Under the new law, entitled "Securities Whistle-Blower Incentives and Protection," when information from the whistle-blower leads to a settlement, the SEC is required to pay the whistle-blowers between 10% and 30% of money recovered by the SEC.
How do I qualify as a whistle-blower under the Dodd-Frank Act?
To qualify as a whistle-blower, you must voluntarily provide original information to the SEC that leads "to the successful enforcement of [a] covered judicial or administrative action" In other words, if you provide information in response to an SEC subpoena or in some other manner that is involuntary, you may not qualify as a whistle-blower.
What type of information is considered "original" under the Dodd-Frank Act?
Under the Dodd-Frank Act, the information provided by the whistle-blower must be "original." In this regard, the Dodd-Frank Act provides:
"The term 'original information' means information that is derived from the independent knowledge or analysis of a whistle-blower is not known to the [SEC] from any other source, unless the whistle-blower is the original source of the information; and is not exclusively derived from an allegation made in a judicial or administrative hearing or investigation or from the news media, unless the whistle-blower is the source of the information."
How will the SEC determine the value of the monetary award to a whistle-blower?
If you qualify as a whistle-blower under the Act, the SEC is required to pay an award between 10% and 30% "of what has been collected of the monetary sanctions imposed in the [SEC] action."
The amount of any whistle-blower award is determined at the discretion of the SEC. The Act gives some guidance as to the criteria that the SEC should use in determining whether to award a whistle blower 10% or 30% of a recovery. Those factors include: (1) "the significance of the information provided by the whistle-blower to the success of the [enforcement action;" (2) "the degree of assistance provided by the whistle-blower and any legal representative of the whistle-blower;" (3) " the interest of the [SEC] in deterring violations of the securities laws by making awards to whistle-blowers;" and (4) any "additional relevant factors" that the SEC may establish through promulgation of regulations.
Can I be fired from my job or demoted if I provide whistle-blower information to the SEC about my employer?
No. The Dodd-Frank Act Whistle-Blower law provides new employment protections for people who provide information about violations of the securities laws committed by their employers. Specifically, the Act provides:
"No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, a whistle-blower in the terms or conditions of employment because of any lawful act done by the whistle-blower in providing information to the [SEC]."
Furthermore, the Act gives a whistle-blower a private right of action (i.e., the right to sue) if an employer violates the Act by firing, demoting, threatening or harassing an employee who provides whistle-blower information to the SEC. Whistle-blowers can sue their employer or former employer in federal court. If successful, the whistle-blower can be reinstated to their job with full seniority, receive two times the amount of back-pay they are owed, and reimbursement of attorneys' fees and litigation costs.
Do I need a lawyer to represent me if I want to report securities fraud to the SEC as a whistle-blower?
Yes. A whistle-blower will inevitably face significant challenges in proving that he or she has provided "original information" that qualifies for compensation under the Dodd-Frank Act. In recognition of these challenges, the Dodd-Frank Act specifically contemplates whistle-blowers being represented by private lawyers, and authorizes such lawyers to receive a contingent fee based on the award paid to the whistle-blower by the SEC.
In addition to assisting whistle-blowers prove that they qualify for an award from the SEC, skilled legal counsel may be able to advocate for their client to receive the maximum 30% award. Additionally, the whistle-blower's lawyer may be able to represent the same person in a private securities fraud class action against the company.
What kind of lawyer should I consult with if I think that I may qualify as a whistle-blower?
It is important to consult with an experienced securities fraud lawyer (like your author) before you go to the SEC. An attorney will need to conduct a detailed investigation of your fraud allegations in order to determine whether the federal securities laws have been violated, and whether the information you are able to provide to the SEC is sufficiently "original" to qualify for an award under the whistle-blower program. Additionally, your lawyer will coordinate all of your communications with the SEC in order to protect your right to make a claim for a whistle-blower award.
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Disclaimer: this guide provides general information about the law and is not intended to provide legal advice or opinions, and does not constitute an attorney-client relationship. The law differs in each jurisdiction and may be interpreted or applied differently depending on the jurisdiction or situation. Accordingly, I recommend that you consult with an attorney so you can get legal advice tailored to your particular circumstances.