Why hire an SEC whistleblower lawyer?

Why Hire an SEC Whistleblower Lawyer

In contrast to False Claims Act (FCA) qui tam claims, a whistleblower reporting wrongdoing to the U.S. Securities and Exchange Commission (SEC) is not required to retain counsel. So why should a whistleblower consider retaining an attorney? Hiring an effective and experienced SEC whistleblower lawyer can significantly increase your chances of recovering and maximizing an SEC whistleblower award.

Since the inception of the SEC Whistleblower Program, the SEC has received more than 52,400 whistleblower tips and awarded approximately $1.3 billion to 231 individuals, including multi-million dollar awards to our clients. In FY 2021, the SEC received more than 12,200 whistleblower tips.

As less than half of one percent of SEC whistleblower tips result in the payment of a whistleblower award, having an experienced SEC whistleblower attorney prepare a thorough TCR whistleblower submission, protect your interests at the SEC, and prepare a detailed award application can significantly increase your chance of obtaining an award.

Experienced and effective SEC whistleblower attorneys can provide critical guidance and effective advocacy to whistleblowers to increase the likelihood that they get the maximum award from the SEC Whistleblower Program.

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

We have secured awards for seven whistleblowers, and the courageous whistleblowers that we represent have helped stop more than $1 billion in Ponzi schemes and other fraudulent investment schemes.

Blow the Whistle Anonymously

The SEC allows whistleblowers to submit tips anonymously if represented by counsel. For most of Zuckerman Law’s clients, it is imperative that their identity remain confidential throughout the process. Therefore, our experienced SEC whistleblower attorneys prioritize protecting our clients’ identities and take the necessary steps to minimize any risk that a client’s identity could be exposed.

For more information, see Anonymous Whistleblowing: Does the SEC Whistleblower Program Protect a Whistleblower’s Identity?

Preparing an Effective SEC Whistleblower Submission

The SEC Whistleblower Office receives more than 12,000 Form TCR submissions per year and has limited resources. It is critical that whistleblowers and their attorneys prepare submissions that grab the SEC’s attention and provide a roadmap for a successful enforcement action. Indeed, most successful whistleblower submissions involve and include far more than filling out a form on the SEC’s website.

Unlike most whistleblower law firms, Zuckerman Law has a full-time in-house certified public accountant (CPA) and certified fraud examiner (CFE) to analyze complex frauds. We leverage our expertise and experience working with the SEC to:

Maximize the likelihood that the SEC Division of Enforcement acts on our client’s tip; and
Maximize the percentage of our client’s future award.

For more information, see What happens after I submit a tip to the SEC?

Advocating Effectively to Secure a High Whistleblower Award

When the SEC takes an enforcement action based on a tip provided by a whistleblower, there is no guarantee that the whistleblower will receive an award. Instead, the whistleblower can apply for an award and navigate a complex process to try to obtain an award. An experienced SEC whistleblower lawyer can prepare a detailed award application to persuade the SEC to grant the whistleblower a substantial award.

For more information, see What happens after I apply for an SEC whistleblower award?

Choosing an Effective SEC Whistleblower Law Firm

What are some questions to ask when evaluating which firm to hire?

What results has the firm achieved for clients at the SEC?
What are the firm’s capabilities to investigate complex fraud schemes?
What is the firm’s experience working effectively with SEC attorneys and accountants?

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.

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

Whistleblower Law Firm Representing SEC Whistleblowers

Our attorneys have been representing whistleblowers at the SEC before Congress created the Dodd-Frank SEC Whistleblower-Reward Program. Since the inception of the program, we have worked effectively with the SEC and its Enforcement Division to combat many types of fraudulent schemes, including, but not limited to:

How to Get an SEC Whistleblower Award

SEC Whistleblower Process

SEC Whistleblower Protections

SEC Whistleblower Program: How to Qualify for an SEC Whistleblower Bounty

These frequently asked questions provide an overview of key facets of the SEC Whistleblower Program. Every case is unique. To schedule a free, confidential consultation, call us at 202-262-8959.

What is the SEC Whistleblower Program? Collapse

The SEC Whistleblower Program offers awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total monetary sanctions exceeding $1 million. A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected in actions brought by the SEC and in related actions brought by other regulatory or law enforcement authorities. The SEC Whistleblower Program allows whistleblowers to submit tips anonymously if represented by an attorney in connection with their tip.

Our clients’ SEC whistleblower tips have helped the SEC halt more than $1 billion in fraudulent investment schemes.

Since the inception of the SEC Whistleblower Program, the SEC has paid more than $1.3 billion in awards to whistleblowers, including seven awards to our clients. The largest SEC whistleblower awards to date are $114 million, $110 million, and $50 million. See a summary of the SEC whistleblower cases that have resulted in large awards.

What violations qualify for an SEC whistleblower award? Expand

Any violation of the federal securities laws qualifies for an SEC whistleblower award. The SEC has broad jurisdiction over a wide range of industries and entities-both public and private. The most common SEC whistleblower tips involve:

How can I submit a tip to the SEC? Expand

SEC Whistleblower Tips: What is the SEC Form TCR?

The SEC Form TCR (“Tip, Complaint, or Referral”) is the form that whistleblowers and their attorneys use to submit tips to the SEC Whistleblower Office. To maximize the possibility of obtaining an SEC whistleblower reward, it is important to understand the key sections of the Form TCR.

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.

Ask us how we have successfully obtained multi-million dollar awards for SEC whistleblowers.

Section B of the SEC Form TCR

Section B requests information about the whistleblower’s attorney. This section is important because whistleblowers can submit their tips anonymously if represented by attorneys, allowing them to leave Section A blank. This is a critical advantage of the SEC Whistleblower Program as compared to other whistleblower programs, such as the IRS Whistleblower Program, which do not allow for anonymous reporting.

Section D of the SEC Form TCR

Eligibility for SEC Whistleblower Award

Section D asks whistleblowers to describe their complaints. Many of Section D’s questions, however, are aimed at determining whether a particular whistleblower is eligible for an SEC award (even though Section E is technically the “eligibility” section). Importantly, almost all whistleblowers can become eligible for awards, if they take certain steps. This includes employees and contractors, such as compliance personnel, auditors, directors, and officers, who may incorrectly assume they are ineligible for SEC awards. Even whistleblowers who were involved in the fraud or misconduct may be eligible for awards.

External auditors, for example, generally are not eligible to receive SEC whistleblower awards. This is particularly true for external auditors who obtained their information during an audit of an issuer. However, an exception allows these external auditors to become eligible if they report the violation or fraud to a superior in their independent public accounting firms and the firms fail to promptly report the information to the SEC. If this happens, the external auditors can report immediately to the SEC and be eligible for awards.

The SEC’s rules include many similar exceptions that allow otherwise-ineligible whistleblowers to become eligible by taking certain steps. Whistleblowers should consult with an experienced SEC whistleblower attorney to determine whether they are, or may become, eligible for SEC whistleblower awards. This consultation could be the difference between a multimillion-dollar whistleblower award and no award at all.

Maximize Your SEC Whistleblower Award

Many questions in Section D will also affect a whistleblower’s future award percentage. Under the program, a whistleblower may receive an award of between 10% and 30% of the total sanctions imposed because of his or her tip. To maximize the size of a potential award, whistleblowers should evaluate the factors that the SEC considers when determining an award percentage and stress these factors in their submissions. This analysis must occur prior to submitting information to the SEC.

Section D, part 5b, for example, asks whether the whistleblower “reported this violation to his or her supervisor, compliance office, whistleblower hotline, ombudsman, or any other available mechanism at the entity for reporting violations.” While this question may be important in determining a whistleblower’s eligibility (in cases involving, e.g., the 120-day exception), it may also impact a whistleblower’s award percentage. According to the SEC’s Final Rules, the whistleblower office may increase the amount of an award if the whistleblower “reported the possible securities violations through internal whistleblower, legal or compliance procedures before, or at the same time as, reporting them to the Commission.” So, whistleblowers should strongly consider reporting internally to their companies before reporting to the SEC. After reporting internally, however, most whistleblowers are incentivized to report to the SEC as soon as possible.

Another way to maximize a potential award lies in Section D, part 12, which asks whistleblowers to provide “any additional information [they] think may be relevant.” This section offers whistleblowers an opportunity to identify and emphasize other aspects of the claim that would support an increased award percentage. The SEC may issue a larger award to a whistleblower who, for example, experienced any “unique hardships . . . as a result of his or her reporting and assisting in the enforcement action.” (Rule 21F-6(a)(2)(vi).) Whistleblowers should, on their Form TCR, discuss any retaliation they experienced and any personal risks they took to expose the fraud. Again, whistleblowers should consider these factors before submitting a tip to the SEC.

Identify the Securities Law Violations for the SEC

Section D, part 8 asks whistleblowers to explain why they believe the acts described “constitute a violation of the federal securities laws.” Whistleblowers should determine what violations qualify for an SEC award, and provide the SEC with a clear roadmap describing how the reported acts establish specific qualifying violations.

Whistleblowers should also describe why the violations are material. In the past five years, whistleblowers have filed more than 18,000 tips with the SEC Whistleblower Office. The SEC will use its limited resources to investigate only the best tips. Whistleblowers should therefore explain, in detail, why their tips warrant the use of the SEC’s resources. If a whistleblower is uncertain about a specific violation, he or she may benefit from reading prior SEC enforcement actions and consulting with an experienced SEC whistleblower attorney.

Provide Specific Evidence of the Violation

Section D, part 9 asks whistleblowers to “[d]escribe all supporting materials in [their] possession and the availability and location of any additional supporting materials not in [their] possession.” The SEC Whistleblower Office is more likely to act on a tip if it is supported by strong evidence. Evidence is strong if it is specific, timely, and credible. For example, a whistleblower may provide documentation that walks the SEC through an example of the fraud, step by step, and explains how the fraud materially impacts the entity, its investors, or both.

Notably, recent decisions have clarified what company documents a whistleblower may use-even if the whistleblower signed a confidentiality agreement-to disclose fraud to the government. In Erhart v. BofI Holding, Inc., the U.S. District Court for the Southern District of California held that confidentiality agreements do not trump federal whistleblower rights and that whistleblowers are permitted to take an “appropriate” amount of company documents to disclose fraud to the government. According the order, a whistleblower’s evidence may be considered “appropriate” when it is carefully selected, specifically related to the violation, and accessible in the ordinary course of the employee’s duties. Whistleblowers who engage in “vast and indiscriminate” collection of company documents, on the other hand, may not be immune from potential liability.

Finally, whistleblowers should not provide all types of evidence. The SEC does not want, for example, information that may violate the company’s attorney-client privilege. If a whistleblower has questionable evidence, he or she should consult with an attorney and should potentially notify the SEC to have its taint team handle the evidence.

Protect Your Identity

After providing a detailed explanation of the fraud and the evidence to support it, a whistleblower should identify any information in the submission that could expose him or her as the whistleblower. Section D, part 11 asks whistleblowers to “[i]dentify with particularity any documents or other information in [their] submission[s] that [they] believe could reasonably be expected to reveal [their] identit[ies] and explain the basis for [their] belief that [their] identit[ies] would be revealed if the documents were disclosed to a third party.”

The SEC takes its responsibility to protect whistleblowers’ identities very seriously. Whistleblowers can assist this effort by flagging any information that could potentially identify them. The SEC will then determine the best path to open an investigation without tipping off the target that a whistleblower is even involved.

Section F of the SEC Form TCR

Whistleblowers must sign the Form TCR under the penalty of perjury. Section F requires the whistleblower to affirm the following:

“I declare under penalty of perjury under the laws of the United States that the information contained herein is true, correct and complete to the best of my knowledge, information and belief. I fully understand that I may be subject to prosecution and ineligible for a whistleblower award if, in my submission of information, my other dealings with the SEC, or my dealings with another authority in connection with a related action, I knowingly and willfully make any false, fictitious, or fraudulent statements or representations, or use any false writing or document knowing that the writing or document contains any false, fictitious, or fraudulent statement or entry.”

If a whistleblower submits a tip anonymously, then his or her signed declaration will not be included in the SEC filing. Rather, the anonymous whistleblower’s attorney will sign Section G and keep the whistleblower’s signed declaration in a private file.

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

Yes, a whistleblower can submit an anonymous tip to the SEC Whistleblower Office and be eligible for an award, but only if they have an attorney represent them in connection with their submission to the SEC. An experienced SEC whistleblower attorney can skillfully guide you through the SEC whistleblower process, maximizing the likelihood that your identity is not revealed to unauthorized parties.

We have successfully represented whistleblowers that obtained awards while remaining anonymous.

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

When is the best time to report the fraud or misconduct to the SEC? Expand

Whistleblowers should report fraud or misconduct to the SEC as soon as possible. While some situations require a whistleblower to wait 120 days before providing information to the SEC, we advise our clients to report promptly and that advice has helped our clients obtain awards. There are a few reasons to report promptly:

First, to be eligible for an award, a whistleblower must provide the SEC with “original information“-i.e., information not already known to the SEC. If someone reports another individual’s information to the SEC first, the latter will not be entitled to a percentage of any monetary sanctions collected.
Next, even if a whistleblower is the first to report the information, the SEC considers the timeliness of information to be a significant factor when determining the size of an award. In 2015, 20% of all awards were reduced because of an unreasonable reporting delay. Reporting promptly increases the chance of obtaining the 30%maximum award percentage.
Finally, as a practical matter, the SEC is more likely to act on timely information. The SEC receives a significant number of tips and has limited resources. The best claims reveal fraud that the SEC can halt and whose impact the SEC can potentially minimize. The SEC will probably not act on tips about speculative fraud that occurred years ago.

If you have original information about a securities-law violation, consider retaining an experienced and effective SEC whistleblower law firm that can quickly: (1) assess the claim; (2) draft a compelling tip, complaint, or referral (“TCR”); and (3) persuade the SEC to investigate the violation. By acting promptly to prepare persuasive submissions to the SEC, we have obtained awards for several of our clients.

The SEC Whistleblower Program has issued more than $1.2 billion in awards to whistleblowers since 2012, which includes a multi-million dollar award to one of our clients.

An unreasonable delay in reporting a violation may cause the SEC to reduce an award. In making this determination, the SEC considers:

whether the whistleblower failed to take reasonable steps to report the violation or prevent it from occurring or continuing;
whether the whistleblower was aware of the violation but reported to the SEC only after learning of an investigation into the misconduct;
whether the violations identified by the whistleblower were continuing during the period of delay;
whether investors were being harmed during that time; and
whether the whistleblower might profit from the delay by ultimately obtaining a larger award because the failure to report permitted the misconduct to continue, resulting in larger monetary sanctions.

One or more of these circumstances, in the absence of significant mitigating factors, would likely cause the SEC to recommend a substantially lower award amount.

Common reasons that weigh against determining that a delay was unreasonable include: the whistleblower engaging for a reasonable period of time in an internal reporting process, the delay being reasonably attributable to an illness or other personal or family circumstance, and the whistleblower spending a reasonable amount of time attempting to ascertain relevant facts or obtain an attorney in order to remain anonymous. Can I submit an SEC Whistleblower claim if the SEC already has an open investigation into the matter? Expand

Yes. Even if the SEC already has information about a particular securities law violation, you can still qualify for an award if your information “significantly contributes” to the success of a resulting SEC enforcement action. According to the SEC Whistleblower Office’s 2020 Annual Report to Congress, such information accounted for nearly 30% of the awards in FY 2020.

Our firm successfully represented two whistleblowers that received awards for providing original information to the SEC concerning open investigations.

A whistleblower’s information may “significantly contribute” to an enforcement action in several ways, including if the information:

allows the SEC to bring the enforcement action in significantly less time or with significantly less resources;
expands the scope of the current investigation, leading to additional successful claims; or
allows the SEC to bring claims against additional parties.

Under the whistleblower rules, an individual’s original information leads to the success of an action where it causes staff to (i) commence an examination, (ii) open or reopen an investigation, or (iii) inquire into different conduct as part of a current SEC examination or investigation, and the SEC brings a successful judicial or administrative action based in whole or in part on conduct that was the subject of the individual’s original information, under Rule 21F-4(c)(1) of the Exchange Act; or alternatively, where in the context of an existing investigation, the individual’s original information significantly contributes to the success of an SEC judicial or administrative enforcement action. In determining whether an individual’s information significantly contributed to an action, the SEC considers factors such as whether the information allowed the SEC to bring the action in significantly less time or with significantly fewer resources, additional successful claims, or successful claims against additional individuals or entities. The individual’s information must have been “meaningful” in that it “made a substantial and important contribution” to the success of the covered action. Whistleblower Award Proceeding File No. 2018-6, Rel. No. 34-82897 (Mar. 19, 2018); Whistleblower Award Proceeding File No. 2016-9, Rel. No. 34-77833 (May 13, 2016).

On May 13, 2016, the SEC issued an award of more than $3.5 million to a whistleblower who “bolstered an ongoing investigation with additional evidence of wrongdoing that strengthened the SEC’s case.” Per the press release accompanying that award, Mr. Ceresney, the SEC Enforcement Director, explained that “[w]histleblowers can receive an award not only when their tip initiates an investigation, but also when they provide new information or documentation that advances an existing inquiry.” He added, “This particular whistleblower’s tip substantially strengthened our ongoing case and increased our leverage during settlement negotiations with the company.”

Who is an “eligible” SEC whistleblower? Expand

Most individuals, regardless of citizenship, are “eligible” whistleblowers if they voluntarily provide the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur.

The information provided must lead to a successful SEC action that results in monetary sanctions exceeding $1 million. Companies or organizations cannot qualify as whistleblowers. Furthermore, individuals are not required to be employees of a company to submit information about that company. An individual can qualify for an award and report anonymously if they are represented by counsel.

Since the inception of the SEC Whistleblower Program, the SEC has paid more than $1.3 billion in awards to whistleblowers. The largest SEC whistleblower awards to date are $114 million, $110 million, and $50 million. See a summary of the SEC whistleblower cases that have resulted in large awards.

Experienced SEC whistleblower attorneys can provide critical guidance and effective advocacy to whistleblowers to increase the likelihood that they not only obtain, but also maximize their awards.

We have secured awards for seven whistleblowers, and the courageous whistleblowers that we represent have helped stop more than $1 billion in Ponzi schemes and other fraudulent investment schemes.

Can compliance personnel, auditors, officers or directors qualify for an SEC whistleblower award? Expand

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. Under certain circumstances, however, compliance and ethics personnel can be eligible for SEC whistleblower awards. Since 2012, the SEC has issued more than $1.3 billion in awards to whistleblowers, including awards to compliance officers.

We have successfully represented senior corporate professionals in obtaining awards at the SEC. And we have obtained substantial damages for compliance personnel, internal auditors, and corporate officers in whistleblower retaliation matters, including claims brought under the Sarbanes-Oxley whistleblower protection law.

What is “original information”? Expand

“Original information” is information that is not already known to the SEC. Thus, if another whistleblower files information about a violation with the SEC before you submit that information, you will not be eligible for an award based on the same information (unless you were the original source of the information that the other person submitted).

Information about a violation of the federal securities laws can be derived from your independent knowledge (facts known to you that are not derived from publicly available sources) or independent analysis (evaluation of information that may be publicly available but which reveals information that is not generally known).

An individual may be eligible to receive an award where their information leads to a successful enforcement action-meaning generally that the original information either caused the staff to open an examination or investigation, or the original information significantly contributed to a successful enforcement action where the matter was already under examination or investigation.

Our firm’s SEC whistleblower lawyers have obtained awards for whistleblowers that initiated SEC investigations and for two whistleblowers that contributed to an existing investigation. In addition, we have obtained an award for a whistleblower who provided information based on independent analysis. Contact us for a confidential free consultation to assess whether you are eligible to obtain an SEC whistleblower award.

During FY 2021, approximately 56% of the whistleblowers who received awards provided original information that caused staff to open an investigation or examination, and approximately 44% received awards because their original information significantly contributed to an already existing investigation or examination.

In assessing whether information assisted with an ongoing matter, the Commission considers factors such as whether the information allowed the Commission to bring an action in significantly less time or with significantly fewer resources, and whether it supported additional successful charges, or successful claims against additional individuals or entities.

How might my information “lead to” a successful SEC enforcement action? Expand

Information “leads to” a successful SEC action if it causes the SEC to:

Open an investigation (even if the information ultimately does not have a strong nexus to the SEC’s charges in the action);
Re-open a previously closed investigation;
Pursue a new line of inquiry; or
If the information significantly contributes to an open investigation.

Whistleblowers have enabled the SEC to protect investors and halt ongoing fraud. The largest SEC whistleblower awards to date are $114 million and $50 million.

Of the whistleblowers who received awards in FY 2021, approximately 56% provided original information that caused staff to open an investigation or examination, and approximately 44% received awards because their original information significantly contributed to an already existing investigation or examination. In assessing whether information assisted with an ongoing matter, the SEC considers factors such as whether the information allowed the SEC to bring an action in significantly less time or with significantly fewer resources, and whether it supported additional successful charges, or successful claims against additional individuals or entities.

A whistleblower whose only source of original information is an existing investigation or proceeding is unlikely to qualify for an award. Information that is exclusively derived from a governmental investigation is expressly excluded from the definition of “original information” under Section 21F(a)(3) of the Exchange Act.

Can I submit a claim if I had involvement in the fraud or misconduct? Expand

Yes, so long as you are not criminally charged. Indeed, the SEC has issued a few awards to whistleblowers that bore some degree of culpability for the violation giving rise to an SEC enforcement action.

If you had any involvement in the wrongdoing, you should consult with an experienced SEC whistleblower attorney before contacting the SEC to determine your potential liability. Once you submit a tip, the SEC can forward the information to other agencies, including the Department of Justice, for potential criminal investigations. Depending upon the circumstances, there can be an advantage to reporting a violation before the SEC discovers the violation.

Importantly, even though the SEC Whistleblower Program allows anonymous submissions through attorneys, the agency will issue an award only after it determines that the whistleblower is eligible for the award. The SEC may reduce the amount of an award if the whistleblower participated in, or was culpable for, the violation.

Do I have to report a securities law violations to my company before reporting the violation to the SEC? Expand

In determining whether to report internally prior to reporting to the SEC, a whistleblower should consult with counsel to determine the optimal path forward that will maximize a whistleblower award while also guarding against retaliation.

To qualify for an award, most whistleblowers are not required to report internally before reporting to the SEC. (See eligibility requirements for details.) However, the SEC provides incentives for internal reporting. For example:

If a whistleblower reports internally, and then to the SEC within 120 days of the internal disclosure, then the SEC will use the date of the internal report in determining whether the whistleblower provided “original information.” This internal reporting essentially “holds your place in line.”
If a whistleblower’s internal disclosure prompts a company investigation, the whistleblower will benefit from all the information discovered in that investigation.
The SEC may increase the size of a whistleblower’s award if the whistleblower participated in the company’s internal compliance systems.

Note that the whistleblower protection provision of the Dodd-Frank Act protects only whistleblowers that have provided information to the SEC about potential securities law violations. Therefore, a disclosure that is made solely to a corporate compliance program (without also providing the information to the SEC) would not be protected under the Dodd-Frank Act. But the anti-retaliation provision of the Sarbanes-Oxley Act may protect a disclosure to a person with supervisory authority over the employee if the whistleblower is covered under SOX. See our tips to maximize your recovery in a whistleblower retaliation case.

During FY 2021, approximately 60% of the award recipients in FY 2021 were current or former insiders of the entity about which they reported information of wrongdoing. Of those recipients, more than 75% raised their concerns internally to their supervisors, compliance personnel, or through internal reporting mechanisms, or understood that their supervisor or relevant compliance personnel knew of the violations, before reporting their information of wrongdoing to the SEC.

Can I submit a tip if I agreed to a confidentiality provision in an employment/severance agreement? Expand

Yes. The SEC firmly rejects any employer’s attempt to impede an employee’s communication with the SEC about a possible securities-law violation by using instruments such as:

overly broad confidentiality provisions in severance or employee agreements;
waivers of the right to receive a whistleblower reward; or
agreements to notify the company’s legal counsel before disclosing information to government agencies.

However, SEC whistleblowers should be careful not to submit to the SEC materials protected by the attorney-client privilege.

In August 2016, the SEC issued a cease-and-desist order against BlueLinx Holdings Inc. for using overly broad confidentiality provisions in severance agreements that would likely deter employees from blowing the whistle. In particular, to receive severance BlueLinx employees had to waive the right to recover a whistleblower award and agree to notify the company’s legal counsel before disclosing information to government agencies pursuant to legal process. The SEC’s order imposed a $265,000 penalty on BlueLinx because these requirements violated Dodd-Frank Act Rule 21F-17.

In December 2016, the SEC fined SandRidge Energy Inc. $1.4 million for failing to include a “carve out” in severance agreements that allows employees to report claims to the SEC.

What factors does the SEC consider when determining the amount of the award? Expand

Criteria for Determining the Amount of an SEC Whistleblower Award

Many factors affect the amount of an award. The SEC may increase the amount of an award based on the following factors:

The significance of the tip to the success of any proceeding brought against wrongdoers. A tip’s significance depends on, for example:
- the nature of the reported information, including whether the information’s reliability and completeness allowed the SEC to conserve resources; and
- the degree to which the information supported one or more successful claims brought by the SEC or related actions brought by other regulatory or law-enforcement authorities.
The extent of the assistance that you and your legal representative provided in the SEC action or related action. Considerations include:
- whether you provided ongoing, extensive, and timely cooperation and assistance (including when the whistleblower or their attorney provides industry-specific knowledge and expertise);
- the timeliness of your initial report to the SEC or to your employer;
- the resources conserved because of your assistance;
- whether you appropriately encouraged or authorized others, who might otherwise not have participated in the investigation or related action, to assist SEC staff;
- your efforts to remediate the harm caused by the violations; and
- any unique hardships you experienced as a result of blowing the whistle.
The SEC’s law-enforcement interest in deterring the specific violation. Consider factors such as:
- how much an award enhances the SEC’s ability to enforce the federal securities laws and protect investors;
- the degree to which an award encourages the submission of high-quality information;
- whether the specific violation is an SEC priority; and
- the dangers of the specific violation to investors.
Whether, and the extent to which, you participated in your company’s internal compliance and reporting systems. Think about:
- whether you reported internally before, or at the same time as, you reported to the SEC; and
- whether you assisted any internal investigation concerning the violation.

Conversely, the SEC may reduce the amount of an award based on these considerations:

If you participated in, or were culpable for, the securities-law violation(s) you reported. Consider the following:
- your role in the violation;
- your education, training, experience, and position of responsibility at the time the violation occurred;
- whether you acted knowingly and intentionally;
- whether you financially benefitted from the violation;
- whether you committed a violation in the past;
- the egregiousness of the underlying violation; and
- whether you knowingly interfered with the SEC’s investigation of the violation.
If you unreasonably delayed reporting the violation(s) to the SEC. This determination is based on:
- whether you failed to take reasonable steps to report or prevent the violation from occurring or continuing;
- whether you were aware of the violation but reported to the SEC only after learning of an investigation into the misconduct; and
- whether there was a legitimate reason for you to delay reporting the violation.
If you interfered with your company’s internal compliance and reporting systems. Consider whether you knowingly:
- interfered with your company’s reporting systems to prevent or delay detection of the violation; or
- made materially false statements, or provided false documents, to hinder your company’s ability to detect, investigate, or remediate the violation.

Note that Rule 21F-6(c) establishes a presumption of a statutory maximum award of 30% where (1) the maximum award would be $5 million or less; (2) none of the negative award factors under Rule 21F-6(b)-i.e., culpability, unreasonable reporting delay, or interference with an internal compliance and reporting system-are present; and (3) the award claim does not trigger Rule 21F-16. The SEC may depart from the presumption if (1) the assistance provided by the whistleblower was, “under the relevant facts and circumstances, limited,” or (2) a maximum award “would be inconsistent with the public interest, the promotion of investor protection, or the objectives of the whistleblower program.”

What employment protections are available for SEC whistleblowers? Expand

The Dodd-Frank Act, which created the SEC Whistleblower Program, prohibits retaliation against whistleblowers for raising concerns about potential securities law violations. Remedies for a prevailing whistleblower include reinstatement, double back pay, litigation costs, expert witness fees, and attorneys’ fees.

Retaliation for whistleblowing to the SEC is also proscribed by the whistleblower protection provision of the Sarbanes-Oxley Act (“SOX”). The remedies are similar to those under Dodd-Frank, but SOX also includes special damages, such as emotional distress, impairment of reputation, and other non-economic harm resulting from retaliation. Click here for information about additional options to combat retaliation against SEC whistleblowers.

What type of evidence should I provide to the SEC? Expand

The best way to make your tip useful is to provide specific, timely, and credible information.

As noted in an annual report of the SEC OWB, “Whistleblower tips that are specific, credible, and timely, and that 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 misconduct, provides examples of particular fraudulent transactions, or points to non-public materials evidencing a fraud, the tip is more likely to be assigned to Enforcement staff for investigation.”

A recent decision in Erhart v. Bofi Holdings clarifies that whistleblowers can disclose to the SEC “appropriate” company documents that are “reasonably necessary” to disclose fraud. But the judge warned that wholesale stripping of confidential documents (“vast and indiscriminate”) may not immunize the whistleblower from potential liability.

A whistleblower should avoid disclosing to the SEC information protected by attorney-client privilege (e.g., documents, including emails, that reveal advice from inside or outside counsel).

What happens after I submit a tip to the SEC? Expand

The Office of Market Intelligence (“OMI”) evaluates incoming tips, complaints, or referrals (known as “TCRs“). At least two SEC attorneys evaluate each TCR submitted. Specific, credible, and timely TCRs are assigned to members of the SEC staff for further investigation or analysis. If the OMI determines that a TCR warrants deeper investigation, the staff will assign it to one of the SEC’s eleven regional offices, to a specialty unit, or to an Enforcement group in the Home Office.

If the SEC determines that it needs additional information to evaluate your TCR or to assist it in a resulting investigation, the SEC will contact you or your attorney. You should not expect, however, to receive updates from the SEC regarding your submission.

OMI reviews every TCR submitted by a whistleblower to the SEC that alleges a possible securities law violation. OMI examines each tip to identify those with high-quality information that warrant the additional allocation of SEC resources. Generally, when the evaluation of a tip could benefit from the specific expertise of another Division or Office within the SEC, the tip is forwarded to staff in that Division or Office for further analysis. When OMI determines that a tip should be considered for investigation, OMI assigns the tip to one of the SEC’s 11 regional offices, a specialty unit, or to an Enforcement group in the SEC’s headquarters.

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 regarding what action, if any, the SEC has taken in response to your tip.

We have obtained multi-million dollar awards for whistleblowers. Some of the orders issuing awards to our clients note the extensive assistance provided to help the SEC secure an enforcement action. Contact us to find out how we can help you secure an SEC whistleblower award.

How long does it take to receive an SEC whistleblower award? Expand

Timeline to Recieve an SEC Whistleblower Award

The amount of time it takes to receive an SEC whistleblower award varies significantly from one case to another. Recently we obtained an award for a client just seven months after applying for an award, but we have also handled matters in which the award application process took 3 years.

In general, after a whistleblower submits a Form TCR to the SEC Office of the Whistleblower, the timeline to receive an award can be broken down into the following stages:

SEC Enforcement Action: The SEC must use the whistleblower’s information to bring a successful enforcement action that results in total monetary sanctions in excess of $1 million.
Application for an Award: After the SEC brings a successful enforcement action in excess of $1 million, a whistleblower has 90 calendar days to apply for an award.
Claims Review Process: If a whistleblower submits a timely application for an award, the staff designated by the Director of the Division of Enforcement (“Claims Review Staff”) will assess the application to determine whether the whistleblower is eligible for an award and, if so, the amount of the award of between 10 and 30 percent of the total monetary sanctions collected in the enforcement action.
Appeals: A whistleblower may appeal the SEC’s award determination. The SEC will not pay an award until the completion of the appeals process for all whistleblower award claims related to the successful enforcement action.

The timeline of each stage is explored in further detail below. In some of the matters in which we obtained awards for our clients, the SEC took an enforcement action within one year of our firm filing a TCR, and in other matters, the SEC’s investigation lasted a few years. And where our clients’ disclosures have led to criminal prosecutions, the process can take several years, especially if there is an appeal or retrial.

An experienced and effective SEC whistleblower law firm can help you successfully navigate the process to obtain an SEC whistleblower award.

If you have original information about securities law violations that may qualify for an 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.

What are the largest SEC whistleblower awards? Expand

Since 2012, the SEC has issued more than $1.3 billion in SEC whistleblower awards, including multi-million dollar awards to our clients.

In fiscal year 2021 alone, the SEC awarded $564 million to 108 whistleblowers-both the largest dollar amount and the largest number of individuals awarded in a single fiscal year. Contact us today for a free confidential consultation to find out if you may qualify for an SEC whistleblower award.

The largest SEC whistleblower awards to date are:

$114 million SEC whistleblower award (October 22, 2020);
$110 million SEC whistleblower award (September 15, 2021);
$50 million SEC whistleblower award (April 15, 2021);
$50 million SEC whistleblower award (June 4, 2020);
$50 million SEC whistleblower award (March 19, 2018);
$39 million SEC whistleblower award (September 6, 2018);
$37 million SEC whistleblower award (January 21, 2022);
$37 million SEC whistleblower award (March 26, 2019);
$36 million SEC whistleblower award (September 24, 2021);
$33 million SEC whistleblower award (March 19, 2018);
$32 million SEC whistleblower award (October 15, 2021);
$30 million SEC whistleblower award (September 22, 2014);
$28 million SEC whistleblower award (May 19, 2021);
$28 million SEC whistleblower award (November 3, 2020);
$27 million SEC whistleblower award (May 17, 2021);
$27 million SEC whistleblower award (April 16, 2020);
$23 million SEC whistleblower award (June 2, 2021);
$22 million SEC whistleblower award (May 10, 2021);
$22 million SEC whistleblower award (September 30, 2020);
$22 million SEC whistleblower award (August 30, 2016); and
$20 million SEC whistleblower award (November 28, 2022).

Under the SEC Whistleblower Program, the SEC is required to pay awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total monetary sanctions exceeding $1 million.

A whistleblower may receive a reward of between 10% and 30% of the total monetary sanctions collected. See some of the SEC whistleblower cases that have resulted in large SEC whistleblower payouts and a summary of the ways in which an experienced and effective SEC whistleblower law firm can help you secure an award.

Why hire an SEC whistleblower lawyer?