Blowing the Whistle on Securities Fraud
One of the positives to arise from the 2008 financial crisis was the stiffening of regulations, and the protection of whistleblowers, regarding securities fraud, with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under Dodd-Frank, the Office of the Whistleblower was established for the Securities Exchange Commission (SEC) to encourage those who have information about securities and commodities laws violations to notify the authorities. The Commodity Futures Trading Commission (CFTC) has similar rules and regulations under Dodd-Frank.
If you believe you have legally actionable information regarding securities or commodities fraud, we hope this page will answer your questions. But if concerns still weigh on you, we hope you will contact us at the Louthian Law Firm.
What Is Required of Whistleblowers?
The SEC entitles whistleblowers to an award if their evidence meets the criteria required to bring a case. The information must:
- Be voluntary. Your submission of information to the SEC must occur before it is requested by the SEC, by Congress, or by some other regulatory or enforcement agency, such as FINRA.
- Be original. Original information comes from a whistleblower’s independent knowledge or analysis that is not already known by the SEC and is not a product of publicly available sources.
- Lead to success. If the SEC opens a new investigation, re-opens a previous one, or pursues a new line of investigation, and a successful action is brought based at least partially on your information, then it has led to success. Additionally, the information must lead to monetary sanctions of more than $1 million (called the “covered action”). The SEC can add together monetary sanctions in two or more legal actions, if they arise from the same set of actionable facts, to reach $1 million or more.
- Have been first submitted after July 21, 2010, when Dodd-Frank was enacted. Submissions before that date are not eligible for an award. However, the date of the illegal conduct reported can have occurred before that date.
The CFTC’s requirements are essentially the same as the SEC’s.
Determining the Award
Under Dodd-Frank, a whistleblower can receive anywhere from 10 to 30 percent of the monetary amounts collected in the covered action. The amount awarded is solely up to the SEC or CFTC.
Related actions can also amount to awards from between 10 and 30 percent, with the specific amount at the discretion of the SEC or CFTC. An action is considered “related” if is it based on the same information that led to the covered action and the action is brought by the U.S. Attorney General’s office or similar agency or official.
The SEC uses several criteria when it comes to determining the size of the award within the percentage range. These criteria include the significance of the information, the amount of help provided by the whistleblower, the SEC’s interest in deterring violations, and the extent, if any, to which the whistleblower participated in the situation reported. All of these criteria are guidelines, not rigid requirements.
Legal Protections for Whistleblowers
Typically, whistleblowers remain anonymous, but you will need an attorney to represent your submission if you wish to be anonymous. The appropriate form (Form TCR) must be signed under penalty of perjury when you make the anonymous submission. Generally, you can remain anonymous up until you receive the award.
The Dodd-Frank Act states that you cannot be fired, suspended, demoted, threatened, harassed, or discriminated against if you provide information to the SEC or CFTC. These protections also extend to those who report problems internally and are then fired before they provide their information to the federal government.
Recent Securities Whistleblower Cases and Awards
Since the beginning of the securities whistleblower program, 18 individuals have received a total of over $50 million. The most recent award occurred in July, 2015, when the SEC awarded the third-highest whistleblower award since Dodd-Frank was established—over $3 million to a company insider whose information helped bring down a complicated fraud.
Another large award was paid during October 2013, when a whistleblower received $14 million for information that ended up helping the recovery of investor funds. The recent increase in multi-million dollar payouts seems to indicate that legal representation of whistleblowers is on the rise and that the SEC’s programs are firing on all cylinders.
When life goes wrong, we fight for what’s right.
In conference rooms and courtrooms, we do battle because we believe in the rights and power of the people. If you have knowledge about securities or commodities fraud of any kind and your case is valid, an experienced whistleblower attorney like the ones at the Louthian Law Firm can assess your case and help you file the necessary disclosure statement with the government. In some instances, the government will intervene (take part in your lawsuit). A qualified attorney can help you structure your claims in such a way that the government will be persuaded to intervene, possibly increasing the likelihood that you will recover reward money. However, even if governmental parties decide not to intervene, it might still be advisable for you to pursue your case without their involvement.