Skip to Content

Whistleblowers Under The SEC Whistleblower Rules & Employer Retaliation Protection

Whistleblowers & The SEC Whistleblower Program

This article addresses how whistleblowers under the SEC Whistleblower Program are protected from being discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against, because he or she reported a violation internally and/or to the Securities and Exchange Commission ("Commission" or "SEC").

Types of Fraud SEC Whistleblowers Can Report

Section 21F of the Securities Exchange Act of 1934 ("Exchange Act") (15 U.S.C. 78u-6), entitled "Securities Whistleblower Incentives and Protection," requires the Commission to pay awards, subject to certain limitations and conditions, to whistleblowers who provide the Commission with original information about violations of the federal securities laws.  The SEC Whistleblower Program was not established for whistleblowers to report to the Commission fraud against the government, which is the subject of the False Claims Act.  Instead, SEC whistleblowers are to report violations of federal securities laws, violations of the rules of a self-regulatory organization (such as FINRA) or violations of the Foreign Corrupt Practices Act (which concerns allegations related to bribery of foreign officials).

SEC Whistleblower Monetary Awards

Whistleblowers may receive at least 10 percent and no more than 30 percent of the monetary sanctions that the Commission and the other authorities are able to collect. 17 CFR 240.21F-5.  To be eligible to receive an award, a whistleblower is not required to report the violations internally at the Company where he or she is employed, although if a whistleblower does  report internally, he or she must report the information to the Commission within 120 days thereafter to be eligible for an award.  The award may be increased if the violations were, in fact, reported internally.  In the Frequently Asked Questions of the SEC Whistleblower website, the Commission specifically states that the award may be increased depending, among other factors, "Whether, and the extent to which, you participated in your company's internal compliance systems, such as, for example, reporting the possible securities violations through internal whistleblower, legal or compliance procedures before, or at the same time, you reported them to us."[1]. Read more here about Whistleblower Payouts under the Dodd-Frank Act by clicking here.

How Whistleblowers are Protected by Employer Retaliation

There is always the risk that a whistleblower's employment will be terminated if he or she reports internally or if it becomes discovered that he or she reported to the SEC.  In response to this risk, the SEC whistleblower provisions of Dodd-Frank specifically protect whistleblowers from retaliation. Read further about the Anti-Retaliation Protection here.

Types of Retaliation Protection for being a Whistleblower

For any type of retaliation for: (1) reporting to the Commission, (2) assisting the Commission in any investigation, or (3) proceeding based on the information reported or making disclosures that are required or protected under any law, rule, or regulation subject to the jurisdiction of the Commission (including the Sarbanes-Oxley Act of 2002 [2]), the SEC whistleblower provisions of Dodd-Frank protect whistleblowers from retaliation (including being discharged) in two ways.  See Section 21F(h)(1) of the Exchange Act (15 U.S.C. 78u-6(h)(1))

Whistleblower Protection under Dodd-Frank

  1. First, a whistleblower who has been retaliated against in violation of Dodd-Frank may bring his own private action in federal district court. See Section 21F(h)(1) of the Exchange Act (15 U.S.C. 78u-6(h)(1)(B)(1)) The Statute of Limitations is 3 years from the date of the retaliatory action.  An employer that is found liable will be ordered to reinstate the employee to the position previously held, or to a similar position.  Additionally, the employer may be required to compensate the employee for two times the back pay. The employee also may be entitled to compensation for expenses incurred during the litigation process, such as witness' and attorneys' fees and other costs
  2. Second, the SEC can bring its own enforcement action against a company for retaliatory action against a whistleblower.  Rule 240.21F-2(b)(2)  To date the SEC has not done so, and it is unclear whether it will in the near future because it is overburdened and because Dodd-Frank allows the whistleblower to bring his own action in federal court.

When preparing a SEC Whistleblower submission, the prevailing wisdom is to keep the focus in the filing on the Company's misconduct, but to state that the Complainant was retaliated against by the Company because he or she made internal complaints and brought the violations to light, and that additional information on this issue is available upon request.

SEC Whistleblower Fraud Lawyers & Attorneys at Law

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:
Why be a Whistleblower?
SEC Whistleblower Statute: Section 922 of the Dodd-Frank Act
Immunity and Protection for Whistleblowers
Federal And State Whistleblower Laws
Whistleblower & False Claims Act Blog at bergermontague.com

[1] http://www.sec.gov/about/offices/owb/owb-faq.shtml#P13_4032, FAQ #13.

[2] Under the Sarbanes-Oxley Act of 2002(SOX), protected disclosures include disclosures that relate to securities fraud, bank fraud, wire fraud, or violation of "any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders."  18 U.S.C. § 1514A.  Disclosures, reports, or complaints should be made to a person with supervisory authority over the employee, or to other persons working for the employer who have the authority to investigate, discover, or terminate misconduct. 18 U.S.C. § 1514A(a)(1)(C).

If you have discovered evidence of government fraud, contact an experienced False Claims Act attorney before blowing the whistle. You may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys of Berger & Montague are nationally recognized experts in Whistleblower/Qui Tam actions with over a decade of experience pursuing these complex fraud cases. For more information or to schedule your confidential consultation, use the form on this page or call us at 1-800-424-6690.

Contact For More Information (Green)

View Disclaimer here.

Here is our Google+ Profile!