Order Awarding $54 Million to Two SEC Whistleblowers Provides Three Lessons for Whistleblowers

SEC Announces Second-Largest Award in the History of the SEC Whistleblower Program On September 6, 2018, the SEC issued an order awarding a total of … Continued

What is the SEC Whistleblower Process to Obtain an SEC Whistleblower Award?

The SEC whistleblower process is lengthy and complex. This article details the 10 steps in the SEC whistleblower process to obtain an award.

An experienced SEC whistleblower attorney can skillfully guide you through the SEC whistleblower process, increasing the likelihood of receiving and maximizing an SEC whistleblower award. For more information about how we have helped our clients obtain multi-million dollar SEC whistleblower awards, see our article: How the Best SEC Whistleblower Law Firms Advocate for SEC Whistleblowers.

In conjunction with our courageous clients, our SEC whistleblower lawyers have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies, and return funds to defrauded investors.

Contact us today to find out the strategies that we have successfully employed to secure SEC whistleblower awards for our whistleblower clients.

Recently the Association of Certified Fraud Examiners published a profile of SEC whistleblower lawyer Matt Stock’s success working with whistleblowers to fight fraud:

SEC Whistleblower Program and Awards

SEC whistleblower bounties or awards Under the SEC Whistleblower Program, the SEC is required to pay awards to eligible whistleblowers who voluntarily provide the SEC with original information that leads to a successful enforcement action resulting in monetary sanctions in excess of $1 million.

A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected. If represented by an attorney, a whistleblower may submit a tip anonymously to the SEC.

Since 2012, the SEC has issued more than $1.8 billion in awards to whistleblowers.

If you have information that may qualify for an SEC whistleblower award, contact the Director of Zuckerman Law’s SEC whistleblower practice at [email protected] or call our SEC whistleblower attorneys at (202) 930-5901 or (202) 262-8959.

All inquiries to our firm are kept confidential.

We focus on providing the SEC high-quality TCR submissions — ones that are specific, credible and timely—are most likely to lead to a successful enforcement action.

Tips to Successfully Navigate the SEC Whistleblower Process

SEC whistleblower success While the SEC Whistleblower Program has proven successful at exposing and halting violations of the federal securities laws, the process is complex and many whistleblowers have been denied awards for failing to follow the SEC whistleblower rules. Out of the more than 52,000 tips filed since August 2011, the SEC Office of the Whistleblower has paid awards to 230 whistleblowers.

10-Step Summary of the SEC Whistleblower Process

Below is a 10-step summary of the SEC whistleblower process. Please note this is a general overview that does not address a multitude of considerations that whistleblowers and their attorneys should consider during the process. Whistleblowers should contact an experienced SEC whistleblower attorney for a detailed, fact-specific analysis of the process as it relates to their claim and potential whistleblower award. Click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:

Step 1. Submit a Tip to the SEC

To qualify for an award under the SEC Whistleblower Program, the SEC requires eligible whistleblowers and/or their attorneys (whistleblowers may file anonymously if represented by an attorney) to submit tips regarding violations of the federal securities law in one of two ways:

By submitting a tip electronically through the SEC’s Tips, Complaints and Referrals (TCR) Portal; or
By mailing or faxing a Form TCR to the SEC Office of the Whistleblower.

Since 2011, the SEC Office of the Whistleblower has received more than 52,000 tips. In FY 2021 alone, the SEC received more than 12,000 tips. As the SEC has limited resources to review all submissions, it is imperative that SEC whistleblowers and their attorneys frame their tips in a way that will be more likely to get the SEC’s attention. According to the SEC’s FY 2020 Annual Report to Congress:

In general, whistleblower tips that are specific, credible, and timely, and which are accompanied by corroborating documentary evidence, are more likely to be forwarded to investigative staff for further analysis or investigation. For instance, if the tip identifies individuals involved in the scheme, provides examples of particular fraudulent transactions, or points to non-public materials evidencing the fraud, the tip is more likely to be assigned to Enforcement staff for investigation. Tips that make blanket assertions or general inferences based on market events are less likely to be forwarded to or investigated by Enforcement staff.

In addition, and as a practical matter, whistleblowers are more likely to have their tips reviewed and acted on if they have an experienced SEC whistleblower lawyer advocating for them. For more information on submitting a TCR to the SEC, see our article: 5 Tips for SEC Whistleblowers and Lessons Learned from SEC Whistleblower Awards.

Step 2. Tip Analysis/Investigation

The SEC’s Office of Market Intelligence (OMI) evaluates incoming whistleblower tips, focusing on TCRs that contain specific, credible, and timely information. If OMI determines that a TCR warrants further investigation, OMI will assign the tip to one of the SEC’s regional offices, a specialty unit, or to an Enforcement group in the SEC’s Home Office. TCRs that relate to an existing investigation are forwarded to the staff working on the matter.

At this stage in the SEC whistleblower process, the SEC will frequently request to interview whistleblowers and/or their attorneys to, among other things, clarify aspects of the TCR, discuss evidence, and identify potential witnesses. After interviews, whistleblowers and their attorneys will often provide the SEC with additional information and materials to support and bolster their initial TCR.

As a matter of policy, the SEC conducts its investigations on a confidential basis. The purpose of this is to:

protect the integrity of any investigation from premature disclosure; and
protect the privacy of the persons involved in an investigation.

Accordingly, there may be very limited information that the SEC can share with you or your attorney regarding what action, if any, the SEC has taken in response to your TCR.

Step 3. SEC Enforcement Action

As of FY 2020, the SEC was tracking more than 1,100 matters in which a whistleblower’s TCR caused a Matter Under Inquiry (MUI) or investigation to open, or has been forwarded to Enforcement staff for review and consideration in connection with an ongoing investigation. Some of these matters may result in successful enforcement actions with total monetary sanctions in excess of the $1 million threshold.

Step 4. Noticed of Covered Actions Posted

At the end of each month, the Office of the Whistleblower posts Notices of Covered Action for each SEC action where a final judgment or order resulted in monetary sanctions exceeding $1 million. Whistleblowers who submitted TCRs that led to the successful enforcement actions are eligible to apply for awards at this time.

Step 5. Submit an Application for an Award

Once a Notice of Covered Action is posted, whistleblowers have 90 calendar days to apply for an award by submitting a completed Form WB-APP to the SEC Office of the Whistleblower. In the Form WB-APP, whistleblowers and their attorneys are required to, among other things, explain why they are entitled to an award in connection with their TCR. Experienced SEC whistleblower attorneys will also provide a detailed analysis of the significant factors that the SEC considers when determining whether to increase or decrease the percentage of a whistleblower’s awards.

Step 6. Preliminary Award Determinations Issued

After a whistleblower applies for an award, the SEC Office of the Whistleblower’s Claims Review Staff will review the application in accordance with the rules of the program and make a preliminary award determination. This determination will recommend whether to issue an award and the proposed award amount. The Claims Review Staff may base this determination on:

The Form TCR;
The Form WB-APP;
Sworn declarations from the SEC staff that worked on the enforcement action;
The enforcement action’s orders and pleadings; and
Other appropriate materials identified in 17 C.F.R. § 240.21F-12(a).

As detailed in a recent WSJ article, it currently takes the SEC more than 2 years to make this preliminary determination. However, the SEC has adopted rule amendments in September 2020 that will significantly speed up this process in the future.

For more information on the timing of SEC whistleblower claims, see our FAQ: How long does it take to receive an SEC whistleblower award?

Step 7. Contesting a Preliminary Determination

After the Claims Review Staff makes its preliminary determination, it will send the whistleblower a written notification of the determination and an explanation of the whistleblower’s rights in the awards claims process. At this point, the whistleblower will have 30 calendar days to:

Request the record that was used by the Claims Review Staff in making the preliminary determination; and/or
Request a meeting with the SEC Whistleblower Office staff to discuss the preliminary determination (however, such meetings are not required and the office may decline the request).

If the whistleblower decides to contest a preliminary determination, he or she must appeal the determination within 60 calendar days of the later of: (i) the date of the preliminary award determination, or (ii) the date when the SEC Whistleblower Office made materials available for review.

Step 8. Final Orders Issued/Resolution of Appeals

If a whistleblower appeals the SEC’s preliminary determination, the Claims Review Staff will consider the whistleblower’s response, along with any supporting documentation provided, and will make its proposed final determination.

After issuing a proposed final determination, any Commissioner can review the proposed final determination within 30 days. If no Commissioner requests a review within the 30-day period, then the proposed final determination will because the final order of the Commission.

If a whistleblower chooses not to appeal a preliminary determination, or fails to appeal in a timely manner, the preliminary determination will become the SEC’s final order (except where the preliminary determination recommends granting an award, in which case it will become a proposed final determination subject to the above-mentioned 30-day Commissioner approval).

Notably, a whistleblower’s failure to contest a preliminary determination will constitute a failure to exhaust administrative remedies, and the whistleblower will be prohibited from appealing the determination to a United States Court of Appeals.

Step 9. Awards Issued from Investor Protection Fund

Once the SEC issues a final order granting an award, all payments are made out of an investor protection fund, which was established pursuant to Section 21F(g) of the Dodd-Frank Act to fund the payment of awards to whistleblowers. The investor protection fund is financed entirely through monetary sanctions paid to the SEC by securities law violators, and no money is taken or withheld from harmed investors to pay whistleblower awards. See 15 U.S.C. § 78u-6(g)(1)-(4). See some of the SEC whistleblower cases that have resulted in multi-million dollar awards.

Step 10. Appealing the SEC’s Final Orders

If the SEC denies an award to a whistleblower, the whistleblower may file an appeal in an appropriate United States Court of Appeals (either the United States Court of Appeals for the District of Columbia Circuit, or to the circuit where the aggrieved person resides or has his or her principal place of business) within 30 days of the decision being issued.

If the SEC issues an award to the whistleblower of between 10 to 30 percent of the monetary actions collected in the action, the whistleblower may not appeal the award determination if the award was made in accordance with subsection (b). See Rule 21F-13.

Tips to Qualify for an SEC Whistleblower Award

How to Report Information to the SEC Whistleblower Program and Qualify for an SEC Whistleblower Award

The SEC whistleblower process is lengthy and complex. See below for articles responding to frequently asked questions by SEC whistleblowers.

SEC Whistleblower Lawyers Helping Whistleblowers Successfully Navigate the SEC Whistleblower Process

As discussed in our articles, the SEC whistleblower program has become a very effective enforcement tool for the SEC. But very few whistleblowers have received awards, which underscores the importance of having experienced counsel represent a whistleblower effectively at the SEC.

Whistleblower Protections for SEC Whistleblowers

Click here to learn more about anti-retaliation protections for SEC whistleblowers under the Dodd-Frank Act and Sarbanes-Oxley Act.

What Damages Can Whistleblowers Recover in Dodd-Frank Whistleblower Retaliation Cases?

Dodd-Frank SEC Whistleblower Protection Lawyers

The courageous whistleblowers we represent put a lot on the line when they disclose fraud or other securities law violations to their employers or the SEC. Unfortunately, retaliation against whistleblowers remains all too prevalent at many companies. According to the Ethics & Compliance Initiative’s Global Business Ethics Survey, more than one in three employees who reported misconduct experienced retaliation.

This FAQ provides an overview of Dodd-Frank whistleblower protections for SEC whistleblowers.

Our experienced and effective Dodd-Frank SEC whistleblower retaliation lawyers have obtained substantial damages for whistleblowers in retaliation matters and obtained awards for whistleblowers. Contact us today to find out about your options under the Dodd-Frank Act to combat whistleblower retaliation and how to maximize your recovery.

Click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:

Does the Dodd-Frank Act anti-retaliation provision protect whistleblowers that disclose potential violations of securities law to the SEC?

Yes. To qualify for protection under the anti-retaliation provision of the Dodd-Frank Act, a whistleblower must demonstrate that they reported a potential securities law violation to the SEC.

In particular, the Dodd-Frank Act protects three types of whistleblowing:

providing information to the SEC in accordance with the whistleblower incentive section;
initiating, testifying in, or assisting in any investigation or judicial or administrative action of the SEC based upon or related to such information; or
making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002, the Securities Exchange Act of 1934, and any other law, rule, or regulation subject to the jurisdiction of the SEC.

Does the Dodd-Frank Act’s whistleblower protection provision protect internal disclosures (disclosures made to a supervisor, company management, or a corporate compliance program)?

Yes, but only if the whistleblower also disclosed the potential violation to the SEC prior to suffering an adverse action. The Supreme Court held in Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018) that the definition of “whistleblower” in Section 21F(a)(6) of the Exchange Act requires that an individual report a possible securities law violation to the SEC in order to qualify for Dodd-Frank Act protection against retaliation.

Does the Sarbanes-Oxley Act also protect corporate whistleblowers that suffer retaliation for reporting fraud or other potential violations of securities law to the SEC or to an employer?

Section 806 of SOX protects both internal whistleblowing (e.g., reporting securities fraud to a supervisor) and whistleblowing to the SEC. In particular, the whistleblower protection provision of SOX prohibits employers from retaliating against whistleblowers for reporting to law enforcement, regulatory authorities, Congress, or the employee’s supervisor suspected mail fraud, wire fraud, bank fraud, securities fraud, a violation of any rule or regulation of the SEC, or any provision of federal law relating to fraud against shareholders.

Unlike the Dodd-Frank Act, the whistleblower protection provision of SOX does not require the whistleblower to have disclosed the potential violation to the SEC. It protects an individual who disclosed a possible violation only to their employer.

For more information about SOX whistleblower protection, download our guide Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.

This table identifies some of the major differences between the anti-retaliation provisions of SOX and Dodd-Frank. To maximize the potential recovery, a whistleblower could initially bring a SOX claim at OSHA and subsequently remove it to federal court and also bring a Dodd-Frank retaliation claim. Doing so could enable the whistleblower to recover double back pay and uncapped special damages.

	SOX	Dodd-Frank
Scope of coverage	Any company with a class of securities registered under section 12 of the Securities Exchange Act of 1934, or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934, including any subsidiary or affiliate whose financial information is included in the consolidated financial statements of such company, or nationally recognized statistical rating organization, or any officer, employee, contractor, subcontractor, or agent of such company.	Any employer
Protection for internal whistleblowing	Yes	Internal whistleblowing protected only if individual has also reported a possible securities violation to the SEC
Protection for whistleblowing to SEC	Yes	Yes
Statute of Limitations	180 days	6 years
Administrative exhaustion	Must file initially with OSHA	None
Arbitration	Exempt from mandatory arbitration	Not exempt
Back pay	Ordinary back pay	Double back pay
Special damages for emotional distress and reputational harm	Available	Not available

What acts of retaliation are prohibited under the Dodd-Frank anti-retaliation law?

Does the Dodd-Frank whistleblower protection law require a whistleblower to demonstrate that the employer knew about the whistleblower’s disclosure to the SEC?

No. In Digital Realty, the Supreme Court held that where an employee blows the whistle to the SEC and subsequently reports the misconduct to the employer and then suffers retaliation because of the internal disclosure (not because of the disclosure to the SEC, which the retaliating employer is unaware of), the internal disclosure is protected under Dodd-Frank even where the employer does not know that the employee reported a possible securities law violation to the SEC:

[Dodd-Frank] protects a whistleblower who reports misconduct both to the SEC and to another entity, but suffers retaliation because of the latter, non-SEC, disclosure. That would be so, for example, where the retaliating employer is unaware that the employee has alerted the SEC. In such a case, without clause (iii), retaliation for internal reporting would not be reached by Dodd-Frank, for clause (i) applies only where the employer retaliates against the employee “because of” the SEC reporting. §78u–6(h)(1)(A). Moreover, even where the employer knows of the SEC reporting, the third clause may operate to dispel a proof problem: The employee can recover under the statute without having to demonstrate whether the retaliation was motivated by the internal report (thus yielding protection under clause (iii)) or by the SEC disclosure (thus gaining protection under clause (i)).

What damages can an SEC whistleblower recover in a SOX or Dodd-Frank whistleblower retaliation case?

Are auditors and compliance personnel protected from whistleblower retaliation?

Yes, but individuals who are integral to a company’s compliance will not be protected under Dodd-Frank when they initially make a mandatory internal disclosure, i.e., they will be protected only when they make a disclosure to the SEC.

Employees whose principal duties involve compliance or internal audit responsibilities, employees of public accounting firms, and officers and directors are eligible for an SEC whistleblower award only if they meet one of the following requirements:

They reasonably believe the disclosure is necessary to prevent conduct that is likely to cause “substantial injury” to the financial interest or property of the entity or investors;
They reasonably believe the entity is engaging in “conduct that will impede an investigation of the misconduct”; or
At least 120 days have passed either since they properly disclosed the information internally, or since they obtained the information under circumstances indicating that the entity’s officers already knew of the information.

Under the third requirement, the whistleblower will not be protected when they make the required internal disclosure. Therefore, if the employer retaliates against the whistleblower before the whistleblower reports the violation to the SEC, Dodd-Frank would not protect the whistleblower. But the whistleblower could likely bring a SOX retaliation claim.

Click here to read about whistleblower protections and incentives for auditors and accountants.

Should a corporate whistleblower suffering retaliation bring a claim under Dodd-Frank, Sarbanes-Oxley, or both whistleblower protection laws?

We recommend bringing claims under SOX and Dodd-Frank to maximize the potential recovery, although the claims cannot be brought simultaneously in federal court (the SOX claim must be filed initially at OSHA). The statute of limitations for a SOX whistleblower claim is just 180 days and this short statute of limitations applies to each discrete adverse employment action, with the exception of hostile work environment claims. Accordingly, if you have suffered retaliation for whistleblowing, it is critical to promptly identify each actionable adverse action and determine the deadline for filing a claim.

There are four advantages to bringing a SOX claim in addition to a Dodd-Frank claim:

Uncapped special damages: The Dodd-Frank Act authorizes economic damages and equitable relief but does not authorize non-economic damages. In contrast, SOX authorizes uncapped “special damages” for emotional distress and reputational harm.
Exemption from mandatory arbitration: SOX provides an unequivocal exemption from mandatory arbitration, but Dodd-Frank claims are subject to arbitration.
Preliminary reinstatement: If an OSHA investigation concludes that an employer violated the whistleblower protection provision of SOX, OSHA can order the employer to reinstate the whistleblower.
Favorable causation standard: A far more generous burden of proof (“contributing factor” causation under SOX, rather than “but for” causation under Dodd-Frank).

There are four advantages to bringing a Dodd-Frank claim in addition to a SOX claim:

Double back pay: Dodd-Frank authorizes an award of double back pay (double lost wages) plus interest, whereas SOX authorizes ordinary back pay with interest along with other damages. Both statutes authorize reinstatement and attorney fees.
Longer statute of limitations: Whereas the statute of limitations for a SOX retaliation claim is just 180 days, the statute of limitations for a Dodd-Frank retaliation claim is six to ten years.
Broader scope of coverage: SOX whistleblower protection applies primarily to employees of public companies and contractors of public companies. The Dodd-Frank prohibition against whistleblower retaliation applies to “any employer,” not just public companies.
No administrative exhaustion: In contrast to SOX, Dodd-Frank permits a whistleblower to sue a current or former employer directly in federal district court without first exhausting administrative remedies at DOL.

Can a whistleblower obtain a reward for reporting a securities law violation to the SEC?

Yes, under the SEC’s Dodd-Frank whistleblower reward program, a whistleblower who voluntarily provides original information to the SEC that leads to a successful enforcement action that recovers more than $1 million in monetary sanctions is eligible for an award ranging from 10% to 30% of the monetary sanctions collected in the enforcement action.

To learn more about the SEC whistleblower awards, download our guide SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

Is an employee protected against retaliation for providing testimony in an SEC investigation or at a hearing in an administrative or judicial enforcement action?

The whistleblower protection provision of SOX does protect such testimony. The plain meaning of the anti-retaliation provision of Dodd-Frank should also protect the witness, but the SEC might limit Dodd-Frank protection to written disclosures to the SEC. A criminal prohibition against retaliation in Section 1107 of SOX, 18 U.S.C. § 1513(e), could also provide a remedy in that Section 1107 of SOX is a predicate offense under RICO. Section 1107 of SOX provides:

Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense, shall be fined under this title, imprisoned not more than 10 years, or both.

The Seventh Circuit’s decision in DeGuelle v. Camilli, 664 F.3d 192 (7th Cir. 2011) illustrates how a whistleblower suffering retaliation can pursue a RICO action relying on Section 1107 as a predicate offense. To plead a RICO case, the whistleblower must aver (state or assert to be the case) a second predicate act that is related to the Section 1107 violation, e.g., securities fraud. RICO is a potent remedy because it authorizes treble damages (financial compensation that is triple the amount of the actual or compensatory damages).

Another potential remedy for a whistleblower that suffers retaliation for participating in a federal court proceeding is 42 U.S.C. § 1985(2). This civil rights statute prohibits conspiracies to intimidate or retaliate against parties, witnesses or jurors testifying or participating in federal court proceedings. Under 42 U.S.C. § 1985(2), a victim of intimidation or retaliation who suffers injury to “his person or property” can recover damages against the perpetrators of the conspiracy. The Supreme Court held in Haddle v. Garrison, 525 U.S. 121 (1998) that a conspiracy to terminate an employee’s at-will employment constitutes injury to person or property and is therefore actionable under 42 U.S.C. § 1985(2).

Does the SEC enforce the anti-retaliation provision of the Dodd-Frank Act?

Yes, the SEC enforces the anti-retaliation provision of the Dodd-Frank Act, but it does not provide relief for the whistleblower, e.g., the SEC does not obtain lost wages or order reinstatement. Instead, it can take an enforcement action against the registrant for violating the anti-retaliation provision of the Dodd-Frank Act.

The SEC has taken enforcement actions for whistleblower retaliation, and such an action could increase an SEC whistleblower award. In September 2016, the SEC ordered International Game Technology (“IGT”) to pay a $500,000 penalty for terminating the employment of a whistleblower because he reported to senior management and to the SEC that the company’s financial statements might be distorted. See Exchange Act Release No. 78991 (Sept. 29, 2016). During an internal investigation into the whistleblower’s allegations, IGT removed him from opportunities that were integral to his ability to perform his job successfully. IGT then fired the whistleblower the same day as the internal investigation concluded that IGT’s cost-accounting model was appropriate and did not cause its financial statements to be distorted. The whistleblower was protected under the SEC whistleblower program, despite being mistaken, because he reasonably believed that IGT’s cost-accounting model constituted a violation of federal securities laws.

On June 16, 2014, the SEC announced that it was taking enforcement action against Paradigm Capital Management, Inc. (“Paradigm”), a hedge fund advisory firm, for engaging in prohibited principal transactions and for retaliating against the whistleblower who disclosed the unlawful trading activity to the SEC. See Exchange Act Release No. 72393 (June 16, 2014). This was the first case in which the SEC exercised its authority under Dodd-Frank to bring enforcement actions based on retaliation against whistleblowers.

According to the order, Paradigm retaliated against its head trader for disclosing, internally and to the SEC, prohibited principal transactions with an affiliated broker-dealer while trading on behalf of a hedge fund client. The transactions were a tax-avoidance strategy under which realized losses were used to offset the hedge fund’s realized gains.

When Paradigm learned that the head trader had disclosed the unlawful principal transactions to the SEC, it retaliated against him by removing him from his position as head trader, changing his job duties, placing him on administrative leave, and permitting him to return from administrative leave only in a compliance capacity, not as head trader. The whistleblower ultimately resigned his position.

Paradigm settled the SEC charges by consenting to the entry of an order finding that it violated the anti-retaliation provision of Dodd-Frank and committed other securities law violations; agreeing to pay more than $1 million to shareholders and to hire a compliance consultant to overhaul their internal procedures; and entering into a cease-and-desist order.

The SEC’s press release accompanying the order includes the following statement by Enforcement Director Andrew Ceresney: “Those who might consider punishing whistleblowers should realize that such retaliation, in any form, is unacceptable.” The Paradigm enforcement action suggests that retaliation can invite or heighten SEC scrutiny.

Dodd-Frank Act and Sarbanes-Oxley Act Whistleblower Protections for SEC Whistleblowers

Are CFTC (Commodity Futures Trading Commission) whistleblowers protected against retaliation?

Yes. The Dodd-Frank Act prohibits retaliation against a whistleblower for:

providing information to the CFTC in accordance with the rules governing the CFTC whistleblower program; or
assisting in any investigation or judicial or administrative action of the CFTC based upon or related to such information.

The anti-retaliation protections apply whether or not the whistleblower satisfies the requirements, procedures, and conditions to qualify for an award.

The statute of limitations for a CFTC whistleblower retaliation claim is 2 years. Remedies include reinstatement, back pay, and attorney fees.

Click here to learn more about protections for CFTC whistleblowers.

Does the CFTC enforce the anti-retaliation provision in the Dodd-Frank Act?

Yes, the CFTC can take enforcement action against an employer that “retaliates against a whistleblower by discharge, demotion, suspension, direct or indirect threats or harassment, or any other manner of discrimination” because the whistleblower provided “information to the Commission after reporting the information through internal whistleblower, legal or compliance procedures.” 17 C.F.R. 165.20(b).

In addition to SOX, do other whistleblower protection laws protect corporate whistleblowers?

Should a whistleblower report internally before disclosing a violation to the SEC?

Prior to deciding whether to report internally, the whistleblower should carefully weigh several factors, including the risk of retaliation, the employer’s potential inclination to destroy evidence or otherwise cover up a violation, the extent to which senior management is profiting from the violation, and the adequacy of the company’s compliance program. There is a significant incentive to report internally in that a whistleblower who initially reports internally, and reports the same information to the SEC within 120 days, will receive credit for any information the company subsequently self-reports to the SEC.

Dodd-Frank SEC Whistleblower Process

Dodd-Frank SEC Whistleblower Awards

Dodd-Frank SEC Whistleblower Retaliation Lawyers

If you have suffered retaliation for whistleblowing, contact an experienced SEC whistleblower protection attorney at Zuckerman Law for a free, confidential consultation by calling 202-262-8959.

Guide to Dodd-Frank SEC Whistleblower Program

To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:

SEC Whistleblower Retaliation Lawyer's Guide to SOX Whistleblower Protection

For more information about SOX whistleblower protection, see our guide titled Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers:

ABOUT ZUCKERMAN LAW

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We are a Washington, DC-based law firm that represents whistleblowers in whistleblower rewards and whistleblower retaliation matters and litigates discrimination claims on behalf of employees in the District of Columbia, Maryland, and Virginia. The firm is dedicated to zealously advocating on behalf of our clients to achieve justice and accountability.

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SEC Whistleblower Program Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award — **SEC Whistleblower Guide**

SEC Whistleblower Cases Resulting in Awards

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Author: Jason Zuckerman

Since 2012, the SEC has issued nearly $1.3 billion in awards to whistleblowers, which includes awards to our clients totaling millions of dollars. Based on our success representing SEC whistleblowers, our firm’s experienced SEC whistleblower attorneys can provide critical guidance to SEC whistleblowers throughout this process to protect their identities and increase the likelihood that they obtain substantial awards.

The largest SEC whistleblower awards to date are $114 million, $50 million and $50 million. Since the inception of the program, SEC whistleblower cases have enabled the agency to recover more than $2.7 billion in financial penalties from wrongdoers. The details of most SEC whistleblower cases resulting in awards are not publicly available, however, for several reasons:

First, the rules of the SEC Whistleblower program allow whistleblowers to report anonymously to the SEC if represented by an attorney. In fact, in certain circumstances, a whistleblower may remain anonymous, even to the SEC, until an award determination.
Next, even at the time of an award, a whistleblower’s identity is not made available to the public as the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. For example, the SEC does not disclose the specific SEC whistleblower case that resulted in an award because that information could directly or indirectly reveal a whistleblower’s identity. See Section 21F(h)(2) of the Exchange Act.
Finally, most whistleblowers choose not to go public about their award or disclose the enforcement action that led to their award – but not all.

The SEC whistleblower cases identified below represent some of the claims that resulted in an SEC whistleblower award and either the whistleblower’s identity or the enforcement action that led to the award was revealed.

If you have information that you would like to report to the SEC Whistleblower Office, contact the experienced SEC whistleblower lawyers at Zuckerman Law at (202) 262-8959 for a free, confidential case review.

Recently the Association of Certified Fraud Examiners published a profile of SEC whistleblower lawyer Matt Stock’s success fighting fraud:

Click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:

SEC Whistleblower Case Combatting EB-5 Fraud Results in $14.7 Million Award

In late-2012, a whistleblower, Michael Sears, anonymously filed a tip with the SEC about EB-5 fraud in a $147 million project run by Anshoo Sethi. As a result of Sears’ tip, the SEC obtained an emergency court order on February 8, 2012 to freeze the assets of Sethi and his companies in order to protect the investor funds. As detailed in the SEC’s complaint, Sethi raised more than $145 million from investors by making material misrepresentations about the EB-5 project. Then, after raising the funds, Sethi diverted more than $2.5 million to his own personal bank account in Hong Kong.

On April 19, 2013, the court ordered the return of the $147 million to the investors and Sears became eligible to apply for an award. On October 1, 2013, the SEC announced the more than $14 million SEC whistleblower award, however, in accordance with the SEC’s rules, the press release did not disclose Sears or the SEC whistleblower case in connection with the award. Sears’ identity was only revealed after his business partner, John Tung, filed a lawsuit against him alleging Sears owed him part of the multi-million dollar whistleblower award.

SEC Whistleblower Case Exposing Financial Reporting Fraud Results in $16.5 Million Award

Eric Ben-Artzi, a former risk officer at Deutsche Bank, blew the whistle on colleagues’ fraudulently inflating the value of the bank’s portfolio of credit derivatives during the height of the financial crisis. The SEC acted on Ben-Artzi’s tip about financial reporting fraud and ultimately fined the bank $55 million. Due to the success of Ben Artzi’s tip (along with a co-whistleblower), the SEC determined that the whistleblowers were each entitled to a whistleblower award of $8.25 million, totaling $16.5 million.

In a column in the Financial Times, We must protect shareholders from executive wrongdoing, Ben-Artzi announced that he was turning down his share of the award, or at least until certain conditions were met, to ensure that bank executives are held accountable. Ben-Artrzi stated: “Deutsche did not commit this wrongdoing. Deutsche was the victim . . . Meanwhile, top executives retired with multimillion-dollar bonuses based on the misrepresentation of the bank’s balance sheet. It is therefore especially disappointing that in 2015, after a lengthy investigation helped by multiple whistleblowers, the SEC imposed a fine on Deutsche’s shareholders instead of the managers responsible.”

Ben-Artzi requested that his “share of the award be given to Deutsche and its stakeholders, and the award money clawed back from the bonuses paid to the Deutsche executives, especially the former top SEC attorneys.” Once those conditions were met, Ben-Artzi said he would be willing to collect a whistleblower award. Ben-Artzi later accepted the award.

SEC Whistleblower Case Against Monsanto Results in $22M Award for a Former Executive

On February 9, 2016, the SEC announced that Monsanto agreed to pay an $80 million penalty for inadequate internal accounting controls. According to the SEC’s order, the company failed to properly account for millions of dollars in rebates offered to retailers and distributors of Roundup after generic competition had undercut its prices and caused the company to lose significant share in the market. Monsanto booked significant revenue from sales incentivized by the rebate program, but failed to recognize all the related program costs at the same time.

On August 30, 2016, the SEC announced an award of $22 million to a whistleblower “whose detailed tip and extensive assistance helped the agency halt a well-hidden fraud at the company where the whistleblower worked.” In September 2016, the whistleblower surfaced in the media, however, chose to remain anonymous (only disclosing that he was a former Monsanto executive) because he was unsure about his future career path and did not want his involvement in the case to damage it. Like Ben-Artzi, the former executive was frustrated that the SEC did not take action against others at Monsanto who knew about the fraud.

SEC Whistleblower Case Targeting Financial Reporting Fraud Results in $88 Million Award to Three Merrill Lynch Insiders

On March 19, 2018, the SEC announced its largest-ever whistleblower awards, with two whistleblowers sharing a nearly $50 million award and a third whistleblower receiving more than $33 million. The three whistleblowers were later revealed to be employees of Merrill Lynch who exposed that the brokerage was misusing customer cash by holding up to $58 billion a day in a clearing account when it should have been held in reserve. The SEC fined Merrill Lynch $415 million for the violations. See the SEC’s order determining the whistleblowers’ award claims here.

Tips to Successfully Navgate the Process to Qualify for SEC Whistleblower Award

To learn more about the SEC Whistleblower Program, download the eBook SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

SEC Whistleblower Law Firm

Leading whistleblower law firm Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC, and two of the firm’s attorneys served in high-level positions at a government agency that protects whistleblowers. Firm Principal Jason Zuckerman has been named by Washingtonian Magazine as a “Top Whistleblower Lawyer” and the firm has been ranked by U.S. News as a Tier 1 Firm in Labor & Employment Litigation.

Whistleblower law firm Zuckerman Law has substantial experience investigating securities fraud schemes and preparing effective submissions to the SEC concerning a wide range of federal securities violations, including:

To schedule a free preliminary consultation with the SEC whistleblower attorneys at Zuckerman Law, click here or call us at 202-262-8959.

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Can I report financial fraud and receive an SEC whistleblower award?

Whistleblower Awards for Reporting Financial Fraud Yes. Under the SEC Whistleblower Program, eligible whistleblowers may receive monetary awards when they voluntarily provide the SEC with … Continued

What is a whistleblower reward?

Whistleblower Rewards for Reporting Wrongdoing A whistleblower reward is a monetary incentive provided by the government to reward a whistleblower’s disclosure of original information … Continued

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