International SEC Whistleblower Attorneys: Representing Whistleblowers Worldwide

The leading international SEC whistleblower lawyers at Zuckerman Law have extensive experience representing SEC whistleblowers both domestically and internationally. If you have original information about a potential violation of the U.S. federal securities laws, contact an international SEC whistleblower attorney at leading SEC whistleblower law firm Zuckerman Law for a free, confidential case review by calling +1 (202) 930-5901 or +1 (202) 262-8959.

We also help whistleblowers worldwide report money laundering to FinCEN under the recently enacted Anti-Money Laundering Act whistleblower rewards program.

We can help you report anonymously and qualify for an award. The largest SEC whistleblower awards to date are $279 million, $114 million and $110 million.

The international SEC whistleblower attorneys at Zuckerman Law counsel whistleblowers worldwide, including in Australia, China, Europe, India, Angola, Central America, the United Kingdom, the Middle East, Afghanistan, Argentina, and Canada, and currently represent whistleblowers worldwide in assisting the SEC in active investigations and litigation. We helped a whistleblower abroad obtain a multi-million dollar SEC whistleblower award.

In FY 2021, the successful whistleblowers recognized by the Commission hailed from six continents. In total, approximately 20% of the meritorious claimants in FY 2021 were based outside of the United States.

The SEC continues to vigorously combat fraud worldwide where the fraud harms US investors or impairs market integrity.  In April 2022, the SEC announced charges against 16 defendants, located in the Bahamas, the British Virgin Islands, Bulgaria, Canada, the Cayman Islands, Monaco, Spain, Turkey, and the United Kingdom, for participating in multi-year fraudulent penny stock schemes that generated more than $194 million in illicit proceeds. The SEC investigations leading to these charges involved assistance from securities regulators and other law enforcement authorities in more than 20 countries.

Since the inception of the SEC whistleblower program, the SEC has received whistleblower tips from individuals in approximately 133 countries outside the United States. In FY 2021 alone, the SEC received whistleblower submissions from individuals in 99 foreign countries. 

In September 2020, the SEC issued awards to two whistleblowers for reporting violations occurring overseas.  The press release announcing the awards notes the important contributions of whistleblowers:

“Misconduct occurring overseas can have a major impact on U.S. markets while at the same time remaining hard to detect.  Today’s awards demonstrate the unique ability of whistleblowers to help the SEC uncover and pursue these cases,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.

SEC Whistleblower Program: Process to Qualify for an SEC Whistleblower Award 

Under the SEC Whistleblower Program, whistleblowers are eligible for monetary awards when they provide original information to the SEC about violations of federal securities laws. Whistleblowers are eligible to receive between 10% and 30% of the total monetary sanctions collected if their tip leads to a successful enforcement action with monetary sanctions in excess of $1,000,000.

Since 2012, the SEC Whistleblower Office has awarded more than $1.3 billion to whistleblowers. According to the Corruption Perceptions Index, a majority of countries are making little or no progress in ending corruption. As the SEC Whistleblower Program continues its worldwide outreach, we expect to see an increase in both tips and awards to international whistleblowers.

For more information about the success of the SEC Whistleblower Program, see our column in Forbes: One Billion Reasons Why The SEC Whistleblower-Reward Program Is Effective. Also, click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:

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

Whistleblowers need not be U.S. citizens to be eligible for SEC whistleblower awards

Regardless of citizenship, whistleblowers who provide original information that leads to enforcement actions with total monetary sanctions of more than $1 million may be eligible for an award of between 10% and 30% of the total sanctions imposed.

Since the beginning of the whistleblower program, submissions to the SEC have come from whistleblowers in 130 countries outside of the United States. In 2020 alone, the SEC received tips from whistleblowers in 78 foreign countries. The SEC Whistleblower Office has received the highest number of tips from whistleblowers in the:

• United Kingdom,
• Canada,
• Germany,
• China,
• India, and
• Australia.

One of the largest awards to date – more than $30 million – was issued to a whistleblower living in a foreign country.

How to Qualify for an SEC Whistleblower Award

What violations qualify for an award from the SEC Whistleblower Program?

Any violation of U.S. federal securities laws qualifies for an award under the SEC Whistleblower Program, including:

• Accounting fraud;
• Investment and securities fraud;
• Insider trading;
• Foreign bribery and other FCPA violations;
• EB-5 investment fraud;
• Manipulation of a security’s price or volume;
• Fraudulent securities offerings and Ponzi schemes;
• Hedge fund fraud;
• Unregistered securities offerings;
• Investment adviser fraud;
• Broker-dealer anti-money laundering program violations;
• False or misleading statements about a company or investment;
• Inadequate internal controls;
• Deceptive non-GAAP financial measures;
• Improper revenue recognition;
• Violations of auditor independence rules; and
• Blockchain fraud.

Can I submit an anonymous tip to the SEC Whistleblower Office?

The SEC Whistleblower Program allows whistleblowers to submit anonymous tips if represented by an attorney. In addition, if the SEC opens an investigation based on a whistleblower’s tip, it will go out of its way to protect a whistleblower’s confidentiality. In certain circumstances, whistleblowers may fear retaliation and an experienced SEC whistleblower attorney can skillfully guide whistleblowers through the process, maximizing the likelihood that their identity is not revealed to unauthorized parties. For more information about the SEC whistleblower process, see the SEC’s investor bulletin on SEC investigations.

For more information about the SEC Whistleblower Program, download the eBook Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award and listen to the recent podcast episode of inSecurities Inside the World of Whistleblowers.

Whistleblower Protection for U.S. Employees Working Abroad

In addition to representing whistleblowers before the SEC, CFTC and IRS, we represent corporate whistleblowers in retaliation claims, including claims brought under the following laws:

• Sarbanes-Oxley whistleblower retaliation claims;
• False Claims Act retaliation claims;
• Consumer Financial Protection Act retaliation claims; and
• NDAA retaliation claims.

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

Frequently Asked Questions About the SEC Whistleblower Program 

1. What is the SEC Whistleblower Program?
2. What is the SEC Office of the Whistleblower?
3. What are the largest SEC whistleblower awards?
4. Can I submit an anonymous tip to the SEC Office of the Whistleblower?
5. What exactly does anonymous whistleblowing entail?
6. What employment protections are available for SEC whistleblowers?
7. What violations qualify for an SEC whistleblower award?
8. Can the SEC bring enforcement actions against international schemes?
9. Who is an “eligible” SEC whistleblower?
10. Can compliance personnel, auditors, officers or directors qualify for SEC whistleblower awards?
11. Can I submit a claim if I had some involvement in the fraud or misconduct?
12. Can culpable whistleblowers qualify for SEC whistleblower awards?
13. Do I have to report a potential violation to my company before reporting it to the SEC?
14. What type of evidence should I provide to the SEC?
15. Can I use confidential company documents to expose fraud?
16. Can I disclose secret recordings to the SEC?
17. Can I submit a tip if I agreed to a confidentiality provision in an employment/severance agreement?
18. When is the best time to report the fraud or misconduct to the SEC?
19. What is “original information”?
20. Can I submit an SEC Whistleblower claim if the SEC already has an open investigation into the matter?
21. How might my information “lead to” a successful SEC enforcement action?
22. What “related actions” qualify for an SEC whistleblower award?
23. How do the best SEC whistleblower law firms advocate for whistleblowers?
24. How do I choose the best whistleblower attorney?
25. Why should I choose the Zuckerman Law to represent me in my SEC whistleblower claim?
26. How do I submit a tip to the SEC Office of the Whistleblower?
27. What happens after I submit a tip to the SEC?
28. What factors does the SEC consider when determining the amount of the award?
29. What happens after I apply for an SEC whistleblower award?
30. How long does it take to receive an SEC whistleblower award?

SEC Whistleblower Law Firm Representing Whistleblowers Internationally

The experienced SEC whistleblower lawyers at Washington DC whistleblower law firm Zuckerman Law have successfully represented whistleblowers in whistleblower rewards and whistleblower rewards matters before the SEC and DOL concerning fraud, bribery, and other securities law violations that occurred in the U.S. and abroad.

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.

To learn more about the SEC Whistleblower Program, see the following resources:

• Tips for SEC Whistleblowers
• See our column in Going Concern: Sarbanes-Oxley 15 Years Later: Accountants Need to Speak Up Now More Than Ever.
• See our post in Accounting Today: Whistleblower Protections and Incentives for Auditors and Accountants.
• See our article providing Tips for SEC Whistleblowers
• See our post in The Compliance and Ethics Blog: Shkreli Trial Reveals the Challenges Faced by Compliance Whistleblowers.

Will I get a reward for reporting fraud being committed by my employer?

  Whistleblower rewards programs at federal agencies authorize the payment of awards to corporate whistleblowers, including the whistleblower reward programs at the SEC, IRS, CFTC, and … Continued

SEC Whistleblower Attorneys

The SEC whistleblower attorneys at Zuckerman Law, one of the nation’s leading law firms representing whistleblowers in whistleblower rewards and whistleblower retaliation claims, routinely work with whistleblowers worldwide to investigate and disclose a wide variety of fraudulent schemes. Under the SEC’s whistleblower program, individuals are eligible to receive an award if they:

(1) report a violation to the SEC (whistleblower can report anonymously if represented by counsel); and

(2) the information leads to a successful enforcement action with total civil penalties in excess of $1 million.

The whistleblower will be eligible to receive an award of between 10-30 percent of the total penalties imposed.

Since the inception of the SEC Whistleblower Program, the SEC has received more than 52,400 whistleblower tips and awarded approximately $1.1 billion to 226 individuals, including awards paid to our clients.

During FY 2021, the SEC awarded approximately $564 million to 108 individuals —both the largest dollar amount and the largest number of individuals awarded in a single fiscal year. The two largest SEC whistleblower awards in the program’s history were paid in FY 2021 — a $114 million award to one whistleblower in October 2020 and a $110 million award to another in September 2021.

Click on our guide to the SEC Whistleblower Program to see some of our tips for SEC whistleblowers.

Securities Violations That Qualify for an SEC Award 

Any violation of federal securities laws qualifies for an award under the SEC Whistleblower Program. The SEC has broad jurisdiction over both public and private entities. The most common tips that the SEC receives involve violations in public filings, investment violations, and insider trading tips. However, other notable areas of SEC enforcement include things such a foreign bribery, EB-5 fraud, and even auditor independence violations.

• Accounting fraud;
• Inadequate internal controls;
• Investment company fraud;
• Insider trading;
• EB-5 investment fraud;
• Foreign bribery payments and other violations of the Foreign Corrupt Practices Act;
• Market manipulation schemes;
• Unregistered broker-dealers;
• Investment adviser fraud;
• Offering fraud and Ponzi schemes;
• Deceptive non-GAAP financial measures; and
• Violations of auditor independence rules.

Since 2011, the SEC Whistleblower Office has received over 18,00 tips, some of which led to enforcement actions resulting in a total of over $584 million in sanctions (including more than $346 million in disgorgement and interest).

Contact the SEC Whistleblower Attorneys at Zuckerman Law 

If you are seeking representation in an SEC whistleblower case, click here, or call us at 202-262-8959 to schedule a free, confidential consultation.  U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area.

Click here to read reviews from clients that we have represented in whistleblower rewards and whistleblower retaliation matters.

Qualifying for an SEC Whistleblower Award

Process to Obtain an SEC Whistleblower Award

Have you witnessed corporate misconduct involving commodities or security fraud, tax underpayment, fraud on the government, or other corporate fraud? Did you know you could be entitled to a reward and legal protection for reporting fraud?

Congress has enacted several laws that provide financial incentives to whistleblowers and protect whistleblowers from retaliation. Under these laws, whistleblowers have helped our government recover more than 30 billion dollars and have enabled regulators and prosecutors to halt ongoing fraud. Now, you can do the right thing and potential obtain a substantial award, and you can report fraud anonymously through an attorney in many cases.

Under the Securities and Exchange Commission and Commodity Futures Trading Commission whistleblower programs, you can receive a reward up to 30 percent for tips leading to monetary sanctions in excess of 1 million dollars. If the IRS uses the whistleblower’s information to collect more than 2 million dollars in owed taxes, the whistleblower may receive a reward of up to 30 percent of the collected proceeds.

If you’re thinking about blowing the whistle, it is critical to hire an experienced attorney to maximum your ability to obtain a whistleblower reward and to protect you from retaliation. The whistleblower attorneys at Zuckerman Law in Washington, D.C. represent corporate whistleblowers nationwide and work diligently to obtain the maximum recoveries for their clients in both whistleblower reward and whistleblower protection claims. The attorneys at Zuckerman Law have been representing whistleblowers before the SEC and Department of Justice for more than a decade concerning a wide variety of complex fraud schemes, including market manipulation, financial statement fraud, and contractor fraud. Zuckerman Law also represents whistleblowers in retaliation claims, including claims under the Sarbanes Oxley Act.

Don’t live in fear. Do the right thing. Call the whistleblower lawyers at Zuckerman Law today at 202-262-8959 or go to our website, www.zuckermanlaw.com, to learn more about whistleblower rights and protections. At Zuckerman Law, we work to protect you and get you the reward you deserve.

Whistleblower Rewards and Bounties for Disclosures of Market Manipulation Schemes

Recently, the CFTC and SEC have stepped up enforcement actions to prevent market manipulation schemes. The SEC defines manipulation as “intentional conduct designed to deceive … Continued

SEC Targeting Investment Adviser Fraud

On February 2, 2017, the SEC charged an investment advisory business and its owner, Mark Varacchi, with stealing at least $3.9 million from investors. According … Continued

Compliance Personnel, Auditors, Officers and Directors Can Obtain SEC Whistleblower Awards

Many key compliance personnel, including internal auditors, external auditors, officers, and directors may incorrectly assume that they are not eligible for awards under the SEC Whistleblower Program. In certain … Continued

Washington, D.C. SEC Whistleblower Attorney – Tier 1 Law Firm

The SEC whistleblower attorneys at Zuckerman Law, a Washington, D.C.-based  law firm, represent SEC whistleblowers both domestically and internationally.  The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate complex financial fraud schemes and prepare effective TCR submissions that lead to SEC enforcement actions.  Zuckerman Law has helped whistleblowers report a wide variety of fraudulent schemes, including:

• Accounting fraud;
• Investment and securities fraud;
• Insider trading;
• Foreign bribery and other FCPA violations;
• EB-5 investment fraud;
• Manipulation of a security’s price or volume;
• Fraudulent securities offerings and Ponzi schemes;
• Hedge fund fraud;
• Unregistered securities offerings;
• Investment adviser fraud;
• Broker-dealer anti-money laundering program violations;
• False or misleading statements about a company or investment;
• Inadequate internal controls;
• Deceptive non-GAAP financial measures;
• Improper revenue recognition;
• Violations of auditor independence rules;
• Misleading or incomplete cybersecurity disclosures; and
• Blockchain or initial coin offering fraud.

If you have original information that you would like to report to the SEC Office of the Whistleblower, contact the Director of our SEC Whistleblower Practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959. All inquiries are confidential.

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.

In contrast to many other SEC whistleblower law firms, our team of SEC whistleblower lawyers includes a Certified Public Accountant and Certified Fraud Examiner with substantial experience auditing public companies and investigating complex fraud schemes.

We understand the many challenges that the SEC faces in investigating our clients’ disclosures and take measures to increase the likelihood that the SEC will be able to effectively pursue the disclosures that our SEC whistleblower lawyers provide on behalf of our clients.

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

Click below to hear SEC whistleblower attorney Matthew Stock’s tips for SEC whistleblowers:

SEC Whistleblower Awards

Under the SEC Whistleblower Program, whistleblowers may be eligible for monetary awards when they voluntarily provide the SEC with original information about violations of federal securities laws. A whistleblower is eligible to receive between 10% and 30% of the monetary sanctions collected if their tip leads to a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.

The SEC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Whistleblowers may submit a tip anonymously through an SEC whistleblower attorney. There is no citizenship requirement to quaify an SEC whistleblower award.

Since Dodd-Frank became effective, the SEC has issued more than $1.9 billion in awards to 397 whistleblowers, which includes awards to our clients totaling millions of dollars. The top SEC whistleblower attorneys can provide critical guidance to whistleblowers throughout this process to protect their identities and increase the likelihood that they not only obtain, but maximize, their awards.

Largest SEC Whistleblower Awards

The table below identifies some of the larger awards that the SEC has provided to whistleblowers:

SEC Whistleblower Attorney

The SEC whistleblower attorneys at Zuckerman Law will work to quickly provide the highest-quality representation. It is critical that whistleblowers provide timely information to the SEC to maximize the potential of an SEC award. The attorneys will also use lessons drawn from our previous experience representing SEC whistleblowers to offer critical guidance on how to:

(1) maximize the probability of recovering an award; and

(2) maximize the award percentage.

If you have information that you would like to report to the SEC, contact an experienced SEC whistleblower attorney at Zuckerman Law for a free, confidential consultation about your case by calling 202-262-8959.

Tip #1: Quickly Determine Eligibility

Analyzing an individual’s eligibility is complex. The analysis differs depending on the individual’s relation to the company and how the individual obtained the information. For example, auditors may report to the SEC and be eligible for an award if:

• they have a reasonable basis to 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 have a reasonable basis to 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.

Eligibility depends on various factors. If whistleblowers are uncertain about their eligibility, then they should consult with an experienced SEC whistleblower attorney. A skillful analysis may be the difference between a multimillion-dollar whistleblower award and no award at all.

Tip #2: Protect Yourself 

Many whistleblowers risk being retaliated against for reporting information to the SEC. Fortunately, the SEC allows whistleblowers to report anonymously if represented by an attorney. If it is imperative that you remain anonymous, you should hire an experienced attorney to skillfully guide you through the process, maximizing the likelihood that your identity is not revealed.

In addition, if an employer retaliates against a whistleblower because of lawful whistleblowing, the Dodd-Frank Act and the Sarbanes-Oxley Act offer substantial protection. In a recent case, a California jury awarded a whistleblower more than $11 million after the whistleblower was terminated for raising concerns about a potential violation of the federal securities laws.

We have substantial experience representing corporate whistleblowers under the whistleblower protection provision of the Sarbanes-Oxley Act.

To learn more about protections for SEC whistleblowers, download our guide Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.

Tip #3: Know the Rules Before Filing with the SEC

Whistleblowers should be aware of the factors that influence the size of awards before filing with the SEC and apply those factors to get the maximum award. For example, the SEC Whistleblower Office may reduce the amount of an award if the whistleblower:

• unreasonably delayed reporting the violations(s);
• participated in, or was culpable for, the reported securities-law violation; or
• interfered with the company’s internal compliance and reporting systems.

On the other hand, the whistleblower office may increase the amount of an award based on:

• the tip’s significance to the success of any proceeding brought against wrongdoers;
• the assistance that you and your legal representative provide in the SEC action or related action;
• the SEC’s law-enforcement interest in deterring the specific violation; and
• whether, and the extent to which, you participated in your company’s internal compliance and reporting systems.

Accordingly, whistleblowers have an incentive to report internally to their companies’ compliance personnel before going to the SEC.

If a whistleblower reports internally, then the whistleblower generally should also report the same information to the SEC within 120 days. That way, in evaluating a potential award, the SEC will consider the date of the internal report, rather than the date that the whistleblower reported to the SEC. As the SEC puts it, the whistleblower office will “hold your place in line.” This may determine, for example, whether a whistleblower submitted “original information.”

Tip #4: Draft a Tip that Grabs the SEC’s Attention

The SEC Whistleblower Office is relatively small, and thousands of tips are submitted annually. Indeed, the SEC received more than 18,000 whistleblower tips in FY 2023, almost 50% more than the previous record set in FY 2022.

Whistleblowers and their attorneys should tailor their tips to quickly grab the SEC’s attention. While we could write a book on this section alone, here are a few “rules” to keep in mind when drafting submissions:

1. Provide the SEC with a clear roadmap for a successful enforcement action. Do not submit a pile of documents and expect the whistleblower office to figure it out. Instead, walk the SEC, step by step, through specific and credible examples of the violation(s).
2. Demonstrate how the violation is “material.” As mentioned, the SEC investigates only those violations that are serious enough to warrant the use of its limited resources. While demonstrating materiality, be sure to analyze the legal issues and tie them to the specific violations. This should include a discussion of potential challenges that the SEC may encounter and how the agency should address them.
3. If possible, provide the whistleblower office with documentation of the violation. The SEC is much more likely to act on a tip that is supported by strong evidence. The SEC does not, however, want all types of evidence. For example, the SEC does not want information that may violate the company’s attorney-client privilege (e.g., documents, including emails, that involve advice from inside or outside counsel).

Tip #5: Act Fast

The timing of a whistleblower’s tip is a significant factor that the SEC considers in determining whether, and how much, to award the whistleblower. Waiting to file with the SEC runs the risk that someone else may provide the same information to the SEC first, thereby rendering you ineligible for an award.

SEC Whistleblower Attorney’s Guide to SEC Whistleblower Program

The following FAQ about the SEC Whistleblower Program identifies the key facets of the program.

1. What is the SEC Whistleblower Program?
2. What violations qualify for an SEC whistleblower award?
3. How can I submit a tip to the SEC?
4. Why should I choose the Zuckerman Law to represent me in my SEC whistleblower claim?
5. Can I submit an anonymous tip to the SEC Whistleblower Office?
6. When is the best time to report the fraud or misconduct to the SEC?
7. Can I submit an SEC Whistleblower claim if the SEC already has an open investigation into the matter?
8. Who is an “eligible” SEC whistleblower?
9. Can compliance personnel, auditors, officers or directors qualify for an SEC whistleblower award?
10. What is “original information”?
11. How might my information “lead to” a successful SEC enforcement action?
12. Can I submit a claim if I had involvement in the fraud or misconduct?
13. Do I have to report a securities law violations to my company before reporting the violation to the SEC?
14. Can I submit a tip if I agreed to a confidentiality provision in an employment/severance agreement?
15. What factors does the SEC consider when determining the amount of the award?
16. What employment protections are available for SEC whistleblowers?
17. What type of evidence should I provide to the SEC?
18. What happens after I submit a tip to the SEC?
19. How long does it take to receive an SEC whistleblower award?
20. What are the largest SEC whistleblower awards?

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 Process to Qualify for an SEC Whistleblower Award

SEC Whistleblower Protection Attorneys

SEC Whistleblower Law Firm

Investment Adviser Fraud Whistleblowing

Under the Dodd-Frank Act, whistleblowers may receive a reward for reporting original information to the U.S. Securities and Exchange Commission (“SEC”) about violations of federal securities laws, including investment adviser fraud. In a recent speech, the director of the SEC Office of Compliance Inspections and Examinations revealed that the agency has increased staffing in the Investment Adviser/Investment Company (“IA/IC”) Examination Program by 20%. This expansion confirms the SEC’s continued focus on investigations and enforcement actions related to investment adviser fraud, such as:

• misleading fee agreements;
• overcharging clients;
• failing to disclose conflicts of interest;
• improper allocation of expenses;
• false advertising of performance; and
• “parking” schemes.

The SEC regulates investment advisers primarily under the Investment Advisers Act of 1940 and the rules adopted under that statute. The SEC frequently initiates enforcement actions for investment advisor violations.

If you have information that may qualify for an SEC whistleblower award, contact the Director of our SEC whistleblower practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959. All inquiries are confidential.

In conjunction with our courageous clients, we have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies, and return funds to defrauded investors. Read our tips for SEC whistleblowers and Forbes column about the success of the SEC whistleblower program. 

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

SEC’s Investment Adviser/Investment Company Examination Program

The director explained, in his speech, that investment advisers are one of the fastest-growing groups of SEC registrants. In the past two years, over 2,000 new advisers have registered, bringing the total number of registered investment advisers to more than 12,000. And unlike broker-dealers, a vast majority of these investment advisers are regulated only by the SEC. As such, the SEC has chosen to be more reliant on FINRA—the self-regulatory organization that shares oversight of the broker-dealer industry with the SEC—and allocate more of its resources to combatting IA/IC fraud.

SEC Investment Adviser Enforcement Actions

Even prior to the reallocation of resources, the SEC aggressively pursued enforcement actions against investment advisers. In the past year, there were 5 notable areas of investment adviser fraud:

Failure to Properly Disclose Fee Arrangements

• Three private equity advisers within The Blackstone Group agreed to pay nearly $39 million to settle charges that they failed to fully inform investors about benefits that they obtained from accelerated monitoring fees and discounts on legal fees.

• Four private equity fund advisers affiliated with Apollo Global Management agreed to a $52.7 million settlement for, among other things, misleading fund investors about fees. Similar to The Blackstone Group’s violation, Apollo and its advisers did not inform its investors about the benefits they received (to the detriment of fund investors) by accelerating the payment of future monitoring fees owed by the funds’ portfolio companies upon the sale or IPO of those companies.

Overcharging Clients

• On May 10, 2017, the SEC announced a $97 million settlement with Barclays Capital for three sets of violations that resulted in clients being overbilled by nearly $50 million. First, according to the SEC’s order, two Barclays advisory programs were charging fees to more than 2,000 clients for due diligence and monitoring of third-party investment strategies when in fact these services were not being performed. Next, Barclay’s collected excess mutual fund sales charges and fees by recommending more expensive share classes when less expensive share classes were available. Finally, Barclay’s overbilled more than 22,000 accounts due to miscalculations and billing errors.

Failure to Disclose Conflicts of Interest

• A New York-based private equity firm, Fenway Partners LLC, and its 4 executives agreed to a $10.2 million settlement for failing to tell their fund clients that they rerouted portfolio company fees to an affiliate and avoided providing the benefits of those fees to the fund clients in the form of management fee offsets. In total, the private equity firm rerouted more than $20 million in payments out of fund assets or portfolio companies to the affiliated entity.

• Three AIG affiliates agreed to pay more than $9.5 million to settle charges for steering fund clients toward more expensive share classes so that the firms could collect more fees. An SEC investigation revealed that the firms generated about $2 million in extra fees by placing clients in share classes that charged fees for marketing and distribution, despite the clients’ being eligible to buy shares in fund classes without those additional charges.

• The SEC alleged in a December 11, 2017 complaint that an investment adviser breached its fiduciary duty to its clients by repeatedly purchasing securities in client accounts that generated undisclosed mark-ups and fees on top of the advisory fees that the clients already paid the adviser to manage their investments. The securities that generated the undisclosed mark-ups were risky and caused substantial losses for clients.

• On August 20, 2018, Merrill Lynch agreed to pay nearly $9 million to settle charges that it failed to disclose a conflict of interest arising out of its own business interests in deciding whether to continue to offer clients products managed by an outside third-party advisory firm. According to the SEC’s order, the conflict of interest arose in Merrill Lynch’s handling of third-party products managed by a U.S. subsidiary of a foreign multinational bank, in which more than 1,500 of Merrill’s retail advisory accounts had invested approximately $575 million.

Charging Avoidable Fees by Recommending Expensive Share Classes

• SunTrust Investment Services, Inc paid $1.1 million to settle charges that it collected at least $1 million in avoidable fees by improperly recommending more expensive share classes of various mutual funds when cheaper shares of the same funds were available.  The SEC found that SunTrust breached its fiduciary duty to its advisory clients, made inadequate disclosures that failed to explain certain conflicts of interest and had deficiencies in compliance policies and procedures in connection with its mutual fund share class selection processes.

Improper Allocation of Expenses

• Private equity firm First Reserve Management L.P. negotiated a legal fee discount for work performed on its fund. Despite receiving the discount, First Reserve did not allocate any of it to the funds. First Reserve also failed to adequately inform its fund clients about, among other things, a liability insurance policy that covered First Reserve for risks not entirely arising from management of the funds (where the governing documents provided that the funds would pay only insurance expenses relating to the affairs of the funds). As a result of these violations, First Reserve was required to pay a civil penalty of $3.5 million.

• On May 2, 2017, Calvert Investment Management agreed to pay more than $22 million to settle charges that fund assets were improperly used to pay for marketing and distribution services as well as expenses in excess of annual expense caps.

False Advertising of Performance

• On August 25, 2016, the SEC announced penalties (ranging from $100,000 to a half-million dollars) against 13 investment advisory firms for accepting and negligently relying on claims by an investment marketing firm called F-Squared. Without obtaining sufficient documentation, the advisory firms recommended F-Squared’s investment strategy to their own clients. An SEC enforcement action later revealed that the strategy—which was purportedly based on F-Squared’s real, historical track record—was only back-tested performance that turned out to be substantially inflated. F-Squared was charged $35 million for its part in defrauding investors through false performance advertising.

“Parking” Schemes

• Morgan Stanley Investment Management agreed to pay $8.8 million to settle charges that one of its portfolio managers unlawfully conducted prearranged trading, known as “parking,” that favored certain advisory clients over others. In the scheme, the Morgan Stanley adviser arranged sales of securities to another trader at a predetermined price that would enable the adviser to buy back the positions at a small markup into other accounts advised by Morgan Stanley.

SEC Whistleblower Reward Program

Under the SEC Whistleblower Program, whistleblowers may be eligible for monetary awards when they voluntarily provide the SEC with original information about violations of federal securities laws that leads the SEC to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.

Since 2011, the SEC Whistleblower Office has issued nearly $1.2 billion in awards to whistleblowers.

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

For more information about the SEC Whistleblower Program, see our eBook Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award. Click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:

Corporate Whistleblower Protection Lawyers

The SEC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Furthermore, the Dodd-Frank Act protects whistleblowers from retaliation by their employers for reporting violations of securities laws to the SEC.

In addition, the anti-retaliation provision of the Sarbanes-Oxley Act provides robust protection for corporate whistleblowers.  To learn more about corporate whistleblower rights, download our guide Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.

How to Qualify for an SEC Whistleblower Award

Washington DC Whistleblower Law Firm Representing SEC Whistleblowers

The whistleblower lawyers at Washington DC whistleblower law firm Zuckerman Law represent whistleblowers at the SEC and CFTC concerning a variety of fraud schemes, including:

• Accounting fraud;
• Investment and securities fraud;
• Foreign bribery and other FCPA violations;
• EB-5 investment fraud;
• Manipulation of a security’s price or volume;
• Fraudulent securities offerings and Ponzi schemes;
• False or misleading statements about a company or investment;
• Inadequate internal controls;
• Deceptive non-GAAP financial measures; and
• Violations of auditor independence rules.

For more information about whistleblower rewards and bounties, contact the SEC whistleblower lawyers at Zuckerman Law at 202-262-8959.

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:

How to successfully navigate the SEC whistleblower process

Investment Adviser Fraud

Section 206(1) of the Advisers Act makes it unlawful for an investment adviser “to employ any device, scheme, or artifice to defraud any client or prospective client.” 15 U.S.C. § 80b-6(1). Section 206(2) prohibits an investment adviser from “engag[ing] in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.” 15 U.S.C. § 80b-6(2). To establish a violation, “each of these sections requires the SEC to show the investment adviser made a material misrepresentation with a culpable mental state.” ZPR Inv. Mgmt. Inc. v. SEC, 861 F.3d 1239, 1247 (11th Cir. 2017).

Section 206 “includes an obligation to provide ‘full and fair disclosure of all material facts’ to investors” and “to employ reasonable care to avoid misleading” current and prospective clients. SEC v. Tambone, 550 F.3d 106, 146 (1st Cir. 2008) (quoting Cap. Gains, 375 U.S. at 194). It follows that section 206 “prohibits failures to disclose material information, not just affirmative frauds.” SEC v. Wash. Inv. Network, 475 F.3d 392, 404 (D.C. Cir. 2007).

Omissions are material “if there is a substantial likelihood that a reasonable investor would consider [them] important in” making an investment decision. SEC v. Fife, 311 F.3d 1, 9 (1st Cir. 2002) (emphasis added) (citing Basic v. Levinson, 485 U.S. 224, 231-32 (1988)). The standard for materiality is thus not actual reliance and “the SEC [is] not required to prove that any investor actually relied on [Appellants’] misrepresentations.” SEC v. World Tree Fin., L.L.C., 43 F.4th 448, 465 (5th Cir. 2022); Wash. Inv. Network, 475 F.3d at 405 (“To obtain an injunction under section 206 against fraudulent conduct, the SEC does not need to prove reliance on the investment adviser’s misleading statements, nor does the SEC need to prove injury.” (citing Cap. Gains, 375 U.S. at 192-93, 195)).

Section 206(1) “requires the SEC to show the adviser acted with scienter.” Id. Section 206(2), on the other hand, “require[s] no showing of scienter, and a showing of negligence is sufficient.” Id.

Proving scienter requires “a showing of either conscious intent to defraud or ‘a high degree of recklessness.'” ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir. 2008) (quoting Aldridge v. A.T. Cross Corp., 284 F.3d 72, 82 (1st Cir. 2002)). “Recklessness is ‘a highly unreasonable omission, involving not merely simple, or even inexcusable [] negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious the actor must have been aware of it.'” Fife, 311 F.3d at 9–10 (alteration in original) (quoting Greebel v. FTP Software, Inc., 194 F.3d 185, 198 (1st Cir. 1999)). “As this court has observed, a defendant’s publication of statements when that defendant ‘knew facts suggesting the statements were inaccurate or misleadingly incomplete is classic evidence of scienter.'” SEC v. Johnston, 986 F.3d 63, 74 (1st Cir. 2021) (quoting Aldridge, 284 F.3d at 83).

SEC v. Navellier & Associates Inc. et al., case number 20-1581.

Read more at: https://www.law360.com/securities/articles/1859162/1st-circ-affirms-sec-s-32m-win-against-investment-adviser?copied=1

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