A whistleblower is $10 million richer, after providing the Securities and Exchange Commission with information and assistance that resulted in a substantial recovery of swindled funds. The SEC released a statement on October 31, 2022, revealing few details of the successful enforcement action, but praising the whistleblower for a significant contribution.
Securities fraud is big business that causes immense harm to honest investors and the overall economy. That’s why the SEC is always on the lookout for scams and market manipulations. But to catch fraudsters, the SEC relies heavily on insiders with knowledge of the scheme. To entice whistleblowers to come forward, Congress placed provisions in the Dodd-Frank Act, creating the SEC Whistleblower Program. The program allows the SEC to issue a reward of 10 to 30 percent of money collected whenever its enforcement efforts result in more than a $1 million recovery.
In roughly 10 years of the program’s existence, the SEC has recovered more than $5 billion and has issued rewards topping $1.3 billion. One of the great aspects of this program is that it pays for itself; whistleblowers are not paid with taxpayer funds, but with funds recovered from the offenders who violate U.S. securities law.
To be eligible as an SEC whistleblower, a person must:
- Come forward voluntarily
- Present unique information that is timely and credible
- Assist in the recovery of more than $1 million
According to the SEC, the whistleblower who earned the $10 million reward “provided important documents and met twice with Enforcement staff.” That’s not a lot of heavy lifting for such an immense payday.
Another advantage for whistleblowers is the legal protection they receive under the Dodd-Frank Act. They are able to remain anonymous throughout the process. SEC filings do not name the whistleblower. Plus, the law prohibits an employer from retaliating against a whistleblower. So, even if a whistleblower’s identity is discovered, their job is secure.
Finally, it’s important to note the positive results that flow from the SEC Whistleblower Program. The SEC can prosecute fraud cases they might never know about or wouldn’t be able to prove. Enhanced enforcement of SEC regulations makes it safer to invest, so legitimate businesses can raise capital more easily, which helps propel the economy. Moreover, depending on the size of the reward, 70 to 90 percent of the funds recovered go to reimburse cheated investors and to pay for future SEC enforcement actions.
In the decade since its inception, the SEC Whistleblower Program has been an unqualified success, and will continue to help keep the stock market honest as long as insiders with knowledge of fraud have the courage to come forward. But potential whistleblowers must be cautious. The SEC does not pursue every tip it receives, and does not pay a reward on every tip it pursues.
To protect your interests, it’s imperative that you speak to an experienced SEC whistleblower attorney. A knowledgeable lawyer can guide you through every step of the process, while protecting your rights, and enhancing your prospects of success.