Securities and Exchange Commission Whistleblower Statute
In response to the global financial crisis in 2008, Congress
passed financial reform legislation known as the Dodd-Frank Act in 2010,
which came into effect in August 2011. In addition to the
sweeping new financial regulations, the Dodd-Frank Act contained
whistleblower provisions to encourage and incentivize any natural
person (not companies or entities) to report securities violations
and expanded the protections for whistleblowers, which were in
place under the Sarbanes-Oxley Act.
SEC Whistleblower Act Originality Requirement
The information provided to the SEC must be "original."
This requirement is met when the information a) is derived
from the independent knowledge or analysis of a whistleblower; b)
is not known to the SEC from any other source; and c) is not
exclusively derived from an allegation made in a judicial
administrative hearing, government report, hearing, audit, or
investigation, or from the news media, unless the whistleblower is
a source of the information.
SEC Whistleblower Rewards
In order for whistleblowers to be eligible for SEC whistleblower
awards, the information provided must result in a
monetary recovery that exceeds $1,000,000, and
whistleblowers are entitled to anywhere from 10% to 30% of
the recovered amount. However, certain individuals
are barred from receiving a reward. If an individual has a
legal or contractual duty with the government to report
information to the SEC, then he/she would be precluded from
receiving a reward. Additionally, the SEC will generally not
grant rewards to attorneys, accountants , personnel with compliance
related duties, foreign officials, or whistleblowers obtaining
information through commission of a crime.
The SEC Whistleblower Act beefs up anti-retaliation
provisions of the False Claims Act by making retaliation
its own right of action for employees who have been retaliated
against, without regard to any other allegations of securities fraud
violations. Additionally, whistleblowers are
protected by these provisions if they report a "facially plausible"
relationship to a securities law violation, not a "material"
violation. The rationale behind adopting this liberal approach is
to incentivize whistleblowers to come forward, rather than screen
themselves out because they are unsure about securities law.
The SEC Whistleblower Act
provides special protection for financial services employees who
might suffer retaliation, applying a wide scope of coverage over
organizations that have any connection to providing consumer
financial products or services. Remedies include
reinstatement, back pay, compensatory damages, as well as
attorneys' fees and litigation costs.
Contact Us To Learn More
We invite you to learn more from our Whistleblowers,
Qui Tam & False Claims Act Practice Group. 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:
Provision of the False Claims Act
Life of a Qui Tam Lawsuit and Why You Want the Government to
What is the False Claims
SEC Prepare for Whistleblower Payouts and Monetary Awards under
Dodd Frank Act
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