SEC Whistleblower Rules
When the Securities and Exchange Commission (SEC) implemented the provisions of the Dodd-Frank Act, the criteria (known as the “Rules”) for becoming a whistleblower eligible for an award were very specific.
Not only were whistleblowers no longer required to report possible securities law violations to internal compliance programs as laid out in the Sarbanes-Oxley Act (SOX), but Dodd-Frank also provided strict protections for whistleblowers from retaliation by the violating company.
If you are considering blowing the whistle and are interested in receiving an award for your efforts, you need to meet the following SEC whistleblower rules.
A whistleblower can be anyone with knowledge of a securities law violation. This includes employees, suppliers, customers, financial advisors, investors, and outsiders who may have gained access to delicate information.
You cannot be a whistleblower if you are an executive of the company, an accountant, or a lawyer obligated to protect attorney-client privilege laws. There are specific instances where an attorney can be a whistleblower, but generally speaking, this is frowned upon at the state level.
Provide a Voluntary Tip
The information you provide must be done on a voluntary basis. Essentially, what this means is that you need to expose the violation before the SEC begins investigating the violating company. If they need to request or demand information from you, then you won’t be considered an eligible whistleblower.
The securities fraud violation you are exposing needs to be discovered through your own independent knowledge. The SEC generally considers a tip to be original if you obtained it through your own investigation, observations, or communications that aren’t readily available through a public source.
For instance, if you saw information on the news about your company breaking securities laws, then it is not considered an original tip. In addition, you need to be the original whistleblower, meaning that if another person comes forward before you, you will not be eligible for an award.
Enforceable Action Is Taken
You will be eligible for an award only if the SEC investigation results in a successful action against the violating company specifically through the help of your tip.
If the SEC is already investigating and you have valuable information that can “significantly contribute” to successful judicial action against the violator, you might also qualify for an award.
Minimum of $1 Million Recovered
Even if enforceable action is taken, the only way you will be able to recover an award is if the SEC is able to obtain at least $1 million in sanctions. However, if you were culpable in the securities law violations, this threshold may not be met if the sanctions on the company are based significantly on your conduct.
Contact a Whistleblower Lawyer
We specialize in securities law violations and will advise you on how to proceed in the most effective and secure way possible. Schedule your free, confidential tip evaluation with us by filling out the form at the bottom of this page or by giving us a call at 1-866-764-3100.