On September 14, 2020, the Securities and Exchange Commission announced a considerable reward topping $10 million to a whistleblower whose information had led to a successful SEC enforcement action. The Chief of the SEC's Office of the Whistleblower, Jane Norberg stated, "This award recognizes the persistent efforts of the whistleblower to expose serious financial misconduct."
The whistleblower’s contribution went beyond a simple tip. Chief Norberg stressed the anonymous individual had "provided extensive and ongoing assistance to the investigative team over the course of the investigation, including identifying witnesses and helping staff understand complex fact patterns and issues related to the matters under investigation."
The SEC Whistleblower Program is relatively new. It was created by The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The law sought to incentivize the reporting of illegal activity in the securities industry by allowing insiders with actionable information to receive a generous reward. Whistleblowers can receive an amount equal to 15 to 30 percent of the total sanctions the government imposes on defendant companies. Since 2012, the SEC has rewarded 94 individuals a total of more than $520 million.
We hope this ample reward encourages more whistleblowers to step forward. Securities fraud is far from a victimless crime. The investors who get cheated aren’t Wall Street fat cats; they’re anyone with a 401(k), union members with pension plans.
The SEC Whistleblower Program helps regulators keep the market honest. What kind of wrongdoing gets reported? A wide range of fraud schemes, such as insider trading, a Bernie Madoff-style Ponzi scheme, or the classic ‘pump and dump’ where brokers hype a stock then sell their own shares when the price rises. There’s no place for those corrupt practices in an honest market.
An SEC whistleblower must be the first person to report on a suspected SEC violation to earn a reward. The whistleblower must provide original, nonpublic information that leads to a successful SEC enforcement action that recovers more than $1 million.
This program aims to always protect the whistleblowers -- Not only can they file anonymously at the start, but unlike other whistleblower processes where complaints are later unsealed, the SEC never reveals a whistleblower’s identity. Plus, the law protects them against retaliation, so even if their employer suspects them, they can’t punish them without incurring additional civil liability.
However, if you are thinking about contacting the SEC on your own consider consulting an experienced whistleblower attorney who knows the SEC program. You might have good information, but unless you present it clearly and comprehensively, the SEC might reject your case. And, because there is no qui tam option for you to file a lawsuit on your own, you’ve lost your one chance. You might also make a misstep when you’re trying to collect evidence, and that could void your legal protection.