SEC Whistleblower Reward Program
In July 2010, the Dodd-Frank Wall Street Reform and Protection Act (Dodd-Frank) created the SEC Whistleblower Reward Program. It provides whistleblowers with a strong monetary incentive, as well as substantial protections, for reporting wrongdoing to the SEC, including:
- Accounting fraud;
- Inadequate internal controls;
- Investment fraud;
- Insider trading;
- EB-5 investment fraud;
- Foreign bribery payments and other violations of the Foreign Corrupt Practices Act;
- Market manipulation schemes;
- Unregistered broker-dealers;
- Investment adviser fraud;
- Offering fraud and Ponzi schemes;
- Inadequate disclosures in communications with investors;
- Deceptive non-GAAP financial measures; and
- Violations of auditor independence rules.
The securities laws are very broad and the SEC has jurisdiction over a wide range of industries and entities – both public and private. If you have information that you would like to report to the SEC Whistleblower Office, contact the experienced SEC whistleblower attorneys at Zuckerman Law for a free, confidential consultation about your case by calling 202-262-8959.
SEC Whistleblower Awards
Under the program, the SEC will issue awards to whistleblowers who provide original information that leads to enforcement actions with total civil penalties in excess of $1 million. A whistleblower may receive an award of between 10-30 percent of the total sanctions imposed.
Original information “leads to” a successful enforcement action if either: (i) the original information caused the staff to open an investigation, reopen an investigation, or inquire into different conduct as part of a current investigation, and the Commission brought a successful action based in whole or in part on conduct that was the subject of the original information; or (ii) the conduct was already under examination or investigation, and the original information significantly contributed to the success of the action.
In determining an award percentage, the SEC considers the particular facts and circumstances of each case. For example, positive factors may include the significance of the information, the level of assistance provided by the whistleblower and the whistleblower’s attorney, and the law enforcements interests at stake. The largest award to date is more than $30 million.
If represented by counsel, a whistleblower may submit a tip anonymously to the SEC. In certain circumstances, a whistleblower may remain anonymous, even to the SEC, until a reward is issued. However, even at the time of a reward, a whistleblower’s identity is not made available to the public. An experienced SEC whistleblower lawyer will be able to skillfully guide you through the process, maximizing the likelihood that your identity is not revealed to unauthorized parties.
Protection Against Whistleblower Retaliation
Whistleblowers are also afforded substantial protection against retaliation. Specifically, an employer may not “discharge, demote, suspend, threaten, harass, directly or indirectly, or in any manner discriminates against, a whistleblower” for legally reporting wrongdoing. In the event that an employer retaliates against a whistleblower, the law provides for substantial relief. This may include reinstatement, double payback, and compensation for related expenses such as litigation costs and reasonable attorneys’ fees.
SEC Whistleblower Office: FY2016 the Best to Date
According to the SEC Whistleblower Office’s 2016 Annual Report to Congress, the office received more than 4,200 tips in FY2016. This is the most tips the office has received in one year. The majority of tips related to corporate disclosures and financials, offering fraud and market manipulation. Other notable areas of tips included insider trading, trading and pricing schemes, foreign bribery, unregistered offerings, municipal securities and public pensions.
The states that yielded the highest number of tips in FY 2016 were California, New York, Florida, Ohio, Texas, Washington, Illinois, and New Jersey. States reporting more than sixty tips were Arizona, Michigan, Pennsylvania, Virginia and North Carolina. The SEC Whistleblower Office also received tips from 67 foreign countries in FY2016. The highest number of tips were from whistleblowers in Canada, the United Kingdom, and Australia. Notably, whistleblowers need not be U.S. citizens to be eligible for SEC whistleblower awards and the attorneys at Zuckerman Law can represent SEC whistleblowers from any state or country.
Since the law went into effect, the SEC Whistleblower Office has awarded more than $149 million to 41 whistleblowers (see a list of the “Largest SEC Whistleblower Awards” below). In FY2016, the office issued more than $57 million in awards to whistleblowers, including six of the ten largest whistleblower awards in the program’s history.
Largest SEC Whistleblower Awards
The table below identifies some of the larger awards that the SEC has provided to whistleblowers:
|Whistleblower Award||Date||Basis for Whistleblower Award|
|$30 million||September 22, 2014||A foreign whistleblower came to the SEC with “information about an ongoing fraud that would have been very difficult to detect.”
This reward underscores that non-US citizens are eligible whistleblowers in the SEC Whistleblower Program.
|$22 million||August 30, 2016||A former financial executive at Monsanto exposed weaknesses in the company’s internal controls that failed to account for millions of dollars in rebates. Monsanto agreed to settle the allegations of accounting fraud for $80 million.
Importantly, auditors and accountants are eligible whistleblowers in the SEC Whistleblower Program. They are often best positioned to witness this type of wrongdoing.
|$17 million||June 9, 2016||A company insider “substantially advanced the agency’s investigation and ultimate enforcement action.”
This award highlights that whistleblowers may receive a reward if they provide original information regarding an open SEC investigation that significantly contributes to the success of the action.
|$14 million||September 30, 2013||The whistleblower exposed a fraudulent offering that targeted foreign nationals who sought to invest in the U.S. economy and gain a legal pathway to citizenship through the EB-5 Immigrant Investor Program.
In 2016, the SEC increased staff in its investment adviser/investment company examination program. As such, we expect to see an increase in the number of actions brought against investment advisers and companies in the coming years.
|$7 million||January 23, 2017||Three whistleblowers split an award of more than $7 million after helping the SEC prosecute an investment scheme.
One whistleblower provided information that was a primary impetus for the start of the SEC’s investigation. That whistleblower received more than $4 million. Two other whistleblowers jointly provided new information during the SEC’s investigation that significantly contributed to the success of the SEC’s enforcement action. Those two whistleblowers will split more than $3 million.
|$5.5 million||January 6, 2017||An anonymous whistleblower orally provided the SEC with critical information about ongoing securities fraud. Generally, the SEC requires that whistleblower provide information “in writing.” However, the SEC waived that requirement in this case due to “highly unusual circumstances” and awarded the whistleblower more than $5.5 million for the information.
This award marks the second time that the SEC has deemed it appropriate to waive a procedural requirement. Former chief of the SEC whistleblower office, Sean McKessy, noted that this award underscores the SEC’s discretionary authority to do what justice requires.
|$5 million||May 17,2016||A former company insider’s detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information.
In the SEC’s press release, it noted that employees are often best positioned to witness wrongdoing.
|$4 million||September 30, 2016||The SEC issued the award to an anonymous whistleblower for “alter[ing] the agency to a fraud.”
The lack of information about the whistleblower and the enforcement action underscores how serious SEC is about protecting the confidentiality of whistleblowers.
|$3.5 million||May 13, 2016||The whistleblower “bolstered an ongoing investigation with additional evidence of wrongdoing” which helped the SEC during settlement discussions with the company.|
|$3.5 million||December 5, 2016||A whistleblower received an award of $3.5 million for providing original information to the SEC that led to a successful enforcement action.|
SEC Whistleblower Lawyers: Top FAQs
Can I submit an SEC Whistleblower claim if the SEC already has an open investigation into the matter?
Do I have to report a securities law violations to my company before reporting the violation to the SEC?
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