Common Securities Violations

In 2010, with the United States still dealing with fallout from the economic crisis of 2007-2008, Congress wanted a tighter leash on Wall Street. Out of that concern came the Securities and Exchange Commission’s whistleblower program. With the 2020 Dodd-Frank Act, Congress also created a program at the SEC that creates a substantial financial reward for people who “blow the whistle” on unlawful behavior in the securities industry.

Based on whistleblower programs that have worked elsewhere in federal law for decades, the SEC whistleblower program is set up to incentivize insiders to disclose wrongdoing. It does this through a combination of protecting their anonymity and offering a financial reward. If the information leads to financial sanctions of at least $1 million against the wrongdoer, the whistleblower can be awarded 10% to 30% of that amount. That’s a minimum of $100,000 for doing a public service—protecting investors who might otherwise be defrauded.

The SEC enforces federal securities laws, so it’s interested in anything that violates those laws.

That could include:

• Fraudulent schemes, such as Ponzi or pyramid schemes
• Theft of money or securities
• Insider trading
• Manipulation of investment prices
• Making false or misleading statements about a company, including in SEC filings
• Offering fraudulent or unregulated securities
• Anything else that could be considered fraudulent conduct

Importantly, this information must be “original”—meaning that it’s not already known to the SEC and is not publicly available. It can be insider information not made public, or information based on your own analysis of publicly available information. (Although the classic case is an employee blowing the whistle on their company, you don’t need to be an employee of the company you’re reporting.) The information must also be voluntary. That is, you do not get whistleblower credit for responding to questions from law enforcement or regulatory bodies.

Finally, for you to claim an award, your information must lead or significantly contribute to an enforcement action resulting in monetary sanctions exceeding $1 million.

If you want to be part of the SEC whistleblower program, you must submit information you believe shows a violation of federal securities laws to the SEC’s Office of the Whistleblower, either online or by physical mail. You can do this anonymously, but if you do, you must have an SEC whistleblower attorney available to act as a go-between. The SEC says it will protect your identity as much as possible, but it may need to disclose information in some circumstances, such as in court.

After receiving a tip, the SEC reviews it and assigns it to an enforcement team for investigation, or sends it to the team on an existing investigation. These investigations are confidential and the agency will not comment on them to the public. If you’re not working with an enforcement team, you may still watch for the SEC to post Notices of Covered Action showing that the investigation is final. If you believe you provided information that led to one of these postings, you must submit a form claiming the award within 90 days. The amount of the award depends on how important the information you provided was, as well as anything you did to help or hinder the investigation.

Whistleblowers who bring insider information to the SEC are protected from retaliation—firing or anything that hurts you at work and is related to your whistleblowing. If this happens to you, the SEC may bring an action against your company. You may also be able to sue in federal court—with the help of an SEC whistleblower lawyer—or file a complaint with the Department of Labor.

If you’re considering becoming a whistleblower by disclosing information to the SEC, the Silver Law Group and the Law Firm of David R. Chase can help. We are nationally recognized securities fraud attorneys with extensive experience in SEC enforcement cases. Attorney David Chase has worked in the SEC’s Enforcement Division, so he understands how to present whistleblower information in a way that gets the agency’s attention. Attorney Scott Silver has published a definitive guide to whistleblower incentives—which we provide for free upon request—and remains actively engaged in this area of law. We are committed to protecting our clients’ confidentiality and their careers while helping them pursue a fair award. To tell us your story at a confidential, free consultation, call us today at 800.975.4345 or send us a message through our online form.