SEC Whistleblower Awards Based on Criminal Actions

The Securities and Exchange Commission cannot bring criminal actions by itself. Most of its enforcement actions are either civil lawsuits or administrative actions. Both of these can be quite serious. The SEC can charge very steep fines; forbid the targeted person or business from working with others; and require that the target disgorge any illegal profits. But it cannot put people in prison.

However, that doesn’t mean that a criminal action can’t be the basis of an SEC whistleblower claim. In fact, claims based on criminal actions can be very successful, because a matter serious enough to require criminal charges is likely to be a high-value matter. But there are different rules for these “related actions,” so you should consider hiring an experienced SEC whistleblower attorney who can guide you through the process.

To collect an award in a criminal matter, you need to meet all the same standards you’d meet in a matter that stays with the SEC. That means you should voluntarily provide original information to the agency that leads to a financial penalty of more than $1 million. At the end of the process, you can claim an award of 10% to 30% of the financial penalty.

You can also collect a separate award if a criminal case leads to monetary sanctions. This kind of case is called a “related action,” and it only happens if your information is passed on to prosecutors at a state Attorney General’s office or a U.S. Attorney’s office. A related action must be based on the same information originally provided to the SEC, which means the prosecutors must have directly relied on your information. The award would be a percentage of the sanctions in the criminal case.

That’s true even when the criminal case does not lead to an outright conviction. That might be true if the matter ends with a deferred prosecution agreement or non-prosecution agreement, which stop short of convicting the target. Under new rules announced in late 2020, the SEC considers these agreements a type of related action. This decision expands the number of criminal cases that can lead to an SEC whistleblower award—and, therefore, the size of the award to the whistleblower.

Blowing the whistle on illegal practices can be risky and complicated. At the Law Firm of David R. Chase and Silver Law, we represent people who need expert legal guidance through the whistleblower process. That includes making sure that their information is as attractive as possible to the SEC; advising them on how to maximize their awards; and keeping their identities confidential even from the SEC, when necessary.

David Chase is a former SEC enforcement lawyer; Scott Silver wrote a widely acclaimed outline of the whistleblower program and offers it free of charge. Both lawyers represent investors and employees who are seeking justice in the securities industry. If you’d like to talk to us about a whistleblower claim and how we can help, don’t hesitate to reach out for a meeting. You can send us a message online or call 800.975.4345.