SEC Whistleblowers

What is the SEC Whistleblower Program?

Since its creation, the SEC has received more than 1,000 tips from individuals who believe they have valuable information about misconduct at public companies. These tips include allegations of accounting improprieties, insider trading, corporate fraud, money laundering, market manipulation, and violations of the Foreign Corrupt Practices Act.

In 2010, after a series of corporate scandals had shuttered companies and devastated countless individual investors, the country debated how to break the cycle of fraud and corruption. Financial watchdogs agreed on two fundamental truths: the investor protection status quo was failing, and law enforcement could not effectively and efficiently police the marketplace without the help of individuals with actionable intelligence.

In response, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, one of the most sweeping financial reforms since the Great Depression. Under the statute, the SEC developed a revolutionary bounty program, now known as the SEC whistleblower program, through which eligible whistleblowers receive significant monetary awards, employment protections and can report anonymously.

Knowing the Eligibility Rules for the SEC Whistleblower Program is Critical

To qualify for the SEC Whistle-Blower Award, you must meet all eligibility requirements below. If you fail to meet any one of them, you will not be considered for the program.

•  Your information must lead to a successful SEC enforcement action.
•  The total monetary sanctions collected from the action must exceed $1 million.

The SEC receives thousands of whistleblower tips each year, and many are denied outright because the submissions fail to meet the eligibility requirements of the SEC whistleblower program. It is critical to understand the eligibility provisions and their nuances.

For the most part, qualifications are pretty straightforward. It doesn't matter whether a whistleblower is a corporate insider or an outsider. Regardless of citizenship, any individual or group of individuals can participate in the SEC whistleblower program, potentially earning significant SEC whistleblower awards.

Key Eligibility Factors:

• The information must be original, something not known to the SEC.
• The tip must be provided voluntarily before the agency has reported the news.
• The advice must be provided voluntarily before the agency has notified the information.
• The whistleblower’s submission must lead to a successful enforcement action resulting in monetary sanctions exceeding $1 million.

SEC whistleblowers may learn about wrongdoing through their business relationships or social interactions. This information can be derived from whistleblowers' independent knowledge or their independent analysis of publicly available information. While being an eyewitness or having evidence of a securities violation is ideal, it is not required.

Why be an SEC Whistleblower?

Since the inception of the SEC whistleblower program, only a handful of individuals have received awards. This means that most people don’t know about this opportunity. If you want to change that, it’s important to share what you know.

SEC whistleblowers also are entitled to confidentiality and protection from job retaliation.

Both US citizens and foreign nationals may file SEC whistleblower claims and receive rewards.

SEC whistleblowers are responsible for enforcement actions with more than $2.5 billion in monetary sanctions. Out of that total, $1.4 billion was for disgorgement of ill-gotten gains and interest, and almost $750 million has been returned to harmed investors.

The SEC has awarded more than $735 million to 127 whistleblowers since issuing its first whistleblower award in 2012.

SEC Whistleblower Program History

Since its creation in 2011, the SEC Whistleblower Office has received more than 1,000 submissions from individuals who provided original information leading to successful SEC enforcement actions resulting in penalties totaling more than $2 billion.

Congress created the SEC whistleblower program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Signed into law by President Obama in 2010, the Dodd-Frank Act is a wide-reaching statute developed and enacted in response to many of the issues that led to the 2008 financial crisis.

Section 922 of the Dodd-Frank Act sets forth the basic structure and framework for the SEC whistleblower program. The law repealed and replaced a scarcely publicized or utilized SEC whistleblower program that applied only to insider trading cases.

Before the Dodd-Frank Act, the Sarbanes-Oxley Act was the fundamental whistleblower framework. Enacted in 2002 in response to stunning, massive fraud by Enron Corporation and WorldCom, Sarbanes-Oxley created criminal liabilities for chief executive officers and chief financial officers and required that companies establish internal controls and procedures for reporting possible financial misconduct.

But the law had significant deficiencies. It essentially relied on companies to self-police misconduct and limited whistleblower protection under Sarbanes-Oxley.

The decade between the passage of Sarbanes-Oxley and the Dodd-Frank Act underscored to Congress that Sarbanes-Oxley was inadequate for policing securities law violations and that additional protections and incentives were needed to convince employees to report misconduct to the SEC.

Freedom of Information Act exemption

The FOIA exempts from disclosure any documents that would reveal “the identity of a confidential source, including a State, local, or foreign agency or authority or any private institution which furnished information concerning a violation of law or regulation or which furnished information relating to the commission or possible commission of a crime or fraud.”

There are nine exemptions to the Freedom of Information Act, which the SEC and other federal agencies can use to deny the release of certain information which the public may request. Exemption 3, 5 U.S.C. Section 552(b)(3)(B) or (b)(3) pertains to information that is prohibited from disclosure by another federal law.

FAQs

Q: What is the SEC Whistleblower program?

A: The SEC Whistle-Blower Program provides financial rewards to individuals who voluntarily provide the SEC with original information leading to successful enforcement actions resulting in monetary penalties exceeding $1 million.

Q: Who is eligible for the SEC Whistleblowers Program?

A: Individuals must meet all of the following criteria to qualify for the SEC Whistle-Blower Award: 1) Be an individual; 2) Have direct and first-hand knowledge of facts relevant to a violation of federal securities laws; 3) Provide the SEC with original information relating to those facts; 4) Not be part of a group that has already received an award under this program.

Q: How do I apply for the SEC WhistleBlower Program?

The application requires basic personal information such as name, address, phone number, email address, etc. Once submitted, the SEC Whistleblowing office will review the application.

Q: When can I expect to hear back on my application?

A: It can take up to 90 days before the SEC receives your application. 

Do You Have a SEC Whistleblower Violation to Report?

The SEC Whistle-Blower Program is designed to encourage individuals to report suspected securities violations without fear of retaliation. If you have any concerns regarding this topic, please contact The Whistleblower Advocates at (833) 310-3147 for a FREE, confidential consultation.