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SEC Whistleblower FAQ
1. What is the SEC Whistleblower Program?
The SEC’s whistleblower program went into effect on July 21, 2010, when President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank whistleblower provision is codified at 15 U.S.C. §78u-6.
Congress created the Dodd-Frank whistleblower program to incentivize integrity and to bring law enforcement and regulatory attention to schemes that undermine America’s securities and investment markets by allowing private individuals to file whistleblower claims exposing securities fraud with the SEC. Under the program, eligible whistleblowers (defined below) are entitled to an award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by other regulatory and law enforcement authorities.
The whistleblower program also prohibits retaliation by employers against employees who provide the SEC with information about possible securities violations.
2. Who is an eligible whistleblower?
An “eligible whistleblower” is a person who voluntarily provides original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur. The information provided to the SEC must lead to a successful enforcement action by the SEC (or one of several other federal or state agencies) resulting in an order of monetary sanctions exceeding $1 million. Groups of people may act in concert as whistleblowers, but companies or organizations cannot qualify as whistleblowers. You are not required to be an employee of the company that is the target of the whistleblower claim to submit information about that company.
3. What does it mean to “voluntarily” provide information?
Your information is provided “voluntarily” if you provide it to the SEC or another regulatory or law enforcement authority before (i) the SEC (or another regulatory agency) requests it from you or (ii) Congress, another regulatory or enforcement agency or self-regulatory organization (such as FINRA) asks you to provide the information in connection with an investigation or certain examinations or inspections.
4. What is “original information?”
“Original information” is information derived from your independent knowledge (facts known to you that are not derived from publicly available sources) or independent analysis (evaluation of information that may be publicly available but which reveals information that is not generally known) that is not already known by the SEC (or other regulatory agency). So if the SEC received your information previously from another person or source, that information will not be original information unless you were the original source of the information that the other person submitted.
5. How might your information “lead to” a successful SEC action?
Your information satisfies the “led to” criterion if your information causes the SEC to open a new investigation, re-open a previously closed investigation or pursue a new line of inquiry in connection with an ongoing investigation, and the SEC brings a successful enforcement action based at least in part on the information you provided. Additionally, you may still be eligible if your information relates to an ongoing examination or investigation, if the information you provide significantly contributes to the success of the SEC’s resulting enforcement action. You may also be eligible if you report your information internally first to your company, and the company later reports your information to the SEC, or reports the results of an internal investigation that was prompted by your information, as long as you also report directly to the SEC within 120 days.
6. I work at a company with an internal compliance process. Can I report internally and still be eligible for a whistleblower award?
Although internal reporting is not required to be considered for an award, you may be eligible for an award for information you reported internally if you also report the information to the SEC within 120 days of reporting it internally. Under these circumstances, the SEC will consider whether your information is “original information” to be the date you reported it internally. In addition, if the company to which you reported conducts an investigation and reports the results to the SEC, you will benefit from all the information your company’s investigation turns up when the SEC considers whether you should receive an award and, if so, where the award should fall in the 10% to 30% range.
7. I provided information to the SEC before the enactment of the Dodd-Frank Act on July 21, 2010. Am I eligible for an award?
No. The statute makes awards available only in connection with information submitted to the SEC after July 21, 2010.
8. How do I submit information under the SEC whistleblower program?
In order to qualify for an award under the whistleblower program, your information must be submitted either through the SEC’s online Tips, Complaints and Referrals questionnaire or by completing the SEC’s hardcopy Form TCR and mailing or faxing it to the SEC Office of the Whistleblower, 100 F Street NE, Mail Stop 5971, Washington, DC 20549, fax (703) 813-9322.
9. Can I submit my information anonymously?
Yes, you may submit anonymously. To do so, you must have an attorney represent you in connection with your submission. You must also provide the attorney with a completed Form TCR signed under penalty of perjury at the time you make your anonymous submission. Robbins Geller attorneys can assist whistleblowers in providing documentation to the SEC.
10. Will the SEC keep my identity confidential?
Whether or not you seek anonymity, the SEC is committed to protecting your identity to the fullest extent possible. For example, the SEC will not disclose your identity in response to requests under the Freedom of Information Act. However, there are limits to the SEC’s ability to shield your identity, and in certain circumstances the SEC must disclose it to outside entities. For example, in an administrative or court proceeding, the SEC may be required to produce documents or other information that would reveal your identity. In appropriate circumstances, the SEC may also provide information, subject to confidentiality requirements, to other governmental or regulatory entities.
11. How will I learn about the opportunity to apply for an award?
The SEC will post on its web site notices of actions exceeding $1 million in sanctions so that anyone who believes they may be eligible will have an opportunity to apply for a whistleblower award. In addition, if the SEC has been working with you or your attorney and believes you may be eligible, the SEC will contact you or your attorney directly to alert you to the opportunity to apply for an award.
12. How do I apply for an award?
Once the case you believe your information led to is posted, you must complete and return Form WB-APP within 90 calendar days to the SEC Office of the Whistleblower via mail to 100 F Street NE, Mail Stop 5971, Washington, DC 20549, or by fax (703) 813-9322.
13. What factors does the SEC consider in determining the amount of the award?
The Dodd-Frank Act requires that the SEC consider many factors in determining the amount of an award based on the unique facts and circumstances of each case. The SEC may increase the award percentage based on the existence of these factors:
- The significance of the information you provided to the SEC in relation to the success of any proceeding brought against wrongdoers.
- The extent of the assistance you provide the SEC in its investigation and any successful proceeding.
- The government’s law enforcement interest in deterring violations of the securities laws by making awards to whistleblowers who provide information that leads to the successful enforcement of these laws.
- Whether, and the extent to which, you participated in your company’s internal compliance systems, such as, for example, reporting the possible securities violations through internal whistleblower, legal or compliance procedures before, or at the same time, you reported them to the SEC.
The SEC may reduce the amount of an award based on these factors:
- If you were a participant in or culpable for the securities law violation(s) you reported.
- If you unreasonably delayed reporting the violation(s) to the SEC.
- If you interfered with your company’s internal compliance and reporting systems, such as, for example, making false statements to your compliance department that hindered its efforts to investigate possible wrongdoing.
14. Can I appeal the SEC’s award decision?
It depends. If the SEC follows the factors described above, authorizes an award, and the amount awarded is between 10% and 30% of the monetary sanctions collected in the SEC or related action, then the SEC’s determination of the amount of the award is not appealable. If the SEC denies your application for an award, you may file an appeal in an appropriate United States Court of Appeals within 30 days of the decision being issued.
15. What rights do I have if my employer retaliates against me for submitting information to the SEC?
Employers may not discharge, demote, suspend, harass, or in any way discriminate against you because of any lawful act done by you in providing information to the SEC under the whistleblower program or assisting the SEC in any investigation or proceeding based on the information submitted. If you believe that your employer has wrongfully retaliated against you, you may bring a private action in federal court against your employer. If you prevail, you may be entitled to reinstatement, double back pay, litigation costs, expert witness fees, and attorneys’ fees. The SEC can also take legal action in an enforcement proceeding against any employer who retaliates against a whistleblower for reporting information to us.
Also, under the Sarbanes-Oxley Act, you may be entitled to file a complaint with the Department of Labor if you are retaliated against for reporting possible securities law violations, including making internal reports to your company.
You should consult an employment lawyer in your area regarding these rights and remedies.
Robbins Geller Rudman & Dowd LLP is committed to fighting for our whistleblower clients in their courageous efforts to combat fraud. We are dedicated to ensuring that our clients receive the compensation and protection they deserve. If you are aware of any securities, commodities, or tax law violations or fraud on the government and would like to consult with us on a confidential basis about a potential whistleblower case, please contact Jonah H. Goldstein or James E. Barz.