September 27, 2018

Dodd-Frank Act Authorizes SEC to Award Whistleblowers

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act encourages whistleblowers to step forward in response to fraud within the U.S. Financial Sector. The recently amended bill creates significant incentives including assurances of confidentiality and employment protections for those who provide information about violations to the Securities and Exchange Commission (SEC).

Any whistleblower who supplies relevant information to the SEC which results in any monetary sanction exceeding $1,000,000 will be awarded between 10 and 30 percent of the amount received by the agency. The award would be paid out of a newly created Investor Protection Fund, made up of monetary penalties collected by the SEC. While the exact percentage of the award is left to the discretion of the agency, the law does provide several factors for the SEC to take into consideration such as…

  • the importance of the information provided by the whistleblower
  • the assistance provided by the whistleblower and his or her attorneys
  • the degree to which the award may prevent future fraud

Additionally, the information provided by the whistleblower must be previously unknown in the public domain unless the whistleblower was the original source of the information. Lastly, the whistleblower must not be convicted of any criminal violations related to the exposed fraud, nor have learned of the information through his or her governmental duties, nor through an audit required under current securities regulations. The SEC will not provide an award to a whistleblower who intentionally provides false information.

You should be aware that qui tam and financial fraud claims are subject to Statutes of Limitations. The area of limitations periods is complex. There are also first to file rules, public disclosure bars, original source issues, and varying limitations in pursuing retaliation claims. If you wish to pursue your claims, you should promptly seek the opinion of an attorney regarding the merits of your qui tam or financial fraud claim and the applicable statute of limitations.