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SEC Prepares for Whistleblower Payouts under Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act

With the passage of the Dodd-Frank Act in 2010, whistleblowers are now incentivized to report securities fraud to the Securities and Exchange Commission (SEC).  Under Dodd-Frank, whistleblowers are protected against retribution from the company and may recover 10-30% of the fines levied against the company if the fines exceed $1 million.  Prior to this Act, few whistleblowers would risk their livelihoods to report securities fraud.

What Happens when a Whistleblower "Blows the Whistle?"

When a whistleblower files a complaint with the SEC, the SEC investigates the alleged fraud (e.g., financial statement fraud, insider trading, violation of the Foreign Corrupt Practices Act). In order to keep SEC investigative costs down, whistleblowers may report to the company and the SEC at the same time.  This allows the company to investigate and disclose to the SEC. Because securities investigations are often difficult and resource-consuming, this allows the SEC to devote its resources efficiently.

What Whistleblowers Should Expect

The Dodd-Frank Act should result in uncovering and punishing a significant amount of fraud (and hopefully deterring future fraud).  The first payments to whistleblowers under the Act are expected to be made soon.  Reports of fraud are expected to balloon soon after these first payments are awarded.  Reporting alone has already garnered high numbers, with over 300 reports from 37 states during the first 7 weeks after Dodd-Frank took effect.  However, the numbers should dramatically increase once potential whistleblowers realize that the Act's incentives actually work.

Different Types of Whistleblower Fraud

Contact Us To Learn More

We invite you to learn more from our qui tam whistleblower law firm. For more information or to schedule a confidential discussion about a potential whistleblower case, please fill out the form on the right. You can also call us at (215) 875-4699.

For further reading:
Anti-Retaliation Provision of the False Claims Act
Life of a Qui Tam Lawsuit and Why You Want the Government to Intervene?
What is the False Claims Act?
What is Qui Tam Law?

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