SEC Whistleblowers

Whistleblowers play an important role in fighting corruption, protecting retail investors, and maintaining a free and healthy market. In recognition of these important protections, the U.S. Securities and Exchange Commission’s (“SEC”) Whistleblower Program was established by Congress under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Congress established the Whistleblower Program to incentivize whistleblowers with specific, timely, and credible information about federal securities law violations to report those violations to the SEC.

As outlined in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers. It does not disclose information that could reveal a whistleblower’s identity.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.

The SEC has awarded more than $900 million to 163 individuals since the whistleblower program became effective on August 12, 2011. The SEC issued its first award in 2012. The largest whistleblower award in the program’s history was made in October 2020, when a whistleblower received $114 million. Through 2020, the top 5 whistleblower awards comprise of the following:

• $114 million – October 22, 2020
• $50 million – March 19, 2018
• $50 million – June 4, 2020
• $39 million – September 6, 2018
• $37 million – March 26, 2019

In Fiscal Year (FY) 2020, the whistleblower program set records in the amount awarded in a single year and the number of individuals awarded, granting $175 million to 39 individuals from October 1, 2019, through September 30, 2020. The awards made in FY 2020 represent 31% of the total dollars awarded to all whistleblowers and 37% of the individual award recipients since the program’s launch.

Since the whistleblower program’s inception in 2011 through the end of FY 2020, enforcement actions from whistleblower tips have resulted in more than $2.7 billion in financial remedies, including more than $1.5 billion in disgorgement of ill-gotten gains and interest. More than $850 million of the ill-gotten gains have been, or are scheduled to be, returned to harmed investors.

All whistleblower awards are paid out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money is taken or withheld from harmed investors to pay whistleblower awards.

The whistleblower program contributes to the protection of Main Street investors.

Iorio Altamirano LLP is committed to protecting Main Street investors by representing whistleblowers. Through our SEC whistleblower practice, we represent individuals who report securities fraud and other federal securities law violations. We work closely with whistleblowers to help them navigate the SEC whistleblower process, file a whistleblower complaint, and file a claim for a whistleblower award.

Individuals who have credible information regarding fraud or other violations of federal securities laws should contact law firm Iorio Altamirano LLP for a free consultation to review their legal rights on filing a whistleblower tip to the SEC and preserve eligibility to receive a whistleblower award.

A whistleblower can be any person who voluntarily provides specific, timely, and original information about potential federal securities laws violations, including:

• current and former employees of companies who had first-hand knowledge of unlawful conduct;
• outsiders who provide detailed analysis of wrongdoing;
• foreign nationals who shine a light on hard to detect fraud happening abroad that impacts U.S. investors and the marketplace; and
• investors who have lost money at the hands of fraudsters.

Approximately 40% of individuals who received an award in the Whistleblower Program’s fiscal year 2020 were outsiders, not affiliated with the entity they were reporting.

A whistleblower tip can be any specific, timely, and original information about potential federal securities law violations. Recently, whistleblower tips have most commonly been related to the following categories:

• Corporate Disclosures and Financials.
• Offering Fraud.
• Manipulation.
• Insider Trading.
• Initial Coin Offerings and Cryptocurrencies.
• Trading and Pricing.
• Foreign Corrupt Practices Act (“FCPA”).
• Unregistered Offerings.
• Market Event.
• Municipal Securities and Public Pension.

Other than being specific, timely, and original, the SEC does not specify what type of information and assistance can lead to an award. However, the SEC has provided guidance:

• Specific Information: Generally, individuals who receive awards provide specific information. For example, the whistleblowers identified particular individuals involved in the misconduct or provided specific documents that substantiated their allegations, or explained where the SEC could locate such documents.
• Identify Specific Transactions or Provide Detail Analysis: In some instances, award recipients identified specific financial transactions that evidenced fraud or provided a detailed assessment of the wrongdoing.
• Relatively Current: The misconduct reported by whistleblowers is often relatively current or ongoing when it was reported to the SEC.
• Additional Assistance or Information: Nearly all of the award recipients provided the SEC with additional assistance and/or information (e.g., answered staff questions or provided testimony) after submitting their initial tips.

A review of past awards reveals that the definition of “information” and “assistance” is broad and varied. For example, in 2020, awards were issued for the following whistleblower tips and assistance:

• A whistleblower whose tip led to bribery charges after a company falsified its financial records to conceal payments to sales agents overseas.
• An individual provided detailed, first-hand observations of misconduct by a company.
• An award was issued to a whistleblower who alerted the SEC of potential wrongdoing and provided substantial ongoing assistance.
• An individual who provided “additional” valuable information received an award.
• An award was issued to a whistleblower who alerted the agency to misconduct occurring, in part, overseas and providing crucial investigative leads that advanced the investigation and saved the SEC significant resources.
• An individual who first provided information internally and suffered hardships due to the internal reporting and then provided significant information to the SEC that prompted an investigation received an award.
• A whistleblower was awarded who made persistent efforts to expose serious financial misconduct and provided extensive and ongoing assistance to the investigative team throughout the investigation. The individual also identified witnesses and helped staff understand complex fact patterns and issues related to the matters under investigation.
• An individual who alerted the SEC to hard-to-detect violations provided both critical information and supporting evidence that conserved SEC time and resources.
• Whistleblowers provided a highly probative independent analysis of a public company’s filings and providing helpful assistance early in the investigation, which helped save the SEC time and resources.
• An individual was awarded whose information prompted the SEC to initiate an investigation and assisted the SEC throughout the investigation by helping the SEC target key information and identify important witnesses.
• A person who provided vital information and assistance that substantially contributed to an ongoing investigation received an award.
• A whistleblower received an award whose information and assistance helped the SEC stop an ongoing fraud and aided the agency’s ability to obtain an asset freeze and prevent the dissipation of investor funds.
• A whistleblower was awarded who took personal and professional risks in reporting information through the internal compliance system at a company related to hard-to-detect overseas conduct.
• A person whose information prompted the SEC to initiate a cause examination and bring an enforcement action that resulted in the return of millions of dollars to harmed investors received an award.
• An individual, who had compliance-related responsibilities, reported concerns internally, waited for 120-days before reporting significant information to the SEC that helped focus an ongoing investigation.
• Whistleblowers jointly provided a tip and provided ongoing assistance by providing detailed information that helped the SEC’s staff to understand key documents and identify witnesses.
• A person who provided information that alerted the agency to an ongoing fraudulent scheme preying on retail investors was rewarded.
• A couple of harmed investors who provided the SEC with information and assistance early in the investigation exposed a well-concealed fraud received an award.

For a whistleblower to receive an award, several conditions must be met. The process can take several years, but there are very short periods when the whistleblower much act, making it all the more important that whistleblowers be represented by counsel. Here is a brief overview of how the process works:

Step 1: The whistleblower submits a tip to the SEC.

Step 2: The tips are analyzed, and if appropriate, investigations are launched.

Step 3: U.S. authorities file cases, and those cases result in penalties ordered.

Step 4: The Office of Whistleblower Program posts a Notice of Covered Actions (NoCA).

Step 5: Whistleblower must file a claim applying for an award within 90 calendar days of NoCA. The SEC has denied late-filed award claims.

Step 6: The Office of Whistleblower Program reviews and analyzes the whistleblower’s claim.

Step 7: The SEC makes a Preliminary Determination of whether to issue an award and a proposed amount.

Step 8: If a whistleblower’s claim is denied, a whistleblower can request to review a copy of the record that formed the basis of the SEC’s decision, request a meeting with the SEC, and/or submit a written request for reconsideration. These requests must be made timely, within either or 60 days, pursuant to the whistleblower programs’ rules.

Step 9: If the whistleblower requests reconsideration, the staff will conduct additional analysis and make a Proposed Final Determination. Within 30 days of receiving the Proposed Final Determination, any Commissioner may request that the Proposed Final Determination be further reviewed by the Commission. If no Commissioner requests such a review within the 30-day period, then the Proposed Final Determination becomes the Final Order of the Commission.

Step 10: The SEC issues a Final Order of the Commission. If a whistleblower’s request for an award is denied, the whistleblower has thirty days to file an appeal to the United States Court of Appeals for the District of Columbia Circuit or to the circuit where the claimant resides or has his or her principal place of business.

Iorio Altamirano LLP, an investor advocate law firm, is committed to the effective representation of whistleblowers.

Whistleblowers face significant personal and professional risks. Our SEC whistleblower practice draws on years of experience handling securities litigation matters to help whistleblowers build a strong case.

To receive an award, a whistleblower must follow the SEC’s process and do so in a timely manner. As described above, many deadlines must be met, including many short “windows” in time where the whistleblower must take action to preserve a whistleblower’s eligibility for an award.

Any individual with credible information regarding fraud or other violations of federal securities laws should contact whistleblower law firm Iorio Altamirano LLP for a free consultation to review your legal rights on how to file a whistleblower tip to the SEC and preserve eligibility to receive a whistleblower award.

Even if you have already submitted a whistleblower tip or aided regulators in an investigation, it is not too late to retain counsel. Iorio Altamirano LLP represents whistleblowers at all stages of the process.