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SEC Whistleblower Program

whistleblower

Although relatively new, the Securities and Exchange Commission (SEC) whistleblower program and its implementation have shown a strong commitment to investigating financial fraud. This is demonstrated by the increase in awards paid by the SEC and public statements by the Commission regarding its commitment to the program and protecting whistleblowers.  The SEC whistleblower program has paid 15 awards to whistleblowers in the three years since its implementation, totaling nearly $50 million dollars.

Like the qui tam provisions under the False Claims Act (FCA), whistleblowers who report wrongdoing to the SEC are eligible to receive a reward if the information provided to the SEC results in a recovery in excess of $1 million.  The SEC whistleblower program also provides job protection in the form of anti-retaliation provisions, also similar to the FCA.  While the concepts of the FCA and SEC whistleblower program are similar, they are two distinct and different procedures whereby whistleblowers can report fraud.  Below is a brief synopsis of the SEC whistleblower program.

Anonymity & Confidentiality

Under the SEC whistleblower program, a whistleblower may report fraud anonymously and can collect any potential award anonymously. However, it is important to note that to retain anonymity throughout the process, the whistleblower must be represented by an attorney. A whistleblower may proceed under the SEC whistleblower programs without counsel, but cannot do so anonymously.  Such a provision is hugely important to would be whistleblowers because remaining anonymous can prevent employer retaliation and other anti-whistleblower repercussions.  There are no such anonymity provisions in either the FCA or the Internal Revenue Service (IRS) whistleblower programs, making the SEC confidentiality provisions an advantageous way to report fraud.

Whistleblower Rewards

In order to be considered a “whistleblower” under the SEC whistleblower program the whistleblower must be an individual who provides information to the SEC that relates to a possible violation of federal securities laws, rules or regulations.  The information can involve any company, public or private, domestic or foreign, who has violated U.S. securities laws.  If the SEC recovers more than $1 million dollars based on the information provided by the whistleblower, he/she will be eligible to receive a reward equal to between 10% and 30% of the money recovered by the SEC.  The SEC has broad discretion to determine rewards including considering among other factors:

  • the significance of the information provided
  • the degree of assistance provided by the whistleblower
  • the “programmatic interests” in deterring future violations and making rewards and;
  • any other factors the SEC may establish.

Anti-Retaliation Provisions

The SEC whistleblower program contains provision to prevent employer retaliation against whistleblowers.  In general an employer may not discharge, demote, suspend, threaten, or discriminate against a whistleblower.  If violated a whistleblower can make a claim for reinstatement to his/her prior position, two times the amount of back pay with interest, and attorneys fees and costs.

If you have information regarding financial fraud, securities violations it is important that you know your legal options. For a free and completely confidential consultation with one of Ashcraft & Gerel’s experienced qui tam attorneys, please feel free to contact us online or call us today at 855-379-0385.