Will You Blow The Whistle For The SEC?

The role of the U.S. Securities and Exchange Commission (SEC) is to maintain fair and orderly markets, protect investors, and assist with the creation of capital. To do this they depend on companies, brokers, dealers, and exchanges being truthful, fair and honest. Due to securities fraud, these things do not always happen, and people end up making investment decisions based on false information. While there are often those that know these things are taking place, they are not always forthcoming, whether due to their own role in the deception, fear of retaliation, or for other reasons, but there are others that are willing to be a whistleblower. If that is you, it may be worth a substantial amount of money. 

What Is A Whistleblower?

A whistleblower is simply anyone who has knowledge of wrongdoing or illegal acts or activities within an organization that they are willing to report. You may report it internally within your company, and/or to an investigatory or governing body such as the IRS or SEC. As a whistleblower, you may occupy various roles within or outside the company such as:

  • Current employee
  • Former employee
  • Client
  • Contractor
  • Vendor
  • Any other position that may provide you with access to this information

What Type Of Evidence Will You Have To Provide As A Whistleblower?

While it is often assumed that the whistleblower has witnessed the wrongdoing or has firsthand knowledge of the fraud, this is not always the case. You may have accessed this information, accidentally or through various forms of documentation, or even through hearsay. But before you can provide a valid report, you must have some type of concrete and specific evidence that the fraud occurred. You must be able to provide information such as what type of fraud occurred, when and where it occurred, as well as how it occurred. The source of the information that you supply must be original, meaning that it cannot be information that you are able to find on the internet, in the newspaper, in court testimony, or other public sources. 

What Are The Benefits Of Being A Whistleblower?

If you have information about fraud or violations of securities law, you may be able to trade that information for monetary incentives under the Dodd-Frank Wall Street Reform and Consumer Protection Act or the False Claims Act. For example, under the Dodd-Frank Act, if you provide the SEC with information that leads them to cases where sanctions are levied for $1 million dollars or more, you may be entitled to anywhere between 10 to 30 percent of the amount collected. Many times the amount you are eligible to collect will depend on the following:

  • The significance of your information
  • How much you assist the investigating agency
  • Whether or not you participated in the fraud
  • Whether you delayed in making the report
  • If you reported the violation internally and more

What Are The Downsides Of Being A Whistleblower?

As you may imagine, most people or companies who are in the midst of committing fraud are not going to welcome someone reporting the fraud. As a result of your report, you may find yourself facing an illegal demotion, undesirable reassignment, or dismissal.

You are protected from this type of retaliation by various laws that are geared specifically towards the industry you are in. For example, the Whistleblower Protection Enhancement Act (WPEA) is designed to protect those that work for the federal government, while the Sarbanes Oxley Act protects those who work for corporations that are traded on the New York Stock Exchange.

Unfortunately, the same companies that are willing to commit securities fraud are also usually willing to engage in retaliation. Although it is illegal and you may have protections, you must first be able to prove that the retaliation is taking place and many times the only way to do this is through legal channels. Fortunately, you may be able to report and remain anonymous by using the services of an attorney. 

Being a whistleblower for the SEC or any other governmental agency, and getting a whistleblower award, is a very complicated process. Even with strong, valid information, there are a lot of pitfalls along the way that can not only derail your report, but may even snare you in the wrongdoing. Consider contacting a securities law attorney at a firm like Carter West Law before you ever make your report. They will be able to guide you, as well as help you to outline and format the information that you are reporting.