What Are the Dodd-Frank Whistleblower Rules?
The Dodd-Frank Act established a number of new rules and provisions that govern who can be an SEC whistleblower and be eligible for a reward. These rules aren’t easily interpreted by a layperson, however, which is why we’ve fully described what each whistleblower rule means below:
According to Dodd-Frank, potential whistleblowers are limited to “eligible persons.” In general, employees of companies can report any securities fraud or conduct they encounter that could harm investors, whether directly or indirectly. This applies to past, current, and future violations.
It’s important to note that whistleblowers are not required to be company insiders, however. People who deal with the company as consultants, customers, and more are all eligible to become whistleblowers, as is anyone who discovers fraud through independent analysis.
Entities such as corporations and companies are not allowed to become whistleblowers, however. Nor are foreign officials or regulatory officials who work for the US government.
Additionally, attorneys and auditors who work with the guilty company will only be able to become whistleblowers under certain conditions. Attorneys, for example, can only blow the whistle if their information isn’t protected by attorney-client privilege.
Finally, someone who is convicted of a crime in relation to the fraud reported to the SEC will also not be eligible for a whistleblower reward. However, someone who is culpable but not convicted or prosecuted could still receive a reward, although the culpability will likely reduce the amount awarded.
Whistleblowers cannot expect a reward if they were forced to divulge their information. To receive a financial reward from the SEC, your tip must be voluntarily submitted.
If the information you supply was in response to a request, demand, or inquiry from the SEC or some other regulatory or investigatory body, your tip will not count as voluntary.
However, if the demand for information was made of a company or corporation that refused to comply, you might be able to submit a tip independently that would then be considered voluntary.
Valid whistleblower tips contain original information. This means both that the information is not publicly available and that the SEC is not already aware of it. This rule makes it essential to submit a whistleblower tip as quickly as possible, as the SEC will essentially award whistleblowers on a “first come” basis.
It’s important to note, however, that you can provide information that supplements an ongoing investigation and be eligible for a whistleblower award. As long as you provide original information that adds something new and valuable, you might qualify.
Successful Enforcement Actions
Submitting a whistleblower tip to the SEC will have one of three broad results:
- The SEC does not launch an investigation into the allegations of securities fraud
- The SEC launches an investigation but finds no misconduct or fraud
- The SEC launches an investigation, confirms the alleged misconduct, and sanctions the guilty party
Only the third result will potentially result in a whistleblower reward under the Dodd-Frank rules. If no fraud is found or if the SEC declines to investigate, you can’t receive a reward.
Sanctions of One Million Dollars or More
A successful enforcement action is not enough to yield a whistleblower reward, however. In order to receive a bounty for your whistleblower tip, the sanctions applied by the SEC must recover one million dollars or more.
If this monetary threshold is met and you meet the other criteria described above, you can receive a whistleblower reward worth 10 to 30 percent of the total sanctions recovered.
Help with Your SEC Whistleblower Tip
If you think your information meets the Dodd-Frank rules, or if you want to find out if it does, contact Meissner Associates for a free and fully confidential tip evaluation. Just complete the form below or call 1-866-764-3100.