SEC Whistleblower Program – Report Fraud and Misconduct

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), enacted in 2010, empowered the Securities Exchange Commission (SEC) to pay monetary awards to whistleblowers who provide the SEC with original information that leads to a successful SEC enforcement action resulting in sanctions exceeding $1 million. Pursuant to Dodd-Frank, the award to the whistleblower can be anywhere between 10% and 30% of the sanctions the SEC collects. Under these provisions, whistleblowers have received substantial awards for reporting.

The whistleblower provisions of Dodd-Frank were part of a complete overhaul of the United States financial system after the 2008 financial crisis and were part of an effort by the government to bolster corporate accountability and compliance. The whistleblower program now serves as a critical tool that enables the SEC to take advantage of the knowledge and firsthand experience of individuals—particularly corporate insiders—who become privy to fraud and other violations of securities laws. These whistleblowers help the SEC prosecute misconduct that they may not otherwise be able to discover, including:

• Ponzi schemes
• Pyramid schemes
• High-yield Investment Programs
• Theft or misappropriation of funds or securities
• Manipulation of a security’s price or volume
• Insider trading
• False or misleading statements about a company (including false or misleading SEC reports or financial statements)
• Failure to file required reports with the SEC
• Bribery of, or improper payments to, foreign officials
• Fraudulent conduct associated with multiple securities transactions or public pension plans

Since its enactment, the whistleblower program has helped the SEC to recover almost $2 billion in financial penalties and award more than $400 million to whistleblowers.

In addition to creating the whistleblower program and providing for a financial award to eligible whistleblowers, Dodd-Frank also implemented provisions that protect individuals who report fraud and misconduct from retaliation by their employers. Retaliation includes firing a whistleblower as well as other mistreatment, demotion, or change of job status/duties. A company that wrongfully retaliates against a whistleblower may be liable for monetary damages to the whistleblower.

Additionally, the SEC is required to keep whistleblowers’ identities confidential. Pursuant to 15 U.S.C. § 78u-6(h)(2)(A), subject to several exceptions, the SEC “shall not disclose any information, including information provided by a whistleblower to the [SEC], which could reasonably be expected to reveal the identity of a whistleblower.” For more information, see our article about whistleblower confidentiality and reporting anonymously.

Individuals who believe they have tips about fraud or other wrongdoing can report to the SEC by submitting a Tips, Complaint, and Referral complaint form (Form TCR) through the SEC’s website. The form includes general questions about the misconduct, as well as a section to provide a narrative explanation of the matter being reported.

The SEC receives thousands of tips every year and does not have the resources to thoroughly investigate every one. Thus, it is critical to thoroughly consider every detail of the report and consult with an experienced securities and whistleblower attorney to ensure that the complaint form fully informs the SEC of the securities laws violations and other fraud/misconduct being committed. This will maximize the possibility of the SEC conducting a deeper investigation into your tip, which could result in an SEC enforcement action and a whistleblower award.

Silver Law Group is a securities and investment fraud law firm experienced in representing SEC whistleblowers. The SEC whistleblower process is complex and demands the advice and counsel of experienced securities attorneys in order to successfully navigate the process and encourage the SEC to take action and issue a whistleblower award. If you have information that may qualify you as an SEC whistleblower, contact Silver Law Group for a confidential consultation toll free at (800) 975-4345 or email ssilver@silverlaw.com.