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SEC Whistleblower Program Overview: Qualifying for Rewards

SEC Whistleblower Rewards - Kohn, Kohn & Colapinto LLP

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.

SEC Whistleblower Reward Eligibility Requirements

“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:

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

The Dodd-Frank Act prohibits employers from retaliating against individuals who provide information to the SEC or assist the agency. Whistleblowers who experience job retaliation can sue for reinstatement, double back pay, and other damages. Retaliation may include discharging, demoting, harassing, suspending, or discriminating against a whistleblower for assisting the Commission in an investigation.

The SEC also has the authority to take enforcement actions against companies that retaliate against employees for reporting potential securities law violations. Exchange Act Rule 21F-17(a) prohibits actions that impede an individual from communicating directly with the Commission staff about a possible securities law violation. The SEC has imposed significant fines on companies that have violated the SEC whistleblower statute.

Keep in mind that the Dodd-Frank Act offers a long statute of limitations (up to 6 years) for reporting financial misconduct and reduces rewards for whistleblowers who unreasonably delay reporting a violation.

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.

Our Firm’s Cases

  • SEC Whistleblower

    SEC Dodd-Frank Act Confidential Informant. Protecting the confidentiality of Wall Street whistleblowers is among the most important breakthroughs in federal whistleblower law. Under the Dodd-Frank Act, whistleblowers can file anonymous cases, and everything about their case, including who they sued, remains secret.

    Our SEC whistleblower law firm has prevailed in significant cases, including one of the largest SEC awards granted to date. To maintain the secrecy of this whistleblower, we can only report that he or she obtained a reward within the top-five ever given by the SEC – a whistleblower informant award of over $30 million.

  • SEC Confidential Whistleblower

    Kohn, Kohn & Colapinto represented an anonymous whistleblower, who on May 17, 2021, received a whistleblower award of almost $13.5 million. The SEC Issues More Than $31 Million in Whistleblower Awards related to this case, which involved securities law violations.

    Founding partner KKC Stephen M. Kohn commended this whistleblower for his or her courage, perseverance, and determination for speaking out against the fraudster. The whistleblower was compensated for the years of sacrifice and suffering, and will continue seeking full justice.

    Awards such as these further demonstrate that the Dodd-Frank Act whistleblower laws covering securities, commodities and foreign bribery crimes work. They deter crime, put fraudster in jail, recover billions for investors, and protect the integrity of the markets. The SEC has created the safest reporting system ever devised to incentivize the disclosure of fraud.

Additional Resources

  • January 30, 2023

    On January 30, the U.S. Securities and Exchange Commission (SEC) awarded $1 million to a whistleblower whose “tip was the initial source of the underlying investigation and caused the opening of the investigation,” according to the award order. Qualified SEC whistleblowers are entitled to monetary awards through the SEC Whistleblower ...

  • January 24, 2023

    On January 24, the U.S. Securities and Exchange Commission (SEC) issued a $28 million award to joint whistleblowers who alerted the agency to ongoing fraud, allowing the SEC to return millions of dollars to harmed investors. Qualified SEC whistleblowers, individuals who voluntarily disclose original information that contributes to the success ...

  • January 19, 2023

    On January 19, the U.S. Securities and Exchange Commission (SEC) awarded $18 million to three whistleblowers who separately made disclosures which contributed to the success of  the same enforcement action. The whistleblowers’ voluntary disclosures led to millions of dollars being returned to harmed investors. Qualified SEC whistleblowers, individuals who voluntarily ...

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.

A Message from SEC Chair Gensler