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SEC Whistleblower Claims

SEC Whistleblower Claims for securities and financial-related matters received a significant boost and funding by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), which represents important legislation that allows individuals to report suspected fraud to the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) without fear of retaliation from the alleged perpetrators of the fraud. Whistleblower statutes represent a fundamental shift in the federal government’s strategy for the enforcement of violations of rules and regulations designed to govern the financial and banking system. The Whistleblower programs provide a “bounty” to those “insiders” who possess important information that leads to the successful prosecution of individuals and corporations who violate the federal laws, while protecting the whistleblower from retaliation against themselves and their careers.

Background

The SEC’s Office of the Whistleblower was established in 2011 as authorized by the Dodd-Frank Act. The SEC Whistleblower Program rewards high-quality, unique information that results in an SEC and/or CFTC enforcement action with sanctions exceeding $1 million. AAwards can range from 10 percent to 30 percent of the money collected in a case. On October 1, 2013, the Securities and Exchange Commission announced an award of more than $14 million to a whistleblower whose information led to an SEC enforcement action that recovered substantial funds. Payments to whistleblowers are made from a separate fund established by the Dodd-Frank Act.

Scott L. Silver, managing partner of the Silver Law Group, was an early proponent of the legislation and authored a primer on the SEC Whistleblower Program.

Definition

The SEC defines a “whistleblower” as “an individual, who alone or jointly with others, provides the SEC with information pursuant to the procedures set forth by the SEC, and the information relates to a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur.” Neither companies nor non-natural entities are eligible to be whistleblowers. Also, whistleblowers have to report information that relates to a violation of SEC and/or CFTC federal laws or regulations; neither a violation of state or foreign laws meet the requirements. The SEC requires that whistleblowers make claims using SEC Form TCR, and will only evaluate whether the information provided is material once the claim has been made.

Whistleblower Program Provisions

The SEC Whistleblower Program has provisions designed to encourage individuals to voluntarily provide unique, original information derived from independent knowledge gained through observation and/or analysis from a nonconflicted professional capacity. The information provided must result in a successful enforcement by the SEC and/or CFTC of at least $1 million. The main provisions outlined by the SEC Whistleblower program include:

  • Voluntary Submission;
  • Original Information;
  • Eligibility Exclusions;
  • Information Leads to Successful Enforcement;
  • Monetary Sanctions Basis For Whistleblower Award;
  • Impact of Whistleblower Awards on Company Internal Compliance; and
  • Other Elements.

The range of potential award amounts given to a whistleblower depends on the significance of the information provided, including:

  • nature of information;
  • degree information led to successful outcome;
  • provided ongoing, extensive cooperation;
  • timeliness of initial report;
  • government resources conserved;
  • encouraged others to assist;
  • remediated harm caused by violations; and
  • unique hardships experienced by whistleblower.

Whistleblower Protections

The Whistleblower Program rules and regulations provide protections for whistleblowers, including the creation of a private cause of action for employees in the financial services industry who suffer adverse employment actions because they reported a suspected law violation. The whistleblower protection initiatives outlined by the SEC Whistleblower rules and regulations are related to:

  • Financial Service Industry Employees;
  • Sarbanes-Oxley (SOX) Covered Employees;
  • Prohibition Against Employment Arbitration Clauses; and
  • Anti-Retaliation Provisions.

The financial services industry employees protected under these provisions covers a broad range of employees including, but not limited to:

  • securities brokerage firms;
  • commodities brokerage firms;
  • loan underwriting;
  • credit ratings agencies;
  • property appraisals;
  • financial advisory services; and
  • credit counseling.

Legal Counsel and Whistleblower Process

Silver Law Group has Martindale Hubbell “AV” Preeminent Peer Review™ rated lawyers committed to the protection of Whistleblowers throughout the whistleblower claim process. Our legal team includes former defense attorneys and government prosecutors now working to protect SEC Whistleblowers. We are committed to the prosecution of your whistleblower claims which arise from violations of the Sec and CFTC industry rules and regulations.

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