SEC: Securities Fraud

What is the SEC Whistleblower Program?

The SEC Whistleblower Program was created by Congress to incentivize those with knowledge about securities fraud to come forward and report the matter and present evidence to the SEC. Under the SEC program, eligible whistleblowers are entitled to an award of between 10 percent and 30 percent of the monetary sanctions collected in actions brought by the SEC and related actions brought by other regulatory and law enforcement authorities.

The SEC whistleblower law prohibits retaliation by employers against employees who provide the SEC with information about possible securities violations.

Who is eligible for an award?

Any person who voluntarily provides the SEC with original information about a violation of federal securities laws that has occurred, is ongoing, or is about to occur, is eligible for a whistleblower award to be determined based on the amount of the money collected, and the quality of the information provided.  You do not need to be a company insider or employee of the offending company to be an SEC whistleblower, nor do you need to be a United States citizen. For any award to be triggered, however, SEC action based on the whistleblower information must result in monetary sanctions in excess of $1 million.

More than one person may be eligible for a whistleblower award in a covered action, but companies or organizations do not qualify for whistleblower awards.

To be considered as providing “original information” to the SEC, a whistleblower must have derived his or her information from information that is not publicly available (i.e. not from news sources, court cases, or government reports or audits) or from independent analysis of public information which revealed information not generally known, or already known, to the SEC.

Learn more about the SEC Whistleblower Program history and statistics here.

Think you have a case? Read more about the process below:

SEC Whistleblower Process

To qualify for an award under the SEC Whistleblower Program, you must submit information regarding possible securities law violations to the Commission in one of the following ways:

SEC Office of the Whistleblower
100 F Street NE
Mail Stop 5971
Washington, DC 20549
Fax (703) 813-9322

The SEC allows whistleblowers to submit information anonymously, i.e., without the whistleblower providing any identity or contact information, but to collect an award you must be represented by, and provide contact information for, an attorney in connection with your submission, and you must also complete a “tip, complaint, or referral form” (Form TCR) signed under penalty of perjury.

For information on the kinds of considerations the SEC makes when analyzing fraud allegations and determining which cases to pursue, please see the SEC’s Division of Enforcement Manual.

If my company has an internal compliance office, do I have to report internally to be eligible for a whistleblower award?

No.  Internal reporting of a possible SEC violation at your company is not required to be considered for an SEC whistleblower award.  However, if you report internally and the company takes no action, and you subsequently report the possible violation to the SEC within 120 days of reporting it to the company, your submission will be recorded as if it was filed on the day you reported it to the company, and you may be eligible for a larger award under the SEC whistleblower program.

Can I submit my information anonymously?

Yes, you may submit information anonymously and still be eligible for a whistleblower award, but to do so, you must have an attorney represent you in connection with your submission, and you must also provide your attorney with a completed  “tip, complaint, or referral form” (Form TCR) signed under penalty of perjury.

How does the SEC announce awards?

If the SEC has been working with a whistleblower and his or her attorney, the SEC will contact the whistleblower and his or her attorney directly in order to alert them about the opportunity to apply for an SEC whistleblower award.   In addition, the SEC web site posts Notices of Covered Actions in Whistleblower Award Cases when those actions exceed $1 million in sanctions so that anyone who believes they may be eligible for an award will have an opportunity to apply.

How do I apply for an award?

Whistleblowers must apply for an award by completing and returning Form WB-APP within 90 calendar days of when a covered action is announced.

  • The SEC posts Notices of Covered Action where a final judgment or order results in monetary sanctions exceeding $1 million. The inclusion of a Notice means only that an order was entered with monetary sanctions exceeding $1 million. Posting a Notice for a particular case does not necessarily mean that the SEC has made a determinations that a whistleblower tip, complaint or referral led to the Commission opening an investigation or filing an action with respect to the case, or that an award to a whistleblower will be paid in connection with the case.

What factors does the SEC consider in determining the amount of the award?

The rules governing the SEC’s Whistleblower Program requires the agency to consider multiple factors in determining award amounts.

The SEC may increase the award percentage based on:

  • The quality, quantity and significance of the information provided in exposing the fraud;

  • The amount and quality of assistance provide to the SEC during the investigation and any subsequent proceedings;

  • The SEC’s law enforcement interest in deterring future violations of securities laws;

  • Whether the whistleblower participated in a company’s internal compliance system by reporting possible securities violations before, or at the same time, as violations were reported to the SEC.

The SEC may reduce the amount of an award:

  • If the whistleblower was a participant in, or culpable for the securities law violations reported

  • If the whistleblower unreasonably delayed reporting the violations to the SEC

  • If the whistleblower interfered with a company’s internal compliance and reporting system

Can a whistleblower appeal an SEC award decision?

If the SEC awards an amount between 10 percent and 30 percent of the monetary sanctions collected, then the Commission’s award determination is not appealable. If the Commission denies your application for an award, however, you may file an appeal in an appropriate United States Court of Appeals within 30 days of the decision being issued.

What rights do I have if my employer retaliates against me?

Employers may not discharge, demote, suspend, harass, or in any way discriminate against a whistleblower because who lawfully reports possible securities violations to the SEC.  If an employer wrongfully retaliates against a whistleblower, the whistleblower may bring a private action in federal court and if they prevail, they may be entitled to reinstatement, double back pay, litigation costs, expert witness fees, and attorney’s fees. The SEC can also take legal action in an enforcement proceeding against any employer who retaliates against a whistleblower for reporting information to the SEC.