The Dodd-Frank Act

Elements of the SEC Whistleblower Program

In July of 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act to promote financial stability in the aftermath of the 2008 financial crisis. Section 922 of the act established the Securities and Exchange whistleblower program.

The SEC whistleblower program is designed to provide monetary incentives to individuals who voluntarily provide the SEC with original information of financial fraud that leads to sanctions in excess of $1 million.

The whistleblower “voluntarily” provides information if he/she submits the information to the SEC before receiving a request for such information from the SEC or another federal agency.

“Original information” refers to information that derives from the whistleblower’s independent knowledge or analysis, and concerns conduct that is not already under investigation or examination by the SEC.

When these conditions are met, the whistleblower is eligible to receive between 10-30% of the money collected.

In addition, the SEC protects the identity of whistleblowers who desire to remain anonymous and also protects whistleblowers against retaliation for engaging in protected activity.

How to submit original information?

Information about possible securities law violations can be submitted to the SEC online or by mail/fax. Whistleblowers must file a Tip, Complaint or Referral (“TCR”) form detailing the alleged violations to the best of their knowledge.

To submit information anonymously, whistleblowers must be represented by counsel, who submits the TCR form on their behalf.

Note that the SEC may disclose the whistleblowers’ identity in an administrative or court proceeding; or provide information, subject to confidentiality requirements, to other governmental or regulatory entities.

How the SEC determines the percentage of proceeds awarded a to whistleblower

These factors may increase the award percentage received by the whistleblower:

  1. The significance of the information the whistleblowers provided to the success of any proceeding brought against the wrongdoers.
  2. The extent of the assistance the whistleblowers provide in the SEC’s investigation and any successful proceeding.
  3. The SEC’s law enforcement interest in deterring violations of the securities laws by making awards to whistleblowers who provide information that leads to the successful enforcement of these laws.
  4. Whether, and the extent to which, the whistleblower participated in the company’s internal compliance systems, such as, reporting the possible securities violations through internal whistleblower, legal or compliance procedures before, or at the same time, the whistleblower reported them to the SEC.
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