Do You Need an SEC Whistleblower Lawyer?
Are you a whistleblower who has uncovered securities fraud?
- Have you been punished — or fired — for opposing unethical accounting practices at a public company?
- You risked your career to protect shareholders. Who will protect you?
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) offers protection and monetary rewards for employees who report fraud at publicly traded companies. Passed in response to the 2008 economic crash, the Dodd-Frank Act encourages whistleblowers to expose financial wrongdoing before it harms many people.
If you have reported — or are considering reporting — securities fraud at your company, the Dodd-Frank Act could reward you for doing the right thing. It also could help to save your career by providing you with legal protection against workplace retaliation by the fraudsters.
The whistleblower attorneys at The Employment Law Group® law firm have deep experience helping employees in Dodd-Frank Act cases — both at the Securities and Exchange Commission (SEC) for reward claims, and in federal court seeking protection and financial damages for whistleblowers. Indeed, our cases have been on the cutting edge of this law ever since its passage.
Representing an employee before a U.S. district court, for instance, our attorneys obtained one of the first judicial decisions to establish a broad definition of who gets whistleblower protection under the Dodd-Frank Act. In another case, we obtained a decision that created a favorable standard for whistleblowers when a court agreed it should defer to decisions made by the Department of Labor, which enforces one of the law’s anti-retaliation provisions.
Important statutes in this area of law:
Commodity whistleblower incentives and protection ; securities whistleblower incentives and protection ; civil action to protect against retaliation in fraud cases
Notable TELG cases in this area of law:
A federal judge laid down a standard favorable for employees by giving deference to decisions made at the Department of Labor’s Administrative Review Board.
A federal judge in Connecticut determined that a plaintiff need not actually make disclosure to the SEC to be a whistleblower
The Dodd-Frank Act allows whistleblowers to claim a reward of 10 to 30 percent of the amount above $1 million that the SEC recovers as a result of a tip. Rewards so far have reached up to $30 million. If you're the victim of retaliation for blowing the whistle on fraud, you may be entitled to reinstatement in your job, lost wages or benefits, attorney fees, and other litigation expenses.
As with all legal claims, deadlines are crucial. The Dodd-Frank Act has a six-year statute of limitations, which is fairly generous. Waiting to bring a retaliation case, however, may jeopardize your protection under related laws, such as the Sarbanes-Oxley Act of 2002, which has a much shorter deadline. Failing to act promptly also could hurt your chances of getting a reward from the SEC's whistleblower program. When other employees are aware of the violation, you need to move quickly. To perhaps oversimplify, the only person who is entitled to a reward is the first person who provides information to the SEC.
Frequently Asked Questions
The SEC prosecutes myriad types of securities violations. Prosecutions can be based on very specific forms of fraudulent or unlawful conduct such as “churning” and unauthorized trading or, more typically, “general” violations such as market breach of fiduciary duties and making false statements to shareholders.
Dodd-Frank Whistleblower Rewards
How much is a Dodd-Frank whistleblower reward?
The reward ranges from 10 to 30 percent of the amount recovered by the SEC beyond $1 million. The SEC uses the following factors to determine the percentage:
- The significance of the original information provided by the whistleblower
- The degree of assistance provided by the whistleblower
- The interest of the SEC in deterring violations of securities laws
- Other factors that the SEC may establish by rule or regulation
What is “Original Information?”
Original information means information that is:
- derived from the independent knowledge of the whistleblower;
- not known to the CFTC from any other source, unless the whistleblower is the original source of the information; and
- not exclusively derived from an allegation made in a judicial or administrative hearing, a government report, audit, or investigation, or the news media, unless the whistleblower is a source of the information.
To be eligible for a Dodd-Frank reward, must a whistleblower be employed by the company that commits the securities fraud?
No. SEC whistleblowers certainly could work for the company in question — but they also might be outside bookkeepers, consultants, or contractors for that company. Customers, even. Anyone who’s in a position to understand that fraud is occurring.
What if I’m unhappy with the award that the SEC has given me as a result of my information?
You need to first understand that issuing a reward is at the SEC’s discretion. Even still, the regulations provide that an individual who is unhappy with the size of his or her reward may appeal the award decision. It is especially important to have an attorney represent you during this process.
Dodd-Frank Whistleblower Protection
What forms of retaliation against whistleblowers are prohibited?
The Dodd-Frank Act prohibits a broad range of adverse employment actions, including:
- Termination, discharge, or firing
- Threatening adverse employment actions
- Workplace Harassment
- Any other conduct that would dissuade an employee from reporting SEC violations
What compensation can a prevailing employee recover?
A prevailing employee can:
- Be reinstated to their former position
- Recover double the wages owed to the employee in the form of back pay with interest
- Recover attorney fees and litigation costs
SEC Whistleblower Process
What happens after I disclose information to the SEC?
Usually, the SEC will take some time to investigate your matter before contacting you or your attorney. If your tip seems to have some merit, you may be called in to an interview with the SEC or asked to provide more documentation. This is another area where an attorney can help you – both by helping you prepare and organize your documentation so that it is more accessible for the SEC and with assisting you to prepare for and participate in follow-up interviews with the SEC’s attorneys.
Am I allowed to remain anonymous when I provide information to the SEC?
Yes and no. The regulations provide that an individual can provide information anonymously only if he or she is represented by an attorney. Even then, you may eventually need to disclose your identity to the SEC. This is true if the SEC needs to interview you or in the event that you want to claim a reward. Even still, the SEC takes whistleblower anonymity very seriously and will work to protect your identity, even after issuing you an award.
Do I need to have physical proof for the SEC?
The SEC is more likely to pursue claims where a whistleblower has documents to corroborate his or her allegations. However, not having documents does not preclude someone from providing information to the agency. Moreover, there are other ways that the SEC can substantiate your claims — whether through independent investigation or by contacting potential witnesses.
If you are an employee of the company, you may have access to records, emails, or other documents that would help corroborate your claims of fraudulent activity. But you need to be careful. There are rules governing the information that an employee may lawfully download and process. You should consult with an attorney who can advise you on the best manner in which to move forward.
What if I’m concerned about being complicit in the fraud? Do I have anything to worry about?
That depends. Simply because you came forward with information will not necessarily shield you from liability. This is typically true if you were the brains behind the fraudulent scheme or if you took significant steps to help your company further it. This is perhaps one of the strongest reasons to retain counsel. An experienced attorney can work with you and with the SEC to help minimize your exposure while working with the SEC.
Am I required to have an attorney to provide information to the SEC? How does an attorney help me prepare my submission?
Actually, no. Anyone can complete the Form TCR and submit it to the SEC.
However, while it is theoretically possible for an individual to submit information to the SEC, retaining counsel is advisable for a number of reasons. First and foremost, an attorney experienced in securities issues will be able to craft your disclosure in a way that will make your claim more appealing and easily discernible to the SEC.
I’m an experienced professional who deals with commodities and futures trading on a daily basis. I know about the fraudulent conduct and can articulate it clearly for the SEC. Do I really need to have an attorney help me?
Absolutely. Individuals performing a finance, accounting, or compliance function may have additional procedural hurdles to jump through. This could include making internal disclosures before contacting the SEC or waiting for a defined period of time before bringing their information to the Commission. Even if (or, especially if) you are an expert in the field, you should speak with an attorney who is experienced working with SEC whistleblowers.