SEC and CFTC Whistleblower Programs
On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), commonly known as the financial reform bill. The Act contains provisions that create SEC and CFTC whistleblower reward programs.
SEC Whistleblower Program
Section 922 of the Act amends the Securities Exchange Act of 1934 by adding a whistleblower provision to enhance incentives and protections for individuals who come forward with information that leads to successful SEC enforcement actions resulting in the recovery of more than $1 million by the government.
This new law is much broader than the existing SEC whistleblower program, which only covered insider trading violations. Whistleblowers can now receive rewards for reporting a wide variety of securities law violations, including:
On August 12, 2011, the final rules for the SEC whistleblower reward program officially went into effect.
CFTC Whistleblower Program
Section 748 of the Act amends the Commodity Exchange Act by adding a whistleblower provision to enhance incentives and protections for individuals who come forward with information that leads to successful action brought by the CFTC that results in the recovery of more than $1 million by the government.
The CFTC has issued the final rules for for its whistleblower reward program.
The SEC and CFTC whistleblower programs provide for the following:
1. Whistleblower Rewards: Under the Dodd-Frank Wall Street Reform Act, the SEC and CFTC will pay a whistleblower reward to individuals who provide original information to the SEC or CFTC which results in monetary sanctions exceeding $1 million. The award will range from 10-30% of the amount recovered, and the amount of the award will be determined by the SEC or CFTC. Factors affecting the value of the whistleblower reward include:
- The significance of the information provided by the whistleblower
- The degree of assistance provided by the whistleblower and the whistleblower's counsel
- The programmatic interest of the SEC in deterring violations of the securities law
- The extent to which the whistleblower cooperated with the internal complaince department of his or her employer
However, certain whistleblowers are not entitled to receive a reward. These include:
- Officers or employees of certain government or self-regulatory organizations or those who were officers or employees at the time the information was learned
- Whistleblowers who are convicted of a criminal violation related to the action for which they supplied the information
- Whistleblowers who gained the information through performance of an audit required under the securities laws
2. Job Protection: The new law contains provisions that protect whistleblowers from retaliation state that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. If such retaliation occurs, the whistleblower may sue for reinstatement, back pay, and any other damages that were incurred.
3. Confidentiality: The new law allows whistleblowers to report fraud anonymously, provided that they have secured legal representation. In certain instances, the whistleblower’s identity may not be revealed to the SEC or the CFTC until it is time to pay the whistleblower reward. No other federal whistleblower program, including the Tax Whistleblower Program and the qui tam provisions of the False Claims Act, safeguard the whistleblower’s confidentially this strongly.
Kenney & McCafferty has been representing whistleblowers for more than 15 years. Our entire practice is focused on helping whistleblowers fight fraud against the government, and we derive a great deal of satisfaction in providing such an important public service. Our attorneys will work closely with the SEC and CFTC throughout their investigation, assisting in all facets, in order to ensure that you maximize your reward.
If you have knowledge of securities law violations and would like to discuss the possibility of a whistleblower award under the SEC or CFTC whistleblower programs, please contact our SEC whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.