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SEC Whistleblower Lawyer Blog

What is a Whistleblower?

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.

The program has brought in more than $150 million in restitution and fines and the SEC has paid more than $15 million in payments to the whistleblowers, including over $14 million dollars to one citizen who provided evidence against a 30-year-old Chicago resident who allegedly duped about 250 investors in an affinity fraud.

A U.S. District Court sided with the SEC and ordered the return of $147 million in assets to investors. Mr. Sethi and two related business entities neither admitted nor denied the allegations. Attorneys who represented Mr. Sethi didn’t return phone calls.

In another case earlier this month involving “a complex area of the securities market,” two SEC whistleblowers earned a combined $875,000.

According to a senior officer at the SEC, a “critical mass” of tips will soon yield more investigations, fines and bounties.

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