Whistleblowers who report securities law violations are entitled to a reward if the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) or any other government entity recovers funds as a result of the whistleblower's information.
The financial overhaul law, known as the Dodd-Frank Wall Street Reform and Protection Act, contains provisions that create SEC and CFTC whistleblower reward programs. The new SEC whistleblower program is much broader than a predecessor SEC whistleblower program, which just covered insider trading violations. Now whistleblowers who report securities law violations - from insider trading to money laundering to violations of the Foreign Corrupt Practices Act -- will receive a reward if the SEC and any other government authorities recover more than $1 million based on that information. The Dodd-Frank law establishes a similar whistleblower reward program for the CFTC.
Here are the main aspects of the new whistleblower programs as provided in the financial overhaul law:
- Whistleblower rewards: 10 percent to 30 percent of the monies the SEC, CFTC and other prosecuting authorities collect based on the whistleblower's information if more than $1 million is collected. The law says certain factors will be considered to determine the whistleblower's reward:
- The significance of the information provided.
- The assistance provided by the whistleblower and the whistleblower's attorney.
- The "programmatic interest" of the SEC "in deterring violations of the securities law."
- Job protection: The law specifically states that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. Whistleblowers who suffer from employment retaliation may sue for reinstatement, back pay and any other damages that occurred.
- Confidentiality: Whistleblowers may report fraud anonymously, as long as they have retained a lawyer to represent them. In some cases, their identities may remain unknown even to the SEC and the CFTC until the time comes for the payment of a reward. This is the strongest confidentially provision available out of any of the federal whistleblower programs, including "qui tam" cases under the False Claims Act and the Internal Revenue Service (IRS) whistleblower program. See "Can the SEC Be Trusted to Protect a Whistleblower's Identity?" written by Phillips & Cohen partner Erika A. Kelton.
The SEC has issued regulations for the SEC whistleblower reward program, and the CFTC's whistleblower regulations are also available.
Phillips & Cohen has experience representing whistleblowers in cases involving complex financial transactions and securities and tax law violations. For example, we successfully represented the whistleblower in one of the largest financial fraud cases involving Wall Street, as well as a Wall Street banker who exposed fraudulent tax shelters involving more than $10 billion of taxable income.
If you are aware of any securities or tax law violations and would like to discuss the SEC, CFTC or IRS whistleblower programs with a Phillips & Cohen attorney at no charge, please contact us.