Blowing the Whistle on Securities Fraud


South Carolina Security Frad LawyerOne 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.

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.

You do not need to be a U.S. citizen to file a whistleblower claim. U.S. citizens and foreign nationals alike may file claims and receive awards.

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.

Whistleblowers are also entitled to job protection. 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.

The largest SEC payout to a whistleblower occurred in September 2014, when $30 million was awarded by the SEC for assistance and information that led to a significant monetary recovery.

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.


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