Under the Dodd-Frank Act and SEC rules, an employer may not discharge, demote, suspend, harass, or in any way discriminate against an employee who reported potential securities law violations to the SEC. The Dodd-Frank Act also prohibits employers from taking any action to impede an individual from contacting the SEC about possible securities law violations.
In order to protect whistleblowers from retaliation, the SEC also offers strong confidentiality protections to individuals. The agency does not reveal identifying information about whistleblowers in response to Freedom of Information Act requests or publicly released documents. Whistleblowers may even make a disclosure anonymously if they file with the assistance of an SEC whistleblower attorney.
The SEC may take legal action against employers who retaliate against whistleblowers. Individuals who have faced retaliation may also sue their employer in federal court to gain double back pay (with interest), reinstatement, and attorneys’ fees.
Under the Dodd-Frank Act, an employer may not discharge, demote, suspend, harass, or in any way discriminate against an employee who reported potential securities law violations to the SEC
In order to qualify for Dodd-Frank Act anti-retaliation protections, a whistleblower must have made a disclosure to the SEC “in writing” before facing retaliation
A whistleblower who has experienced retaliation may file suit against their employer seeking double back pay (with interest), reinstatement, and attorneys’ fees
The SEC also pursues enforcement actions against companies who retaliate against whistleblowers or interfere with employees’ ability to blow the whistle to the SEC
One of the SEC’s most powerful anti-retaliation protections is confidentiality. An individual can even blow the whistle anonymously with the aid of an SEC whistleblower attorney
Forms of Retaliation
Retaliation against whistleblowers can take many forms. Section 992 of the Dodd-Frank Act specifically states that employers may not “discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against a whistleblower in the terms and conditions of employment.”
While retaliation is often drastic and clear, such as termination or suspension, it can entail other subtler actions. For example, an employer may change a whistleblower’s job duties in retaliation for blowing the whistle or exclude a whistleblower from certain meetings. Retaliation can also be a negative performance review or passed up for a job promotion or raise. Other forms of harassment, ostracization, and mocking can also be retaliation.
Furthermore, SEC Rule 21F-17(a) prohibits employers from “imped[ing] an individual from communicating directly with the Commission staff about a possible securities law violation.” This rule includes the use of restrictive nondisclosure or confidentiality agreements.
Qualifying for Anti-Retaliation Protections
To be protected from whistleblower retaliation under the Dodd-Frank Act, a whistleblower must have made their disclosure to the SEC “in writing” before experiencing retaliation. Meaning whistleblowers who blow the whistle internally are not protected unless they also formally file a whistleblower disclosure with the SEC. Consulting an experienced SEC whistleblower attorney before filing a Form TCR with the SEC is the best way for an individual to ensure that they are fully protected.
Employees who face retaliation for blowing the whistle may file a lawsuit against their employer in federal court. The Dodd-Frank Act established a lengthy statute of limitations to protect whistleblowers better. Individuals have six (6) years from the date of the retaliatory act to file a suit.
When a whistleblower is successful in court they may be entitled to a wide range of relief. This relief may include reinstatement with the same seniority status, two times the amount of back pay with interest, compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.
Actions Taken by the SEC Against Retaliatory Companies
In addition to a whistleblower’s private right of action, the SEC may pursue enforcement actions against employers who retaliate against whistleblowers. The agency has sanctioned several companies over the past decade for retaliating against whistleblowers and impeding individuals’ ability to blow the whistle to the SEC.
In 2014 the SEC brought charges against a company for whistleblower retaliation for the first time. Paradigm Capital Management and its own Candace Weir agreed to pay $2.2 million to settle the charges. The SEC alleged that Paradigm retaliated against a whistleblower by removing them as a head trader, changing their job function, stripping them of supervisory responsibilities, and otherwise marginalizing them.
In 2022, the SEC charged Brink’s Company with impeding the ability of employees to blow the whistle to the SEC. The SEC alleged that Brinks used language in confidentiality and nondisclosure agreements that restricted whistleblowing.
To protect whistleblowers from retaliation, the SEC also offers strong confidentiality protections to individuals who disclose securities violations. As described in SEC Rule 21F-7, “will not disclose information that could reasonably be expected to reveal the identity of a whistleblower.” This rule means that the SEC does disclose whistleblowers’ identities in response to Freedom of Information Act requests or published whistleblower award determinations. In some instances, however, the SEC is required to disclose certain information during administrative or court proceedings.
To better protect their identity, whistleblowers may blow the whistle anonymously to the SEC. The SEC requires a whistleblower to hire a whistleblower attorney to blow the whistle anonymously. By doing so, a whistleblower’s attorney may then file the whistleblower’s disclosure, in the form of a TCR, to the SEC. However, to claim a whistleblower award, a whistleblower must reveal their identity to the SEC.
Each year the U.S. Securities and Exchange Commission (SEC) Office of the Whistleblower releases an Annual Report to Congress detailing the activities of the highly successful SEC Whistleblower Program. The annual report for the 2022 Fiscal Year (FY 2022), which ended on September 30, reveals that the SEC Whistleblower Program had a record-setting fiscal year. The SEC received a record 12,300 whistleblower tips in FY 2022 and issued 103 whistleblower awards totaling approximately $229 million. Here are some key takeaways from the report: SEC Whistleblower Program Continues Success of Record-Shattering FY 2021 “Fiscal Year (FY) 2022 continued to build on the record-breaking success of FY 2021 for the U.S. Securities and Exchange Commission’s Whistleblower Program,” the report begins. In fact, FY 2021 was not just a record-breaking year but a record-shattering one. That year, the SEC received a record 12,200 whistleblower tips and issued a record $564 million in whistleblower awards to a record 108 individuals. Over the course FY 2021, the whistleblower program issued more awards than in all previous years combined. The SEC Whistleblower Program’s Annual Report for FY 2022 shows that FY 2021 was not a fluke. In FY 2022 the SEC received a new record 12,300 whistleblower tips. It also once again issued over 100 whistleblower awards. While the overall monetary amount awarded to whistleblowers dipped, the difference can almost entirely be attributed to two $100 million-plus awards issued by the ...
On November 28, the U.S. Securities and Exchange Commission (SEC) issued a $20 million whistleblower award to an individual whose disclosure contained “new and critical information that led to the success of an enforcement action,” according to the SEC. "Today’s whistleblower played a crucial role in the ultimate success of the enforcement proceeding," said Creola Kelly, Chief of the SEC’s Office of the Whistleblower. "Whistleblowers can help advance existing investigations in meaningful ways when their information saves the agency time and resources, and when their contributions allow SEC staff to better understand complicated issues." Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the SEC with original information that leads to a successful enforcement action, are entitled to an award of 10-30% of the sanctions collected by the SEC in the case. The SEC weighs a number of factors in determining the exact percentage to award a whistleblower. In this case, the SEC “considered that the whistleblower provided significant information and continuing assistance that helped Enforcement Division staff more quickly and efficiently investigate complex issues,” according to the agency’s press release. However, according to the award order, the SEC also negatively assessed the facts that the whistleblower “was involved for a short period and at the direction of his/her supervisor in the conduct underlying part of the Covered Action” and “delayed reporting for over two years after being ...
The U.S. Securities and Exchange Commission (SEC) Whistleblower Office’s Annual Report to Congress for the 2022 Fiscal Year details a record fiscal year for the agency’s highly successful whistleblower program. During the 2022 Fiscal Year, the SEC Whistleblower Program received 12,300 whistleblower tips and issued 103 whistleblower awards totaling $229 million. This was the most whistleblower tips received by the program in a fiscal year and the second-highest amount of money awarded by the program in a fiscal year. "The SEC's whistleblower program continues to be a model of success,” said whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. “Investors and taxpayers are the biggest winners. Fraudsters are the biggest losers. Congratulations to the hard working staff at the Whistleblower Office." “The significant increase in the number of whistleblower tips and awards since the program’s inception shows that the program, with its enhanced confidentiality protections, is effectively incentivizing whistleblowers to make the often difficult decision to come forward with information about potential securities-law violations,” said Creola Kelly, Chief of the Office of the Whistleblower. “Regardless of whether a whistleblower is a corporate insider, a main street investor, or an unrepresented claimant, the Commission vigorously safeguards their identity while rewarding eligible individuals who identify bad actors in our markets.” The record number of whistleblower tips received by the SEC in the 2022 Fiscal Year cover a wide-range of types of securities fraud. According to the report, ...
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