The Securities and Exchange Commission (“SEC”) is the federal agency responsible for regulating the securities industry and for enforcing federal securities laws. The SEC protects the public against fraudulent and manipulative practices in the securities markets. Congress created the SEC Whistleblower Program as a way to offer incentives to those people who have knowledge about securities fraud. The program encourages individuals to report fraudulent activity and present evidence to the SEC.
Under the Dodd-Frank Act, Congress authorized the SEC Whistleblower Program to provide monetary awards to eligible individuals who come forward with useful and original information that leads to a successful enforcement action resulting in at least one million dollars in sanctions. The whistleblower is entitled to an award of between 10 and 30 percent of total money collected. In addition, the SEC Whistleblower Program prohibits any retaliation by employers against employees who provide securities violations information to the SEC.
Which Individuals Can Receive a Monetary Reward Under the SEC Whistleblower Program?
Any individual who files a complaint with the SEC containing original information about a violation of federal securities laws that occurred in the past, is presently occurring or is about to occur is eligible for a whistleblower award.
The amount of the award (from 10-30%) is determined by the amount of money recovered and the quality of the information given to the SEC. Whistleblowers need not be a company insider to qualify for a reward from the program. In addition, potential SEC whistleblowers do not have to be citizens of the United States.
To receive a monetary reward, however, any action taken by the SEC based on the provided whistleblower information must result in monetary sanctions that exceed $1 million. It is possible for more than one person in a covered action to be eligible for a whistleblower award, but companies and organizations do not qualify for monetary awards.
What is Original Information?
In order to recover an award, whistleblowers must provide “original information” to the SEC. That is, the whistleblower must obtain his or her information from data that is not readily available to the public. For example, information from newspapers, court cases, government reports or audits is not “original information.” Additionally, data gathered from an independent study of public information that reveals information not already known to the SEC is not considered “original information.”
SEC Action Against Fraud
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