SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award



  SEC WHISTLEBLOWER PROGRAM

  Zuckerman Law

  Copyright ©2017 by Zuckerman Law

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  CONTENTS

  Overview of the SEC Whistleblower Program

  What is the SEC Whistleblower Program?

  Can I submit an anonymous tip to the SEC Whistleblower Office?

  What employment protections are available for SEC whistleblowers?

  What violations qualify for an award?

  What are the largest SEC whistleblower awards?

  Whistleblowers Eligible for an Award

  Who is an eligible SEC whistleblower?

  Can I submit a tip if I was involved in the fraud or misconduct?

  Can I submit a tip if I agreed to a confidentiality provision in an employment/severance agreement?

  Can compliance personnel, auditors, officers, or directors qualify for an SEC whistleblower award?

  Reporting to the SEC and Maximizing Award Percentage

  When is the best time to report the fraud or misconduct to the SEC?

  Do I have to report the violation to my company before reporting it to the SEC?

  Can I submit an SEC whistleblower claim if the SEC already has an open investigation into the matter?

  How do I submit a tip to the SEC?

  Are there any tips for submitting a TCR to the SEC?

  What type of evidence should I provide to the SEC?

  What factors does the SEC consider when determining the amount of an award?

  Why should I choose the Zuckerman Law to represent me in my SEC whistleblower claim?

  After Reporting to the SEC

  What happens after I submit a tip to the SEC?

  How long does it take to receive an SEC whistleblower award?

  OVERVIEW OF THE SEC WHISTLEBLOWER PROGRAM

  What is the SEC Whistleblower Program?

  The Dodd-Frank Act (“Dodd-Frank”) was signed into federal law on July 21, 2010, in response to the financial crisis of 2008. That recession, widely considered “the worst financial crisis since the Great Depression,” struck after the U.S. housing market crashed and the entire financial industry nearly collapsed. The stock market lost about US$25 trillion in value, and 23 million people lost their jobs. The global economy fell into a recession.

  Dodd-Frank, passed in the wake of the global recession, is the most significant overhaul of U.S. financial regulations since the Great Depression. Among the Act’s achievements are the creation of the

  U.S. Securities and Exchange Commission (“SEC”) Whistleblower Office and the SEC Whistleblower Program. This program offers awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total civil penalties exceeding $1 million. A whistleblower may receive an award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and in related actions brought by other regulatory or law-enforcement authorities.

  The SEC Whistleblower Office, in its short history, has successfully exposed violations of federal securities law and appropriately rewarded whistleblowers who provided information about those violations. Since 2011, the SEC Whistleblower Office has received over 18,000 tips, some of which led to enforcement actions resulting in a total of over $584 million in sanctions (including more than

  $346 million in disgorgement and interest). Furthermore, the whistleblower office has issued well over

  $100 million in awards to whistleblowers for information and assistance. In 2016 alone, the SEC awarded more than $57 million to whistleblowers. Notably, many of the largest SEC whistleblower awards have been issued in the past year.

  Can I submit an anonymous tip to the SEC Whistleblower Office?

  Yes, but only if you have an attorney represent you in connection with your submission. maximizing the likelihood that your identity is not revealed to unauthorized parties. An experienced whistleblower attorney can skillfully guide you through the process,

  In addition, the SEC is committed to protecting whistleblowers’ identities, to the extent possible. It would be very difficult for the SEC to receive the best fraud-exposing tips if it did not take steps to protect whistleblowers’ confidentiality. For example, the SEC will often issue awards and provide no information about the whistleblower or even the enforcement action. According to the SEC Whistleblower Office’s 2016 Annual Report to Congress, almost 25% of whistleblowers who received awards reported anonymously. There are limits, however, to the SEC’s ability to shield your identity, and in certain circumstances the SEC must disclose it to outside entities. You should consult with an experienced whistleblower attorney for more details on your specific claim.

  What employment protections are available for SEC whistleblowers?

  Under Dodd-Frank, which created the SEC Whistleblower Program, employers cannot discharge, demote, suspend, harass, or in any way discriminate against employees for raising concerns about a potential securities-law violation. Remedies may include reinstatement, double back pay, litigation costs, expert-witness fees, and attorneys’ fees.

  Employees may also have a retaliation claim under the Sarbanes-Oxley Act (“SOX”). The remedies are similar to those under Dodd-Frank, but SOX also includes special damages, such as emotional distress, impairment of reputation, and other noneconomic harm resulting from retaliation. A jury recently awarded $11 million to a whistleblower in a SOX retaliation case.

  What violations qualify for an award?

  Any violation of the federal securities laws qualifies. The SEC has broad jurisdiction over a wide range of industries and entities—both public and private. The most common tips involve:

  • Accounting fraud;

  • Unregistered securities offerings;

  • Investment and securities fraud;

  • Investment adviser fraud;

  • Insider trading;

  • False or misleading statements about a company or investment;

  • Foreign bribery and other FCPA violations;

  • Inadequate internal controls;

  • EB-5 investment fraud;

  • Deceptive non-GAAP financial measures; and

  • Manipulation of a security’s price or volume;

  • Violations of auditor independence rules.

  • Fraudulent securities offerings and Ponzi schemes;

  Click on the federal securities laws violations above for a detailed description of the violation and related enforcement actions. Finally, note the SEC has jurisdiction over additional areas as well. Whistleblowers should contact an experienced SEC whistleblower lawyer to see if their claim qualifies.

  What are the largest SEC whistleblower awards?

  The SEC issued its largest award, $30 million, on September 22, 2014. The second- and third-largest awards to date are $22 million, issued in August 2016, and $20 million, awarded in November 2016.

  Under the program, the SEC issues awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total civil penalties exceeding $1 million. A whistleblower may receive an award of between 10% and 30% of the total
sanctions imposed.

  Since 2012, the SEC has issued more than $149 million in awards to whistleblowers. In 2016 alone, the program awarded more than $57 million in to whistleblowers, which is more than the agency awarded in all the previous years of the program combined.

  The details of most awards are not publicly available because many whistleblowers file anonymously, through attorneys. In these situations, the SEC goes to great lengths to not reveal any information, including any details about the enforcement action, that could expose the whistleblower.

  For example, when the SEC issued $30 million to an anonymous whistleblower, it did not identify the whistleblower, indicate where the whistleblower was from, or even disclose the case that the award was tied to. Andrew Ceresney, director of the SEC’s enforcement division, simply said, “This whistleblower came to us with information about an ongoing fraud that would have been very difficult to detect.” Further, the director mentioned that the award could have been even bigger if the whistleblower had timelier reported the information to the SEC.

  However, not all whistleblowers file anonymously. On August 30, 2016, the SEC issued an award of more than $22 million to a former Monsanto executive. (Note that special rules apply to certain individuals, such as executives, auditors, and compliance personnel.) According to the SEC’s press release, Monsanto lacked sufficient internal controls to account for millions of dollars in rebates. This control failure allowed the company to book a sizable amount of revenue without recognizing the costs associated with the rebates. This resulted in Monsanto’s materially misstating its