In the summer of 2010, as the financial markets shattered, Congress passed an overhaul of the financial regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act includes a whistleblower provision, which provides financial compensation for individuals who provide the Securities Exchange Commission (SEC) with “original information” regarding violations of securities laws.
The attorneys at Gana Weinstein LLP have handled SEC Whistleblower complaints since the inception of the program. We have represented portfolio managers and internal compliance officers in successfully disclosing violations of the securities laws to the SEC. Whistleblowers need experienced attorneys to help navigate the complex SEC Whistleblower program as compensation is awarded based on the degree of assistance you and your attorney provide to the SEC. We can guide whistleblowers through the program so that they can simply disclose the necessary information to the SEC.
Below, we answer many of the questions you may have about the SEC Whistleblower program
Who Can File a Whistleblower Complaint with the SEC?
Any individual, or two or more individuals acting together, may provide information to the SEC relating to the violations of securities laws.
What Information does the Whistleblower have to Provide to the SEC?
The whistleblower must provide the SEC with “original information.” Original Information means any information that is derived from your independent knowledge or analysis; is not known to the SEC from any other source; and is not exclusively derived for an allegation made in an administrative or judicial hearing, government report, hearing, audit, or investigation or from the news media unless you, as the whistleblower, are the source of that information.
How Does the SEC Decide to Prosecute the Claim?
The SEC does not disclose how it determines what claims it will prosecute. An experienced attorney can help you navigate the complexities of the whistleblower program to maximize your chance of recovery.
What Steps Will the SEC take if it Decides to Prosecute the Claim?
If the SEC prosecutes the whistleblower’s claim, the SEC can either file a judicial claim in the federal courts or bring an administrative hearing. However, the whistleblower will be eligible for payment only if the judicial claim or the administrative proceeding results in monetary sanctions against the violating entity in excess of $1,000,000.
How Much Compensation Can the Whistleblower Expect to Receive?
The whistleblower may be eligible for compensation if the SEC collects “monetary sanctions” in excess of $1,000,000. Monetary sanctions include any money recovered from penalties, disgorgement, and interest. If the SEC collects monetary sanctions, it will pay awards to one or more whistleblowers who voluntarily provided original information that led to the successful prosecution of the case. The award can range from ten to thirty percent of the total monetary sanctions.
What are the Criteria for Determining the Award to the Whistleblower?
The SEC will consider the significance of the information provided by the whistleblower to the success of the judicial or administrative proceeding, the degree of assistance the whistleblower and his/her legal counsel provide to the SEC, and the interest in preventing future violations of the securities laws.
If the Whistleblower Provides Information to the SEC, is the Whistleblower Guaranteed Payment?
No. First, the SEC must collect over $1,000,000 in monetary penalties. Second, the whistleblower may not be entitled to compensation if the whistleblower is an employee of a regulatory agency, the department of justice, a self-regulatory agency (like FINRA), a law enforcement organization, or the Public Company Accounting Oversight Board. Additionally, the whistleblower may not be entitled to compensation if he/she has been convicted of a crime in connection with the SEC’s judicial or administrative action, gained information through an audit of a company’s financial statements, or failed to submit the information according to the SEC’s required form.