In recent years, violations of federal securities laws have become front-page news, including newsworthy acts committed by Bernie Madoff, Wells Fargo, and Merrill Lynch, among others. Typically, governing agencies learn of financial misconduct through sources within securities firms. This article addresses some frequently asked questions about being an SEC whistleblower.
Q: What is a whistleblower?
A whistleblower is a person who brings wrongdoing to the attention of the government or other law enforcement agency. Frequently, whistleblowers are employees who bring to light violations of the law committed by his or her own employer. A variety of federal laws protect whistleblowers. In addition to reporting labor and environmental law violations, employees can report violations of federal securities laws by acting as an SEC whistleblowers.
Q: What is the SEC?
The Securities and Exchange Commission (SEC) is an agency of the federal government that
enforces federal securities laws, proposes new securities rules, and regulates the securities industries and the stock and option exchanges. Violations of federal securities laws committed by employers can be reported by whistleblowers directly to the SEC.
Q: What is the Dodd-Frank Act?
The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank Act, is a federal law passed by President Obama in July 2010. It was a massive overhaul of the financial regulatory system aimed at increasing corporate accountability and compliance and making operations more transparent.
Q: What kinds of activities can I report to the SEC?
A whistleblower can report any violation of the laws regulating consumer finance, corporate and accounting fraud, and commodity and currency exchanges. This includes:
Q: How do I report illegal activity to the SEC?
The SEC has an online portal where you can submit information and become eligible to receive a whistleblower award. The SEC treats these submissions as confidential and non-public.
Q: Can I be fired or punished by my employer for being a SEC whistleblower?
The Dodd-Frank Act expressly prohibits retaliation by employers against whistleblowers, including firing or discriminating against a whistleblower. The Act provides whistleblowers with a private cause of action in the event that they are retaliated against due to their report to the SEC.
Q: How does the SEC reward whistleblowers?
As an incentive to whistleblowers, the Dodd-Frank Act provides that the SEC will pay monetary awards to eligible whistleblowers who voluntarily provide the SEC with original information that leads to a successful enforcement action. There’s a similar whistleblower program for the Commodities Futures Trading Commission, which rewards whistleblowers who provide information about violations of federal law in the trading of commodities.
Q: How are monetary awards for whistleblowers calculated?
The Dodd-Frank Act defines "monetary sanctions" to include any monies—including penalties, disgorgement, and interest—ordered to be paid as a result of any action for the violation of federal law, or the settlement of any action. Whistleblowers are entitled to receive an award of 10 percent to 30 percent of the total monetary sanctions collected by the SEC.
Q: What notable monetary awards has the SEC previously paid to whistleblowers?
Since the implementation of the Dodd-Frank Act, there have been several significant monetary awards made to whistleblowers. For example, a Monsanto employee was awarded $22 million for reporting improper accounting practices by the corporation. To date, the largest ever award was issued in September 2014, when the SEC awarded over $30 million to a whistleblower living in a foreign country.
Q: Are any types of people excluded from being Dodd-Frank whistleblowers?
Several types of people are excluded from being whistleblowers under the Dodd-Frank Act. For example, you are excluded if at the time you acquire the information you were a member, officer, or employee of a regulatory agency, the Department of Justice, the Public Accounting Oversight Board, or any law enforcement agency. Also excluded is any person convicted of a criminal violation related to the action under which a whistleblower would have otherwise receive an award.
Q: Can I anonymously report illegal activity to the SEC?
Yes, you can anonymously submit a claim to the SEC. However, the SEC requires that should you decide to make an anonymous report, you be represented by an attorney in connection with the submission.
Speak with an Attorney about Your Whistleblower Case
If you have information about financial misconduct, and are considering issuing a report to the SEC, you may want to first speak with a professional about your likelihood of success. FindLaw can help you find an experienced securities attorney near you.
Contact a securities lawyer to assist with any issues related to securities laws and financial instruments.