Using the SEC Whistleblower Program

The SEC (U.S. Securities and Exchange Commission) is a federal agency of the United States government which aims to maintain the fair and orderly function of securities markets. Investigations by the SEC into suspicious activities are a long process, sometimes taking years and the agency is only able to investigate a couple thousand cases at a time. To help this agency enforce laws and regulations on an industry which is secretive by nature, they rely on tips from industry insiders. To help bring more quality leads, the Whistleblower program was established which provides monetary rewards to individuals who provide the SEC tips which result in sanctions exceeding $1 million. This money can be substantial, as the SEC pays out between 10-30% of the sanctions that are rendered. Partly because of this program, the SEC receives more than 20,000 tips annually, with almost a quarter of these coming through the SEC Whistleblower program.

Because of the nature of whistle blowing, there are regulations in place which provide employment protections which safeguard from retaliation from employers as well as anonymous reporting. Eligibility to report to the SEC is virtually anyone, including individuals of another nationality than the United States.

The decision to provide information on illegal activity on employers or co-workers can put an individual in a difficult situation. Because of this, strong anti-retaliation protections have been put in place. These regulations protect the individual or group of individuals from even indirect action against them such as; dismissal, demotion, harassment, threats, or any action which can be distinguished as discrimination. These protections even apply if there is no legal action is brought by the SEC as long as the tip reasonably relates to possible violations.

The option for anonymous reporting aspect of the SEC whistleblower program was put in place to assist in mitigating the fear and anxiety for individuals and to increase the number of tips submitted. For an individual or group of individuals to file anonymously, a lawyer must be used as representation and the reporting party must verify their identity with the representing lawyer. This attorney will, along with advising and acting as a protective barrier between the identity of the individual and the SEC, advocate for the highest payout possible in the event of a tip being eligible for a payout. It is worth noting that before a payout resulting from a qualifying tip is paid, the individual(s) must provide their identity to the SEC.

If a person is aware of SEC violations, the best procedure is to obtain the counsel of an attorney who works or specializes in this field and begin the process of submitting a tip through the SEC Whistleblower program. Despite the process potentially taking anywhere from two to four years, the regulations in place to protect reporters and the monetary rewards make it a worthwhile endeavour.