Recently, an SEC Whistleblower was awarded $36 million for information and assistance that significantly contributed to the success of an SEC enforcement action as well as actions by another federal agency. 

We don’t know the identity of the Whistleblower or the firm or individuals who were sanctioned as a result of the information. That’s because the reporting process is anonymous. There are also anti-retaliation rules in place which prevent targeted firms from retaliating against whistleblowers who make a complaint in writing to the SEC. According to the SEC, this generally means that “employers may not discharge, demote, suspend, harass, or in any way discriminate against an employee in the terms and conditions of employment who has reported conduct to the Commission that the employee reasonably believed violated the federal securities laws.” 

The Dodd-Frank Wall Street Reform and Consumer Protection Act established the SEC’s Whistleblower Program.The Act expanded the protections for whistleblowers and broadened the prohibitions against retaliation.  These provisions encourage people to come forward with the information. 

Whistleblowers have Received Over $1 Billion 

The SEC’s highly successful Whistleblower Program has paid out over $1 billion to anonymous tipsters. The Program grants awards to qualifying whistleblowers who provide significant information leading  to a successful SEC enforcement action. Depending on the circumstances, Whistleblowers receive an award  between 10%-30% of the total monetary sanctions collected by the SEC and by other regulatory or law enforcement agencies. Importantly, the SEC’s Whistleblower Program allows the  whistleblowers to anonymously submit tips if they are represented by an attorney in submitting their tip.

Many types of tips qualify for the Whistleblower Program. The Whistleblower Program is important to maintaining the integrity of the financial markets. Information gathered from a whistleblower who has knowledge of possible securities law violations can be a powerful weapon in the law enforcement toolbox of the SEC. A Whistleblower’s special knowledge of the circumstances as well as individuals involved, can help the SEC identify possible fraud  or securities violations much earlier than they might otherwise have. Thus, this allows the SEC to minimize investor harm, better preserve the integrity of the capital markets, and more quickly stop those responsible for the unlawful conduct.

In return for this valuable information, the Commission is authorized by Congress to award money to eligible individuals who provide high-quality original information that leads to an SEC enforcement action in which over $1,000,000 in sanctions is ordered. The range for these Whistleblower awards is between 10% and 30% of the collected money.

This awards program has been spectacularly successful and has led to many large actions against bad actors by the SEC. The SEC has awarded approximately $1.1 billion to 214 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  

Recent  awards to Whistleblowers have also been quite large. Some of the biggest  awards have been in the hundreds of millions of dollars. The largest whistleblower award to date—for $114 million– was announced by the SEC in October 2020. The next largest–$50 million—was also awarded that year. 

Whistleblowers are Anonymous 

Under the Whistleblower Program, whistleblowers are permitted to anonymously report  if they are represented by an attorney. A whistleblower attorney will be able to carefully guide a whistleblower through the reporting process, while at the same time  helping to protect their identity from unauthorized persons. The program also has a provision which protects against retaliation against the whistleblower.  

You Shouldn’t Delay 

Awards are at the SEC’s discretions. In making the determination of an award amount to a Whistleblower, certain factors may reduce an award. Based on an SEC’s  study of past awards reductions in award amounts occurred where one or more of the negative award factors (i.e., unreasonable delay, culpability, and interference with a compliance and reporting system) are present. This helps to align the Whistleblower’s award determinations with the enforcement goals of the SEC. 

Unreasonable delay is a large factor in awards determinations. If you are a whistleblower, it is imperative that you don’t delay as this may affect any recovery.

Contact Our Whistleblower Attorneys Today For a Free Consultation

If you believe you have information about a securities fraud or securities violation and have questions regarding a whistleblower claim, contact our offices today for a free consultation. Former Wall Street securities attorney Melanie S. Cherdack and her team of lawyers will evaluate your claim at no cost to you. Contact us by filling out our online contact form, or calling 888-768-2499.