The Securities and Exchange Commission’s program to reward whistleblowers for coming forward has undoubtedly been an asset in recovering fraud for the regulatory agency. Useful tips from whistleblowers have helped the Securities and Exchange Commission recover over $1 billion in enforcement actions. The SEC whistleblower program offers financial incentives and anti-retaliatory protection for individuals who report qualifying information relating to federal securities law violations. Irrespective of the potential monetary awards, courageous whistleblowers often put a lot in jeopardy when choosing to come forward. Yet, the process for SEC whistleblowers to be rewarded with payouts is slow, according to a Wall Street Journal article.
The WSJ article notes that the time in which whistleblowers receive a response regarding a reward increased from a year in 2012 to over two years presently. Whistleblower attorneys informed the Wall Street Journal that occasionally clients wait years to receive an award even after being deemed eligible by the SEC. The Wall Street Journal attributes the SEC’s slower process to an oversaturation of reward seekers. The Securities and Exchange Commission receives an influx of tips, with many not being useful, according to the WSJ article. Officials reportedly referred to the process for vetting and allocating whistleblower rewards as “demanding”.
Our whistleblower attorneys believe that a quick and efficient claims review process should be a priority given associated risks for the whistleblowers. Additionally, the value whistleblowers have in fostering a less corrupt society are unquestionable. Whistleblowers are immensely beneficial for minimizing fraudulent activity and protecting investors in the securities industry. The Securities and Exchange Commission has even deemed the whistleblower rewards program as their “most powerful weapon” in enforcement. Informative whistleblower tips have helped the SEC with detecting as well as prosecuting securities law violations and enforcement action.
The SEC’s whistleblower program was established through Section 21F of the Securities Exchange Act of 1934 added by the Dodd-Frank Wall Street Reform Consumer Protection Act. The Obama administration passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to help protect economic affairs following the 2008 financial crises. The Dodd-Frank Act added to the existing whistleblower program established by the Congress passing the Sarbanes-Oxley Act (SOX). Notably, the legislature improved the whistleblower process by expanding eligibility requirements and the statute of limitations as well as enforcing strong monetary incentives.
The whistleblower program currently rewards anywhere from 10% to 30% of the proceeds from a SEC enforcement resulting in over $1 million in sanctions. The first payout after the Dodd-Frank Act was issued to a whistleblower who informed the SEC about a multi-million dollar fraud in 2012. As of today, the Securities and Exchange Commission has awarded over $250 million to whistleblowers after reviewing more than 22,818 tips. As part of the program, whistleblowers are also promised confidentiality and anonymity according to the law. The program also ensures that whistleblowers are protected from retaliation from their employers. The SEC’s whistleblower program may provide benefits, but improvement is still needed.
Recently, the SEC has commented on the state of the whistleblower program as well as formulated potential solutions to the shortcomings. On June 29, 2018, the Securities and Exchange Commission announced their proposal to amend the rules presiding over their current whistleblower program. SEC Chairman, Jay Clayton declared that the proposed changes are intended to “more appropriately and expeditiously reward” eligible whistleblowers.
Part of the SEC’s proposal includes two changes purported to foster a more efficient claims review process. One modification would allow the SEC to automatically bar submissions from applicants who have submitted new or repeated frivolous claims in the past. Another amendment calls for the SEC to have a summary disposition procedure to reject applications that will clearly be denied more immediately. The SEC also proposes expanding eligibility to awards based on certain agreements; greater discretion in monetary allotment; clearer reporting requirements and other amendments.
It takes great courage for whistleblowers to come forward with their claims in the wake of the uncertain, lengthy and convoluted process. Before filing a whistleblower tip, enlist the guidance of a knowledgeable attorney to increase the likeliness of investigative staff following up for an investigation. Malecki Law’s top-rated NYC attorneys have ample experience from representing Dodd-Frank whistleblowers with information deemed useful for recovering money in major SEC investigation. For first-tier representation in a Dodd-Frank whistleblower claim, contact our top-rated securities industry attorneys.