SEC Whistleblower Lawyer Blog

Our Attorneys Include a Former SEC Prosecutor and Wall Street Defense Counsel

New York Attorney General Eric Schneiderman announced a whistleblower-initiated $40 million settlement with Alabama-based investment firm Harbert Management Corp. over unpaid state income taxes claimed instead in lower-tax Alabama.

The dispute arose out of 2015 whistleblower allegations that members of Harbert failed to pay millions of dollars in taxes.  New York law requires businesses that operate both in and out of New York to apportion taxes on income derived in New York.

The settlement alleges that Harbinger Partners Offshore Managers LLC, a $26 billion New York City hedge fund sponsored by Harbert, failed to pay certain required taxes in New York from 2004 through 2009.  Instead, Harbinger paid taxes in Alabama, where rates were much lower.

The SEC announced it was awarding a company insider a whistleblower award of more than $500,000 for reporting information that prompted an SEC investigation into well-hidden misconduct that resulted in an SEC enforcement action.

The whistleblower award is the second award announced by the SEC in as many weeks, bringing the total amount awarded to approximately $154 million to 44 whistleblowers.  Additionally, the whistleblower tips have resulted in almost $1 billion in financial remedies.

According to the SEC Order Determining Whistleblower Claim, the SEC Whistleblower Program’s Claims Review Staff recommended that the whistleblower receive an award because the whistleblower voluntarily provided original information to the SEC that led to the successful enforcement of the action pursuant to Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”).

The SEC announced an award of almost $4 million to a whistleblower who provided detailed, specific information about serious securities misconduct and provided ongoing assistance throughout the ensuing investigation.

According to the SEC order, the SEC recommended that the whistleblower receive an award because the individual voluntarily provided original information to the SEC that led to a successful enforcement action.  Further, while the order redacted the percentage of the monetary sanctions the whistleblower would collect, the final amount was “almost $4 million.”

According to the SEC press release, the whistleblower had industry-specific knowledge and expertise, which is helpful to the SEC and can help it go through the process more efficiently.

When the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted in July 2010, the act implemented numerous protections for investors and consumers.  One of the indirect benefits was the implementation of whistleblower laws, which allows individuals to come forward and anonymously report securities violations.

The Dodd-Frank Act not only provided an avenue for whistleblowers to come forward, the act also implemented protections, anti-retaliation provisions, and other safeguards to ensure whistleblowers could come forward with no apprehension.  Many of these protections are found in Section 21F, “Whistleblower Incentives and Protection,” of the Securities Exchange Act of 1934.

The purpose of Section 21F is to encourage whistleblowers to report possible securities violations by providing, among other things, financial incentives and various confidentiality agreements.  Rule 21F-17 acts as a preemptive measure to prevent individuals and companies from hindering whistleblowers from coming forward.  The provision specifically states:

The U.S. Supreme Court declined to review a former Morgan Stanly employee’s claims that he is entitled to whistleblower protections after reporting to the FBI instead of the SEC.

According to a Law360 report, John S. Verble (CRD# 3197928), the would-be whistleblower, attempted to attain whistleblower protection after he reported illegal activity to the FBI.  Verble filed an action seeking the protection in a lower court, where the court ruled that the Dodd-Frank Act’s whistleblower protections only applied to those who report to the SEC.

The Sixth Circuit, according to the report, upheld the lower court decision and dismissed claims that Morgan Stanley fired Verble in retaliation for reporting the illicit activity.  The Sixth Circuit did not even consider how to interpret the Dodd-Frank whistleblower protections, as it determined Verble’s allegations of working with the FBI were too vague to state a claim for relief.

The SEC announced an award of over $7 million split among three (3) whistleblower who helped the SEC litigate an investment scheme.

The SEC began their investigation when one of the whistleblowers provided a tip to the SEC.  The initial whistleblower will receive more than $4 million for his initial information, per the SEC.  During the SEC’s investigation, the two other whistleblowers together provided new information that significantly contributed to the SEC’s successful enforcement action.  The two other whistleblowers will split more than $3 million for the information they provided to the SEC.

According to the SEC, the tips provided by various whistleblowers have resulted in almost $1 billion in financial remedies, a great amount given that the program was established less than five years ago.

How the Investment Management Firm BlackRock Undermined Whistleblower Incentives on

Firm managing $5.1 trillion is forced to change improper employee whistleblower policy

Until recently, the world’s largest investment management firm forced ex-employees to sign away their rights to potential whistleblower awards in order to receive employee separation package payments. BlackRock, Inc., which has 30 offices in 70 countries, was charged by the SEC and fined $340,000 for the illegal policy, which is alleged to have affected more than 1,000 employees.

BlackRock’s controversial policy, which the SEC alleged was retaliation for a new rule improving whistleblower awards, isn’t the only example of a financial firm attempting to discourage current or former employees from blowing the whistle.

The Securities and Exchange Commission (the “SEC”) announced an award of more than $5.5 million to a whistleblower who provided pertinent information that helped the SEC uncover an ongoing scheme on January 6, 2017.

According to the SEC’s order, the whistleblower was employed at the company involved in the wrongdoing.  The whistleblower proceeded to report the information directly to the SEC, which brought a successful enforcement action to end the scheme.

Enforcement actions from whistleblower tips have resulted in more than $904 million in financial remedies according to the SEC’s whistleblower main page.  The SEC whistleblower has awarded approximately $142 million to 38 whistleblowers since issuing its first award in 2012.

Proposed CFTC Rules Might Make It Easier for Whistleblowers to Inform the Government About Commodities Fraud on

The regulatory agency has requested public comment on proposed amendments

The Commodity Futures Trading Commission (CFTC), the independent US government agency that regulates futures and options markets, has requested public comment on proposed amendments to their rules regarding whistleblowers. Specifically, the changes are intended to streamline the process for whistleblowers and to help ensure that they receive protection from potential retaliation.

How does the CFTC currently deal with whistleblowers?

The Securities and Exchange Commission (the “SEC’) announced on December 9, 2016 that it had awarded more than $900,000 to a whistleblower whose tip enabled the SEC to bring multiple enforcement actions against bad actors.

The nearly-$1 million award is the second award announced by the SEC this week and brings the total amount awarded to whistleblowers to more than $136 million.  The $136 million plus has been awarded to 37 whistleblowers.

Under the SEC whistleblower program, established by the Dodd-Frank Act in 2011, the SEC is required to ardently protect confidentiality of whistleblowers and cannot disclose information that might indirectly or directly reveal a whistleblower’s identity.

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