The Threat of Securities Fraud: A Global Perspective

 

US securities and exchange commission

Several other countries have attempted to mimic the U.S. laws against securities fraud.
Image source: Wikimedia.com

In recent years, Congress expressed interest in mimicking the federal False Claims Act in an effort to identify, punish, and deter acts of fraud against taxpayers, investors, and the federal government as a whole in other areas. As a result, the 2010 Dodd Frank Act, which was drafted to implement serious changes to Wall Street, contained provisions requiring the SEC to implement a whistleblower protection agency incentivizing investors and those with knowledge of securities fraud to come forward with reports of misconduct. The SEC’s whistleblower group recently revealed its successes, from both home and abroad, in its first full year of practice and showcased its effectiveness and strength in combating Wall Street fraud.

It may come as a surprise to many that a large percentage of reports to the SEC’s tip line were derived from sources outside the United States. While Canada and the United Kingdom represented the largest percentage of foreign fraud reports, several other nations produced a significant number of fraud alerts stemming from alleged misconduct between U.S. and foreign investors.

In a 2013 report, the SEC released its top foreign reports of fraud, revealing several reports out of China, Russia, India, and Ireland. Israel and South Africa were also included in the list of 404 offshore reports of fraud collected by the SEC from 2012 through 2013.

Whistleblower Laws Abroad

While the U.S. whistleblower laws against securities fraud have, so far, been a beacon of honesty and integrity within an industry known to be a hotbed for deceit, other countries are facing difficulty in keeping similar laws intact to protect their own investors. For instance, Australia has implemented ongoing Senate inquiries into the effectiveness of its whistleblower laws, which have been referred to as “poorly regarded” by the Governance Institute. Australia’s securities regulator, the Australian Securities and Investments Commission, is known for its lax response time to serious allegations of investor fraud. In one case, the ASIC took over sixteen months to respond to a whistleblower complaint alleging misconduct within one of its bank’s financial planning department. The case eventually resulted in a $51 million settlement with dozens of clients.

By contrast, the American SEC usually completes its initial review of a complaint within one day and determines whether further action is warranted within 31 days. As a result, the Australian Attorney General has been researching the U.S. whistleblower laws in an attempt to revitalize its own mechanisms of combating fraud across all aspects of Australian industry.

U.S. Laws Applied Overseas

One of the highlights of the Dodd Frank whistleblower law is its anti-retaliation clause protecting employees from termination for reporting misconduct to the Department of Justice or government regulatory agency. However, as several federal courts have held, foreign whistleblowers choosing to report violations of U.S. securities laws under the Dodd Frank Act are not covered under the anti-retaliation provisions and could face termination, demotion, or other negative employment actions for choosing to come forward with fraud.

What to Do if You Suspect Investor Fraud

Fraud in the securities industry is not always easy to spot, and it may require an intense scrutinization of your monthly statements to detect. However, the SEC encourages any individual or corporation with information relating to insider trading, fraudulent disclosures, unlawful commission schemes, or any other type of fraud in the securities market to come forward to the SEC’s whistleblower protection center. With the help of a whistleblower attorney, you can help prevent retaliation from your employer, which is expressly forbidden, provided you report your information to an external government agency. Currently, the law does not prevent against retaliation for employees who choose to report securities fraud through internal compliance mechanisms, so it is always more advantageous to work through your whistleblower attorney to protect your job and livelihood.

By | 2014-01-28T20:14:19+00:00 January 28th, 2014|SEC Fraud|