How Information Can Lead to a Successful SEC Enforcement Action

For a whistleblower to be eligible for an award, their information must “lead to” a successful enforcement action by the SEC. This means the information provided must be sufficiently specific, credible, and timely to cause the SEC to:

• Commence an examination, in situations where the SEC was not previously aware of the potential violation.
• Open or reopen an investigation, if the SEC had not already initiated a probe into the potential violation.
• Inquire about new forms of misconduct, which may be part of an ongoing examination or investigation but was not previously known to the SEC.

Furthermore, the information provided must result in a successful enforcement action in which the SEC obtains monetary sanctions exceeding $1 million.

To better understand this process, let’s break down the key factors that determine if the information provided by a whistleblower “leads to” a successful enforcement action:

• Specificity: The information provided must be concrete and detailed enough to allow the SEC to understand the nature of the potential violation and pursue an enforcement action. General or vague allegations may not meet this standard.
• Credibility: The credibility of the whistleblower and the information they provide is crucial. This includes whether the whistleblower has a reasonable basis for their claims, whether the information can be corroborated, and the overall reliability and accuracy of the information.
• Timeliness: The information must be provided in a timely manner. Delay in reporting can result in diminished value of the information or even make an enforcement action unfeasible due to statutes of limitation or other legal barriers.
• Value of the Information: The information provided must be of high enough value to the SEC’s enforcement efforts. This means it must contribute significantly to the success of the enforcement action. For instance, if the information allows the SEC to obtain evidence it otherwise couldn’t have obtained, it is likely to be considered valuable.

While the whistleblower’s role doesn’t necessarily have to extend beyond providing the initial tip, further involvement can strengthen the case and potentially increase the chances of a successful enforcement action. This might involve providing additional information or documents, assisting in deciphering complex financial transactions, or testifying as a witness in proceedings

The SEC Whistleblower Program has been instrumental in uncovering numerous securities law violations, helping to ensure the integrity and fairness of U.S. financial markets. Understanding what it means for a whistleblower’s information to lead to a successful enforcement action is crucial for those considering reporting a potential violation.

By providing specific, credible, and timely information that results in a successful enforcement action with over $1 million in sanctions, whistleblowers have a unique opportunity to contribute to law enforcement efforts and potentially receive a significant financial reward.

Remember, the SEC Whistleblower Program is designed to encourage and protect those who come forward with valuable information about potential securities law violations. If you have such information, consider reaching out to an experienced securities law attorney who can help guide you through the reporting process and ensure your rights are protected