You should consult with an experienced securities fraud lawyer before going to the SEC. An attorney will assist you in evaluating the merits of the alleged violation and guide you through the process. Below is a guide that I published on this topic.
Under the the Dodd-Frank Act Whistle-Blower 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.
Legal Information is Not Legal Advice My answer provides information about the law based on the limited information provided in the questions asked and is not intended to provide legal advice or opinions, and does not constitute an attorney-client relationship. The answer to the question is for educational and informational purposes only. The law differs in each jurisdiction and may be interpreted or applied differently depending on the jurisdiction or situation. Accordingly, I highly recommend that you consult with an attorney to discuss the details of your problem so you can get legal advice tailored to your particular circumstances.
There is no question that whistleblowers often reap a rough course, many times more than they bargained for. You can Google this subject and read some very compelling reportage about what has happened in some very critical cases. That said, it is largely a matter of individual conscience.
You might want to talk with a lawyer in confidence. An attorney may be able to identify some alternatives to full-on whistle-blowing -- such as an anonymous report (allowed by certain agencies in certain circumstances), or another means of causing the info to be directed where it should go. It may even be that your info would not rise to that level and then you will not need to feel anxious about the situation one way or another.
My responses to questions on Avvo are never intended as legal advice and must not be relied upon as legal advice. I give legal advice only in the course of an attorney-client relationship. Exchange of information through Avvo's Questions forum does not establish an attorney-client relationship with me. That relationship is established only by individual consultation and execution of a written agreement for legal services.
Since the Maddoff case, things have changed significantly. A new law was passed that established a separate office within the SEC's Washington DC headquarters to handle whistleblower claims, and the SEC now has a fund of over $400 million that it intends to use solely to pay awards to whistleblowers. If you hire an attorney, the attorney can submit the information to the SEC anonymously, and still preserve your right to an award. And an attorney knowledgeable about the workings of the SEC can help bring the SEC's focus to your issues. Accordingly, given what you state in your inquiry, I would suggest that you contact an attorney knowledgeable about the handling of whistleblower claims. The attorney can give you more specific advise once he or she knows more about the situation.
Notwithstanding the merit of any case brought by a "whistleblower" under Dodd-Frank, a primary objective of the SEC is to pursue those cases where investor interests are best efficiently served. This being the case, whomever you contact as your attorney will not only have to submit the paperwork needed, but will also need to obtain an audience with the SEC and/or others to fully explain the import of the matter you're bringing to them. The matter needs to be conveyed as important. You must educate the regulators on novel factual and legal issues that may cause them to not pursue the matter. And the dialogue with your attorney and SEC needs to be ongoing. As one can surmise, the SEC has limited resources and must choose its battles carefully.
In the interim, you may consider contacting your state securities regulator, who can likely act in a more nimble fashion than the SEC. You may not be getting a "whistleblower" award, but you will bring the wrongdoing to people who can stop the conduct quickly.
The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.