All You Need to Know about the SEC Whistleblower Program

The SEC whistleblower program was initiated to allow for eligible whistleblowers to get rewards for providing information that leads to enforcement of SEC actions. The whistleblower was enacted by the congress to help the government fight violation of security laws as well as financial fraud. Since the establishment of the SEC Whistleblower office, many investment fraud schemes have been uncovered. Additionally, it has haltered fraud considerably. With more than 22,000 tips, $1.5 billion have been earned through SEC information actions as wrongdoers’ monetary sanctions. Out of the $1.5 billion, $322 million has been paid to whistleblowers as awards.

Fundamentals

Markets have been permeated with corporate scandals in the wake of the global financial crisis. Private individuals had to come to salvage the situation as law enforcement couldn’t watch the marketplace efficiently on their own. In 2010, the SEC Whistleblower program came into existence with the aim to provide monetary awards, employment protections as well as anonymous reporting.

Eligibility

You are eligible to participate in this program regardless of citizenship with a few exclusions or qualifications. Employees are now empowered to report on misconduct without fear of retaliation. This is because they can report anonymously.

Anonymous reporting

Anonymous reporting had to be allowed to enable law enforcement as well as regulatory authorities to get actionable intelligence. To be able to report anonymously, you should have a SEC Whistleblower advocate who will represent you. The attorney will have a copy of your submission which is signed as required by law. The advocate or rather attorney will authenticate your identity and submit the information to the SEC. Essentially, he or she will act as an intermediary between you and the SEC. He will push for the highest possible monetary reward in the event of a successful enforcement action.

Employment protections

Before the enactment of the SEC whistleblower law, employees found it difficult to report on securities violations. The concerns surrounding loyalty, being a team player and security made employees hold back from blowing the whistle on their employers. This program came to level the playing field.

The law protects employees from any kind of retaliation from employers in case they blow the whistle. It entirely protects an employer regardless of authenticity of the securities violations allegations. It doesn’t matter if the information could lead to a successful enforcement action. If an employee believes that an employer is retaliating against him or her for tipping the authorities, the employee has a right to immediately initiate a lawsuit against the employer in a federal court. The employee can receive the following remedies upon a successful lawsuit; double back pay with interest, attorney fees, reinstatement and other litigation expenses.

Monetary rewards

The total penalties associated with SEC enforcement actions exceeds $1 million. A whistleblower is entitled to between 10% and 30% of the proceeds gained from SEC enforcement actions. A whistle blower is entitled to other additional awards including monetary rewards from monetary sanctions received from other law enforcement actions as well as regulatory organizations. The rewards are dependent on the significance of information provided, the interest of law enforcement to make an award, the assistance provided as well as participation in internal reporting systems. Some of the factors that could reduce an award include whistleblower delay to report, interference with reporting systems and international compliance as well as whistleblower culpability.