SEC Whistleblower Lawyer Blog

How the SEC’s definition of whistleblower will hold up in court

Since the 2010 passage of the Dodd-Frank Act, the definition of “whistleblower” has been a subject of contention among courts, businesses and would-be whistleblowers. Its supposed ambiguity stems in part from the fact that the SEC offers two potentially contradictory definitions in two separate provisions.

In the first, the bounty provision, the SEC defines a whistleblower as “any individual who provides … information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”

Protections under the Dodd-Frank Act guaranteed award

The Securities and Exchange Commission paid $3 million to a whistleblower on July 17, 2015 under the Dodd-Frank Act, which became law in July 2010. The act protects whistleblowers from retaliation from their employers and guarantees them an award from the SEC and/or the U.S. Commodity Futures Trading Commission (CFTC) for providing information about a potential violation that leads to “the successful enforcement of a covered judicial or administrative action, or a related action,” according to the Federal Register.

According to Andrew Ceresney, director of the SEC’s Enforcement Division, the whistleblower protections outlined in the act are effective in helping to uncover fraudulent schemes that may have otherwise flown under the radar and potentially affected more people and caused greater damages.

Boca Raton, Florida – May 22, 2015 (GLOBE NEWSWIRE) – Silver Law Group and David Chase, P.A. (securitieswhistleblowerattorneys.com) are working together to form a team of experienced lawyers who represent Wall Street insiders and others with potential knowledge of violations of the federal securities laws which may lead to a potential reward from the SEC Whistleblower Program.

We work with Whistleblowers to maximize their reward while protecting them against improper retaliation by their employer or others. Our lawyers represent Whistleblowers and investors against Wall Street and financial services firms including brokerage firms, hedge funds and others. We are led by David Chase, former Senior Counsel in the Enforcement Division of the Securities and Exchange Commission (SEC) and leading investor advocate, Scott Silver. We understand how Wall Street and publicly traded companies are expected to comply with SEC regulations and we routinely appear before the SEC on behalf of our clients.

Scott Silver is a former Wall Street defense attorney turned investor advocate. After beginning his career on Wall Street, Scott relocated to Florida in 2002 and brings a unique and thorough understanding of Wall Street to advocate for Whistleblowers and investors. Along with strong relationships in New York City, Scott routinely represents investors throughout the United States and Latin American. Scott is a recognized leader in FINRA arbitration claims and representing investors in securities or investment fraud cases.

On April 22, 2015, the Securities and Exchange Commission (SEC) announced it had granted a whistleblower with a significant award. The award related to information that a compliance officer provided to the SEC that resulted in a successful enforcement action. The amount awarded to the whistleblower by the SEC as a result of the action is in excess of $1 million.

A Rare Award

The award is the first whistleblower award to be given to a compliance officer and is only the second awarded to an employee with audit or compliance responsibilities. The award for whistleblowers can be between 10 percent and 30 percent of the amount collected, which, in this case, resulted in an award of between $1.4 million and $1.6 million. However, as with all whistleblower cases, the confidentiality of the whistleblower must be protected, meaning other details that could identify the whistleblower, including the name of the company, the company’s industry, and the nature of the conduct, are withheld from public disclosure.

On March 2, 2015, the Securities and Exchange Commission (SEC) announced that it had awarded between $475,000 and $575,000 to a former corporate officer for reporting securities fraud. Pursuant to law, the SEC keeps confidential the identity of the whistleblower, as well as information that may reveal his or her identity, so specific facts of the case are not publicly known. However, this award was significant because the SEC utilized an exception to the general rule that officers are ineligible for whistleblower awards. As a result, all companies should take note and ensure that any reported improper conduct is quickly addressed.

Whistleblower Program

The whistleblower program was adopted in 2010 (becoming law in 2011) under the Dodd-Frank Act and offers rewards to individuals for reporting misconduct if an enforcement action with at least $1 million in sanctions results. Awards range from between 10% and 30% of the money collected through the enforcement action. Information must be considered original, which is defined as:

According to a recent Wall Street Journal story, more than 6,500 people have offered confidential information to the Securities and Exchange Commission (“SEC”) Whistleblower Program. The SEC established the whistleblower office in mid-2011 to allow the public to report violations of the federal securities laws. Pursuant to Dodd-Frank, the SEC offers a bounty of up to 30% of penalties for any monetary sanctions the agency extracts that exceed $1 million.

Nearly 3,600 of the whistleblowers listed a job title, according to information obtained by The Wall Street Journal through a Freedom of Information Act request. The people reporting potential violations include retirees, investors and internal employees.

According to the SEC, it is pleased with the quality of tips it gets and that frivolous complaints haven’t bogged down the system as initially feared. I girded myself for an avalanche of nonsense,” said Sean McKessy, head of the SEC’s whistleblower office. However, instead, at least 42 of the tips came from senior executives and board members, according to the listed job titles.