By Russell Paul
Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”) (15 U.S.C. §78u-6), entitled “Securities Whistleblower Incentives and Protection,” (often referred to as the SEC Whistleblower Statute) requires the Securities and Exchange Commission (the “Commission”) to pay awards, subject to certain limitations and conditions, to whistleblowers who provide the Commission with original information about violations of the federal securities laws.
SEC whistleblowers may report violations of federal securities laws, violations of the rules of a self-regulatory organization (such as the Federal Industry Regulatory Authority) or violations of the Foreign Corrupt Practices Act (which concerns allegations related to bribery of foreign officials). Under the program, eligible whistleblowers are entitled to an award of between 10 percent and 30 percent of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.
How Does a Whistleblower Submit Information?
In order to be considered for an award under the whistleblower program, a whistleblower must submit information that exposes fraudulent conduct through either:
- The Commission’s online Tips, Complaints and Referrals questionnaire, where the whistleblower must answer “yes” to the questions regarding participating in the whistleblower program; or
- By completing the hardcopy Form-TCR and mailing or faxing it to the SEC Office of the Whistleblower, 100 F Street NE, Mail Stop 5631, Washington, DC 20549, Fax (703) 813-9322.
What Makes a Good SEC Tip?
In general, the more specific, credible, and timely a whistleblower tip, the more likely it is that the tip will be forwarded to the Commission’s investigative staff for further follow-up or investigation. For instance, if the tip identifies individuals involved in the scheme, provides examples of particular fraudulent transactions, or points to non-public materials evidencing the fraud, the tip is more likely to be investigated.
For these reasons, we highly recommend that you engage an attorney to assist you with completing Form TCR. Such an attorney may be paid on a contingent basis instead of being paid hourly for his or her work. This means that the attorney would only be paid by receiving a percentage of any award the whistleblower receives.
The SEC Form TCR can be accessed by clicking on this link: https://www.sec.gov/about/forms/formtcr.pdf
What Information Will I Need to Provide?
Form TCR asks specific questions to obtain all of the relevant information about the tip, and allows the whistleblower to attach additional sheets if the answer space provided is insufficient. The Form also requires the whistleblower to personally execute a declaration under penalty of perjury that states the following:
“I declare under penalty of perjury under the laws of the United States that the information contained herein is true, correct and complete to the best of my knowledge, information and belief. I fully understand that I may be subject to prosecution and ineligible for a whistleblower award if, in my submission of information, my other dealings with the SEC, or my dealings with another authority in connection with a related action, I knowingly and willfully make any false, fictitious, or fraudulent statements or representations, or use any false writing or document knowing that the writing or document contains any false, fictitious, or fraudulent statement or entry.”