On December 18, 2020, the SEC announced three different whistleblower awards totaling over $3.6 million. Because the SEC does not disclose details about its whistleblower awards unless the enforcement action is public, there is no information about the cases themselves except for the SEC’s bare-bones press release. (This is related to the helpful fact that SEC whistleblowers can remain anonymous, as discussed below.)
These awards underscore the huge success of the SEC’s whistleblower program. Since it was created in 2012, the SEC has awarded $735 million to 127 brave people who reported corporate wrongdoing, which works out to an average award of more than $5.7 million. Under Dodd-Frank, it can pay to do right by enforcing our securities laws.
What is Securities Fraud?
The SEC’s whistleblower reward program is all about securities fraud. Securities fraud is a huge problem not only because it cheats investors, but also because it can destroy the integrity of markets themselves. If everyone’s 401(k) or pension plans go bankrupt, that’s bad for everyone, and causes massive disruption to our economy. People at the top of the economy playing around with money can ruin everyone else’s lives and financial well-being, as we all saw during the 2008 financial crisis.
Generally, securities fraud is any false or misleading information used to market or sell securities. It can include the failure to disclose important material information. What does this look like in practice? Securities fraud is a broad category that can include any of the following and more:
- Ponzi schemes
- Pyramid schemes
- “Pump-and-dump” schemes
- Misconduct related to audits, like doctoring audit documents, suppressing bad information, or violating auditing standards to make it seem like a company is more profitable or less risky than it actually is
- Insider trading on non-public information
- Unregistered securities offerings
These are just examples. Securities fraudsters are creative and come up with new ways of juicing profits at investors’ or the public’s expense every day.
Can I Be a SEC Whistleblower?
Maybe you’ve seen some dirty financial dealings at your company or at a client or contractor. Can you be a SEC whistleblower?
You can participate in the SEC whistleblower reward program if you:
- Have “original information,” meaning the SEC doesn’t already know about it, as long as you didn’t learn about it from a government report, through litigation, or from the news media
- Voluntarily provide information to the SEC, without being compelled to provide it through a subpoena or other mandatory process
- Provide information that actually leads to or assists with an SEC enforcement action that results in at least $1 million in recovery to the SEC
You do not need to be a US citizen. You do not need to be an employee of the company on which you are blowing the whistle.
Can I Remain Anonymous?
Yes. SEC whistleblowers can make anonymous complaints through an attorney. The Dodd-Frank Act is one of the few laws allowing whistleblowers to remain anonymous when filing a claim, while still having a right to a reward at the end of the day. (You do have to share your identity to get a reward, but the information remains confidential at the SEC and usually the investigation and settlement would already be over.)
Can My Employer Retaliate Against Me for Blowing the Whistle?
No. The law recognizes that standing up to corporate misconduct takes bravery and is risky. In addition to any whistleblower reward you may receive, you would have a cause of action for retaliation or wrongful termination if your employer took action against you because you reported anything to the SEC.
How Much Do SEC Whistleblowers Get Paid?
Whistleblowers who provide information that leads to a successful enforcement action are entitled to between 10 and 30% of the total amount recovered by the SEC, depending on how helpful the information was, how much you cooperated with the SEC or helped them during an ongoing investigation, whether you participated in wrongdoing yourself, and whether you promptly reported misconduct.
Get in Touch With a SEC Whistleblower Attorney Today
If you are thinking about whether to blow the whistle, you should contact our experience SEC whistleblower attorneys today. We can guide you in collecting the documents and evidence you need to convince the SEC to take your case and bring an enforcement action against the company you’re blowing the whistle on.
We have the unique skills and knowledge to represent SEC whistleblowers. As employment attorneys, we understand your rights at work, and can navigate how to protect you. As former defense-side securities lawyers who were hired to defend these kinds of enforcement actions, we also know the ins and outs of securities laws and can help you and the SEC prove the fraud.
Julian Burns King graduated with honors from Harvard Law School and founded King & Siegel in 2018. As head of the Firm’s discrimination and harassment practice areas, she champions the rights of working parents and victims of workplace discrimination and harassment. She has been recognized as a “Rising Star” by Super Lawyers annually since 2018 and has recovered tens of millions of dollars on behalf of her clients.