What a Whistleblower Should Know About the SEC Program

The SEC whistleblower program was enacted as part of the Dodd-Frank Act. The financial reforms that came out of Dodd-Frank included provisions that created a whistleblower reward program as well as protections for when a whistleblower reports information to the Securities and Exchange Commission.

The office of the SEC whistleblower program reports that they had received $975 million on behalf of the government as of Fiscal Year 2017, which is a rather remarkable success when one considers that the program has only been active since Fiscal Year 2012. Of course, securities fraud generally involves large cases, which can create large collections for the government. For more information regarding what a whistleblower should know about the SEC program, talk to a dedicated DC False Claims Act attorney.

SEC Program Versus Federal and State False Claims Acts

An important thing a whistleblower should know about the SEC program is that the rewards work differently than the Federal and State False Claims Acts. It is not, strictly speaking, what is called a qui tam statute. This is a fancy way of saying that a person does not have an independent right to sue for underlying fraud under the SEC whistleblower program.

A whistleblower does not file a case in court. Rather, the whistleblower reports information to the SEC. Still, there are some rights under this program that are special and maybe even better than the way the False Claims Act works. Since it is rarely possible to address Securities fraud under the False Claims Act(s) having this venue to approach another area of fraud is of great value to whistleblowers.

First and foremost, to report fraud under this law one needs to be able to point to a securities violation, not a matter of fraud committed by or against the government. For a case to be strong, the act of fraud committed should be one which damages investors, so there needs to be a strong connection—the stronger the better—to securities law violations. Perhaps the most intriguing thing from a whistleblower perspective about the whistleblower reward law regulations that the SEC has enacted is that the SEC allows a whistleblower to remain anonymous while reporting the fraud.

What Whistleblowers Should Know About Hiring an Attorney

The whistleblower must hire a lawyer to avail themselves of this protection. The whistleblower will file what is called a form TCR and remain anonymous throughout most of the process, of not all of it. There are only a couple of exceptions when the whistleblower would be exposed.

They might be exposed in the event that the SEC actually decides to prosecute the defendant, and the whistleblower is required to be a witness in such a prosecution. A whistleblower may be exposed under those circumstances because as a witness who might obtain an award, the SEC would be obliged to identify them.

However, that event is a long way down the road towards pursuing a claim and a case. If the whistleblower is in the position of testifying in an actual proceeding conducted by the SEC to collect against defendants, it is fair to say that that whistleblower is likely to be someone who can collect an award.

What Are the Rights of the SEC?

The SEC reserves the right to identify the whistleblower in cases where they may be lying. Otherwise, however, the SEC has been remarkably protective of whistleblowers who work to report fraud. They have done everything they can, as far as practitioners in this field can surmise, to protect the identities of whistleblowers who come forward with legitimate information. One could argue the agency has been extraordinarily active in this area.

They have fought to make the precedent that a whistleblower can not waive their right to an award or to report fraud to the SEC. Given that most people in a position to know that their company is committing serious securities violations would likely have to sign some form of document to obtain a severance agreement, this is an important step the Agency has taken to protect whistleblower rights and ensure the flow of information to the SEC.

Call an Attorney to Discuss Important Information About the SEC Program

When it comes to the SEC award program, all whistleblowers should know that information subject to a potential award must be original information, and it must result in some form of a collection by the SEC of more than $1 million. The amount of the award is pegged towards the amount collected by the SEC. The whistleblower may obtain between 10 percent and 30 percent of the money collected by the SEC.

However, the money for the award is not directly paid from the money collected from the defendant, as it would be in other whistleblower actions. Congress enacted this law to include the funds to pay the whistleblowers, and the office of the SEC is obliged to report the status of that fund every year. That fund does, in fact, provide the award money for whistleblowers.

The SEC takes whistleblower protections seriously and is not even aware of the name of the whistleblower who files anonymously initially. The whistleblower files through counsel which means the SEC cannot reveal their identity at the outset since they do not know the name.