SEC Whistleblowers

R Scott Oswald
PRO

Written by

Employment / Labor Attorney - Washington, DC

Posted August 03, 2010

Can a whistleblower recover a reward for disclosing fraud to the SEC?

Section 922 of the Dodd-Frank Act authorizes the SEC to pay a reward to a whistleblower who voluntarily discloses original information covering fraud or unlawful activity, leading to a sanction exceeding $1 million. Penalties, disgorgement, and interest paid count towards the $1 million threshold.

How much is the reward?

The amount of the reward is at the discretion of the SEC, but ranges from 10 to 30 percent of the amount recouped by the SEC. Factors the SEC will consider to determine the amount of the reward include the significance of the information provided by the whistleblower, the degree of assistance provided by the whistleblower, the interest in the SEC in deterring violations of securities laws, and other factors that the SEC may establish by rule or regulation.

What constitutes "original information?"

Original information means information that is: (1) derived from the independent knowledge of the whistleblower; (2) not known to the SEC from any other source, unless the whistleblower is the original source of the information; and (3) not exclusively derived from an allegation made in a judicial or administrative hearing, a government report, audit, or investigation, or the news media, unless the whistleblower is a source of the information.

What restrictions are there on receiving a whistleblower reward from the SEC?

The SEC is prohibited from granting a reward to a whistleblower who is convicted of a crime related to the judicial or administrative action for which the whistleblower provided information; who gains the information by auditing financial statements as required by law; who fails to submit information to the SEC as required by a SEC rule; or who is an employee of the Department of Justice or an appropriate regulatory agency, a self-regulatory organization, the Public Company Accounting Oversight Board, or a law enforcement organization.

Are employees who blow the whistle to the SEC protected from retaliation?

Section 922 prohibits an employer from terminating or discriminating against an employee who discloses information about fraudulent or unlawful conduct to the SEC or assists in a SEC investigation or judicial or administrative action related to the whistleblower's disclosure.

What acts of retaliation are prohibited?

Section 922 prohibits a broad range of adverse employment actions, including termination, demotion, suspension, threatened adverse employment actions, harassment, and any conduct that would dissuade a reasonable employee from whistleblowing.

What remedies are available?

A prevailing employee may receive: (1) reinstatement; (2) double back pay with interest; and (3) attorney fees and litigation costs, including expert witness fees.

Are Section 922 claims subject to mandatory arbitration?

Section 922 whistleblower retaliation claims are exempt from mandatory arbitration agreements.

Where do Section 922 whistleblowers file their claims?

Section 922 whistleblowers can bring a claim directly in federal court either within 6 years of the date of the violation occurring or within 3 years of when the employee should have known of the violation, but no later than 10 years after the date on which the violation occurred.

Additional Resources

Securities and Exchange Commission

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About this lawyer

R Scott Oswald
PRO
R Scott Oswald has been practicing law for 17 years and has been on Avvo since 2008.

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