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SEC Whistleblower Program Overview: Qualifying for Rewards

The SEC Whistleblower Program was created when the Dodd-Frank Act became law in 2010. Congress required the Securities and Exchange Commission to create an SEC Whistleblower Office (Office of the Whistleblower) to administer the SEC’s whistleblower program.

Whistleblowers become eligible for an award when they voluntarily provide the SEC with high-quality original, timely, and credible information and assistance.

Congress also requires the SEC to publish rules to establish the filing procedures for whistleblowers to obtain financial rewards if their original information resulted in sanctions. Furthermore, the program also prohibits retaliation by employers against employees who provide the Commission with information about possible securities violations.

Qualifying for SEC Whistleblower Awards

Non-public claims and information submitted by a whistleblower must lead to a Commission enforcement action of over $1,000,000 in sanctions against a company or an individual. The range for awards is between 10% and 30% of the money collected, and cannot be lower than 10% of the sanctions obtained by the SEC, or higher than 30%. Whistleblowers are also entitled to “related action” awards, once the $1,000,000 threshold is met.

Non-U.S. citizens who blow the whistle on potential securities frauds committed by publicly traded companies outside the United States are eligible to receive rewards and also those whistleblowers report violations of the Foreign Corrupt Practices Act. It’s possible for more than one whistleblower to also qualify for a reward, but the total amount of the rewards paid must not exceed 30% of the sanctions.

“I want to note our appreciation to whistleblowers who, sometimes at great risk to their livelihood, report suspected securities laws violations to the SEC. Our whistleblower program has been a success because of their efforts. Working together, we have stopped frauds and prevented losses for countless investors”

Mr. Jay Clayton, Chairman and Chief of The SEC

“The SEC whistleblower program…has rapidly become a tremendously effective force-multiplier, generating high quality tips, and in some cases virtual blueprints laying out an entire enterprise, directing us to the heart of the alleged fraud.”

Chairman Mary Jo White, Securities and Exchange Commission, Remarks at the Securities Enforcement Forum, Washington DC (October 2013)

The SEC has awarded approximately $1.2 billion to 249 individuals since issuing its first award in 2012. Payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.

Successful Investigations

The Commission is more likely to follow up on SEC tips that are specific, credible, and timely. The sooner a SEC form TCR is filed, the greater the likelihood it will be forwarded to a staff member for further investigation and follow-up. The SEC Whistleblower Program and Reward law covers several types of types of fraud and wrongdoing. Potential violations may include:

  • Ponzi scheme, Pyramid scheme, or a High-Yield Investment Program
  • Theft or misuse of funds or securities
  • Altering a security’s price or volume
  • Insider trading
  • Fraudulent or unregistered securities offering
  • False or misleading statements about a company
  • False or misleading SEC reports or financial statements
  • Abusive naked short selling
  • Bribery of foreign officials
  • Initial Coin Offerings (ICO)
  • Cryptocurrency

Submitting a Tip, Complaint or Referral

To qualify for an SEC whistleblower award under the SEC Whistleblower Program, a whistleblower must submit information regarding possible securities law violations to the Commission either virtually or by mail.

The SEC protects the confidentiality of all whistleblower tips, but not all tips are anonymous. If you are a whistleblower and plan to submit an anonymous tip, you must have an attorney represent you in connection with both your submission of information and your claim for an award. Your attorney’s name and contact information must be provided to the Commission at the time you submit your information.

Before the Commission will pay any award to you, you must disclose your identity to the Commission and your identity must be verified by the Commission.

Protection Against Retaliation

Under the SEC Whistleblower Program, employers are prohibited from retaliating against whistleblowers for providing information to the Commission about fraud or wrongdoing that violates securities law. Retaliation may include discharging, demoting, harassing, suspending, or discriminating against a whistleblower for assisting the Commission in an investigation. If a company has wrongfully retaliated against a whistleblower, the commission may bring enforcement action against that company.

Blowing the Whistle

If you’re thinking of blowing the whistle, we suggest contacting our experienced SEC whistleblower attorneys for a free and confidential case evaluation. Since 1998, our Washington, DC law firm has been handling some of the toughest SEC cases. We’ve prevailed in multiple SEC whistleblower reward cases, including a case in the top 10 of the highest rewards ever granted to a whistleblower. Our attorneys work on a contingency basis, so if we decide to pursue your case, there’s no fee unless we win.

Frequently Asked Questions

The SEC’s whistleblower program pays eligible whistleblowers a reward of between 10 and 30 percent of the sanctions collected in cases over $1 million, when they voluntarily provide the SEC with high-quality original, timely, and credible information and assistance.

There are many violations covered under the SEC’s whistleblower program. This includes ponzi or pyramid schemes, theft or misuse of securities, market manipulation, insider trading, abusive naked short selling, misleading financial statements, bribery, and cryptocurrency fraud.

Payouts are determined by the quality of information provided to the SEC in the original whistleblower claim submission, and how it aided in the investigation. However, payouts are determined by many factors, such as the timeline in which the information was brought to the SEC, your role in the fraud or scheme, whether you benefited from it, and more.