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SEC Whistleblower Actions

The Dodd-Frank Act was passed in July 2010, establishing the Securities Exchange Commission (SEC) Office of the Whistleblower in 2011. The program was designed by Congress to provide monetary incentives for anyone with knowledge of fraudulent activities to step forward and report possible violations of federal securities law. The program entitles eligible whistleblowers to an award between 10 and 30 percent of the recoveries collected in actions by the SEC. Eligible whistleblowers are individuals with original information of a possible violation. One or more individuals are allowed to act as a whistleblower.

The information provided by a whistleblower must lead to a successful action of more than $1 million to be eligible for an award. See 17 C.F.R. § 240.21F-3(a).  Common types of SEC violations are market manipulation, financial statements fraud, offerings fraud, insider trading, violations of the Foreign Corrupt Practices Act and municipal securities fraud. It is not necessary that the whistleblower provide all facts necessary to prosecute the violation; only enough information to lead to a successful enforcement action.

The whistleblower enjoys statutory protection that prohibits employers from retaliating for reporting suspected violations. These protections are not contingent upon successful prosecution; they apply to all SEC whistleblowers who reported in good faith, even if no violation is ultimately established.  Additionally, the SEC is required by law to protect the confidentiality of whistleblowers and cannot disclose any information that might reveal their identity.

On October 1, 2013, the SEC reported the largest whistleblower award to date where an unnamed whistleblower received more than $14 million. This whistleblower’s information led to an enforcement action by the SEC that recovered substantial investor funds. Mary White, SEC Chair, stated that the whistleblower program has had a “big impact on [SEC] investigations by providing us with high quality, meaningful tips.”  Sean McKessy, the Chief of the SEC’s Office of the Whistleblower, has stated that he is grateful that individuals are coming forward with information to help stop fraud because the program is ultimately about protecting future investors from harm.

Lawyers in the Consumer Fraud Section at Beasley Allen will be glad to assist any persons who are entitled to pursue a legitimate SEC whistleblower claim.  If you have a claim or need more information on this subject, contact Larry Golston or Lance Gould, lawyers in our Consumer Fraud Section, at 800-898-2034, or use our free case evaluation form.

Sources:, and Wall Street Journal

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