The Securities and Exchange Commission is also known as the SEC. The whistleblower program was passed in 2010 when the President signed the Dodd-Frank Wall Street Reform alongside Consumer Protection Act. The regulation established an incentive program to incentivize the reporting of different violations through the Commodity Exchange Act that is overseen by Christopher C. Ehrman who is the former senior executive of SEC. As such, the Whistleblower Program offers different awards to individuals who successfully submit different tips related to the violations of the securities laws. Since its launch, the program has provided significant employment protections, a viable reporting system for individuals to issue their reports anonymously, coupled with a monetary award. Whistleblowers are often entitled to a broad range of incentives that range between 10-30 percent of the total monetary sanctions garnered. The funds are usually paid from an Investor Protection Fund. From 2011, the whistleblower tips have made it possible for the SEC department to recover about $1 billion from offenders. The SEC has also awarded over $300 million to different whistleblowers.
Background Information on SEC
Days prior to the implementation of the final rules in 2011, many predicted that history would uncover the establishment of a system that can help fight misconduct. Currently, citizens can confirm that the SEC Whistleblower Program is a leading public-private collaboration in history. As such, the commission has provided the public with quality reporting procedures. Initially, many individuals feared retaliation as well as blacklisting. Corporate whistleblowers were prevented from contacting the SEC to report misconduct. Hidden misconduct would easily fester until they were uncovered amidst controversies. With the help of law enforcement and regulatory authorities, organizations started to highlight fraudulent cases. To reduce the risks of retaliation, SEC’s whistleblower program trains and empowers whistleblowers to report their issues anonymously.
Rules and Regulations
Whistleblowers are allowed to contact a viable law firm that has senior executives to represent them. A person’s ability to report misconduct is a leading pillar of the SEC Whistleblower program. A reporter has to be represented by a lawyer. They must also offer counsel coupled with an original copy of the submission that is often signed under the penalty act. The whistleblower attorney will then verify the whistleblower’s identity prior to submitting information to the SEC. The attorney is also going to serve as a viable intermediary between the SEC and the reporter during the investigation. In addition to these roles, the attorney will advocate for the leading monetary benefits. Before receiving any money, whistleblowers have to reveal their identity to the department of SEC which has consistently guarded the reporter’s identity.
If there’s retaliation, the worker is allowed to act privately in the federal court. This is without involving administrative remedies before filing the report. Besides, some courts have successfully insisted that this private right of action should extend to various disclosures especially if a worker doesn’t offer information to the SEC department. Although the law of reporting is unsettled on this matter, Dodd-Frank confers protection from retaliation.
Who Qualifies for Protection?
Some of the remedies available are such as the reinstatement of the minority, litigation costs, coupled with double back pay. A worker suing under the section has to file a claim within six years from the conduct of retaliation. They may also submit the claim three years after from the moment the worker knew of the retaliation of conduct. For an individual to qualify for protection, the reporter has to have a significant belief that the provided information relates to securities violation. The department of SEC has issued an explanation that the reasonable belief is not just subjective but a genuine belief that the provided information reflects a possible violation. The information should also reflect the possibility of a breach. This eliminates the chances of frivolous submissions.
The new whistleblower program is beneficial to reporters. It also provides a significant benefit over various whistleblower incentives that don’t encourage anonymous submission including the IRS’s whistleblower program. Whistleblowers have to sign a report stating that the information provided is factual, correct, and complete. Attorneys should retain the original signed copy. Besides, Dodd-Frank has enhanced its anti-retaliation protection that was published by the SOX. This has expanded its coverage beyond various companies to employees and affiliates of public companies.