Whistleblowers who report securities law violations are entitled to a reward if the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) or any other government entity recovers funds as a result of the whistleblower’s information.
The financial overhaul law, known as the Dodd-Frank Wall Street Reform and Protection Act, contains provisions that create SEC and CFTC whistleblower reward programs. The new SEC whistleblower program is much broader than a predecessor SEC whistleblower program, which just covered insider trading violations. Now whistleblowers who report securities law violations – from insider trading to money laundering to violations of the Foreign Corrupt Practices Act — will receive a reward if the SEC and any other government authorities recover more than $1 million based on that information. The Dodd-Frank law establishes a similar whistleblower reward program for the CFTC.
Here are the main aspects of the new whistleblower programs as provided in the financial overhaul law:
- Whistleblower rewards: 10 percent to 30 percent of the monies the SEC, CFTC and other prosecuting authorities collect based on the whistleblower’s information if more than $1 million is collected. The law says certain factors will be considered to determine the whistleblower’s reward:
- The significance of the information provided.
- The assistance provided by the whistleblower and the whistleblower’s attorney.
- The “programmatic interest” of the SEC “in deterring violations of the securities law.”
- Job protection: The law specifically states that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. Whistleblowers who suffer from employment retaliation may sue for reinstatement, back pay and any other damages that occurred.
- Confidentiality: Whistleblowers may report fraud anonymously, as long as they have retained a lawyer to represent them. In some cases, their identities may remain unknown even to the SEC and the CFTC until the time comes for the payment of a reward. This is the strongest confidentially provision available out of any of the federal whistleblower programs, including “qui tam” cases under the False Claims Act and the Internal Revenue Service (IRS) whistleblower program. See “Can the SEC Be Trusted to Protect a Whistleblower’s Identity?” written by Phillips & Cohen partner Erika A. Kelton.
The SEC has issued regulations for the SEC whistleblower reward program, and the CFTC’s whistleblower regulations are also available.
If you are aware of any securities or tax law violations and would like to discuss the SEC, CFTC or IRS whistleblower programs, please contact us.
Foreign Corrupt Practices Act Violations
Whistleblowers could receive sizeable rewards through the Securities and Exchange Commission’s whistleblower reward program for providing the government with information about violations of the Foreign Corrupt Practices Act (FCPA).
The FCPA prohibits U.S. companies and individuals from paying money or any other sort of inducement to a foreign official to influence a decision or action affecting that company’s business.
The SEC and the Department of Justice, which jointly enforce the anti-bribery law, recently have become much more aggressive about pursing foreign bribery cases. Corporations have paid huge sums to settle FCPA cases. Siemens Corp. set a record when it paid $800 million to settle an FCPA case. Whistleblowers are entitled to 10 percent to 30 percent of the amount recovered in FCPA cases, which means they could be rewarded with millions of dollars, depending on the settlement amount.
Congress passed the Foreign Corrupt Practices Act in 1977, partially as a result of two separate cases against Northrop Corp. and Phillips Petroleum brought by one of Phillips & Cohen’s founding partners and his public interest law firm that exposed the use of corporate funds to pay bribes in foreign countries.
For more details about the FCPA’s anti-bribery provisions, see the SEC’s “Layperson’s Guide” to the FCPA.
If you would like to discuss your potential case involving an FCPA violation or other securities law violations, Please click here.