot discharge, demote, suspend, harass, or in any way discriminate against employees for raising concerns about a potential securities-law violation.  Do I Have to be an Employee or Former Employee to file a Tip? No. Award recipients have also included investors who had been victims of the fraud, professionals working in the same or related industry, or other types […]

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