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SEC Whistleblower Lawyer Blog

Articles Posted in SEC Whistleblower

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One question many whistleblowers worry about: What if their whistleblowing uncovers their own participation in the wrongdoing? And if it does so, how might that impact their liability and eligibility for an award?   Some culpability is not an automatic bar from a securities whistleblower award. The Securities and Exchange Commission (SEC) understands that some whistleblowers may have participated in the wrongdoing at issue. That may be why they know about it in the first place.One question many whistleblowers worry about: What if their whistleblowing uncovers their own participation in the wrongdoing? And if it does so, how might that impact their liability and eligibility for an award?

Some culpability is not an automatic bar from a securities whistleblower award. Continue reading

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If you are considering filing a whistleblowing report with the United States Securities and Exchange Commission (SEC), you might wonder if the SEC program covers violations that take place abroad. The short answer is: Probably, but it depends. As a starting point, it’s worth noting that there is no requirement for whistleblowers to be US residents or citizens. On the contrary, since the beginning of the SEC’s program, eligible whistleblowers from 130 countries—including the United Kingdom, Canada, China, Australia, and India—have come forward with tips for the SEC to review. When it comes to what (and where) the SEC can investigate, Dodd-Frank Act gives the SEC authority over extraterritorial malfeasance under one of the following two conditions: 1)  when the relevant securities transaction occurs outside of the US, the conduct within the US “constitutes significant steps in furtherance of the [securities] violation,” or 2) when the conduct outside of the US still “has a foreseeable substantial effect” within the US.If you are considering filing a whistleblowing report with the United States Securities and Exchange Commission (SEC), you might wonder if the SEC program covers violations that take place abroad. The short answer is: Probably, but it depends.

As a starting point, it’s worth noting that there is no requirement for whistleblowers to be US residents or citizens. On the contrary, since the beginning of the SEC’s program, eligible whistleblowers from 130 countries—including the United Kingdom, Canada, China, Australia, and India—have come forward with tips for the SEC to review. Continue reading

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People toss around the term “fraud” all the time, often it to describe something fake or insincere. But when it comes to the legal understanding of the term in context of the securities laws, fraud means more than something fake. Understanding what fraud means is important for those who work in the financial sphere—especially if you’re working with clients who aren’t sophisticated investors. Where the line is between aggressive sales, marketing and investing, and actual fraud is sometimes hard to determine. It can be helpful to go back to the basics of what fraud entails.   Securities Fraud, Defined Generally speaking, the legal definition of fraud is: a materially false statement that is made with an intent to deceive a victim who relies on the statement, and the victim has suffered damages because of their reliance Each prong of this definition is important. As an example, suppose a firm promises every client that a live human answers every call on the first ring. But sometimes, the receptionist is on another line, and it takes more than one ring to answer. Also, the firm uses voicemail after hours.People toss around the term “fraud” all the time, often it to describe something fake or insincere. But when it comes to the legal understanding of the term in context of the securities laws, fraud means more than something fake. Understanding what fraud means is important for those who work in the financial sphere—especially if you’re working with clients who aren’t sophisticated investors. Where the line is between aggressive sales, marketing and investing, and actual fraud is sometimes hard to determine. Continue reading

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If you’re aware of a SPAC that is defrauding investors, you may be wondering if you should go to the Securities and Exchange Commission (SEC) and become a whistleblower. While how to best submit your case will always depend on your case, here are guidelines to help you understand the process. But one thing to keep in mind from the start: It’s important to realize that the SEC receives many tips, but it only pursues a few. So the real issue isn’t how you file a tip. Your real question should be, “How do you get the SEC to take an interest in your case?” The best way to do that is to have an attorney experienced in whistleblowing prepare and submit your tip for you. Industry watchers say that using an attorney automatically means that the SEC will take your application more seriously—because having an attorney saves the SEC time. Your attorney will have already pre-screened your case for its legal merit. And an experienced whistleblower attorney can craft a submission that is tailored to address the relevant legal standards and to meet the SEC priorities and other interests. If you’re aware of a SPAC that is defrauding investors, you may be wondering if you should go to the Securities and Exchange Commission (SEC) and become a whistleblower. While how to best submit your case will always depend on your case, here are guidelines to help you understand the process. But one thing to keep in mind from the start: It’s important to realize that the SEC receives many tips, but it only pursues a few. So the real issue isn’t how you file a tip. Your real question should be, “How do you get the SEC to take an interest in your case?” Continue reading

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The SEC announced another whistleblower bounty that paid nearly $3.5 million to four individuals. Jointly, three whistleblowers provided information to the SEC that led to the staff opening an investigation. The investigation led to a successful enforcement action by the SEC. Additionally, that information and investigation led to another agency opening its own investigation, culminating in a separate enforcement action. The fourth whistleblower used publicly available information to offer additional insights to the SEC. This information and analysis showed additional allegations to the staff that furthered the investigation. However, this whistleblower was “an outsider not affiliated with the Company.”  The individual’s analysis from public information was highly detailed and took considerable time and effort to research and collate, such as changes in the company’s stock pricing. The report submitted to the SEC took approximately seven weeks to complete.The SEC announced another whistleblower bounty that paid nearly $3.5 million to four individuals.

Jointly, three whistleblowers provided information to the SEC that led to the staff opening an investigation. The investigation led to a successful enforcement action by the SEC. Additionally, that information and investigation led to another agency opening its own investigation, culminating in a separate enforcement action. Continue reading

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The SEC has awarded $3M to three different whistleblowers for assisting with three distinct covered actions in three separate orders. 1. In the first order, the Claims Review Staff (CRS) awarded a bounty of $1.5 million to an individual who provided original information and voluntarily gave assistance to SEC staff that led to a successful covered action. 2. In the second order, CRS awarded a $1 million bounty to an individual who also voluntarily offered original information that led the SEC to a successful covered enforcement action. In this case, the whistleblower also assisted SEC staff, including multiple interviews. 3. The third order saw a bounty of $400,000 to a whistleblower who first reported their concerns internally, leading to a ceasing of the wrongful activity. The individual subsequently reported the information to the SEC, leading to the opening of an investigation. Over the course of the investigation, the whistleblower met with SEC Enforcement staff, offering additional information and continued assistance. Ultimately, the charges in the covered enforcement action would “bear a close nexus” to the whistleblower’s stated allegations.The SEC has awarded $3M to three different whistleblowers for assisting with three distinct covered actions in three separate orders.

1. In the first order, the Claims Review Staff (CRS) awarded a bounty of $1.5 million to an individual who provided original information and voluntarily gave assistance to SEC staff that led to a successful covered action. Continue reading

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The SEC has again given an award to a whistleblower. This time it totals $3.5 million, and comes after multiple instances of support from the individual. The whistleblower’s contribution prompted SEC staff to investigate more possible securities violations. This made the investigation easier for the SEC staff, which saved them time and resources. The additional information also helped with the whistleblower’s discussion of settlement. Not one, but two SEC enforcement actions were successful as a result of the whistleblower’s assistance and cooperation. The second enforcement action came from the same “nucleus of operative facts”  as the first action.The SEC has again given an award to a whistleblower. This time it totals $3.5 million, and comes after multiple instances of support from the individual.

The whistleblower’s contribution prompted SEC staff to investigate more possible securities violations. This made the investigation easier for the SEC staff, which saved them time and resources. Continue reading

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Most whistleblowers are keen to keep their activity concealed and private until the information becomes public. In an unusual twist, one whistleblower decided to publish a research report online detailing the fraudulent activity of a company and that of its CEO prior to notifying the SEC of the fraud. Within days of sharing this information online, the whistleblower then shared the same information with the SEC. The individual was persistent in reaching out to SEC staff about this information. Their continued contact led to the SEC opening an investigation that resulted in a successful enforcement action. This whistleblower was an outsider, not an employee of the company. Without admitting or denying the findings, the Company and its CEO consented to the SEC’s order that required the Company to pay restitution as well as other remedies Ultimately, defrauded investors saw the return of millions of their dollars.Most whistleblowers are keen to keep their activity concealed and private until the information becomes public. In an unusual twist, one whistleblower decided to publish a research report online detailing the fraudulent activity of a company and that of its CEO prior to notifying the SEC of the fraud.

Within days of sharing this information online, the whistleblower then shared the same information with the SEC. The individual was persistent in reaching out to SEC staff about this information. Their continued contact led to the SEC opening an investigation that resulted in a successful enforcement action. This whistleblower was an outsider, not an employee of the company. Continue reading

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As we've blogged many times, the SEC pays whistleblowers monetary awards out of funds collected from companies and individuals that violate securities law through administrative fines and other sanctions. Since 2012, when the first award was made, the SEC has awarded $1.2 billion to 245 whistleblowers. In 2021 alone, the SEC saw an increase in whistleblower tips of 76% over 2020’s numbers. Most of these tips were related to corporate disclosure, financial statement misconduct, offering frauds, and market manipulation. The SEC issued more whistleblower awards in 2021 than in the entire previous ten years, including two of the largest bounties awarded to date. All told, the SEC awarded 108 individuals approximately $564 million in bounties in fiscal year 2021. To ensure that whistleblowers are not only properly compensated, but given incentive, the SEC is considering two changes to the whistleblower program. This will ensure that bounties are properly awarded, and individuals’ awards aren’t unintentionally reduced due to SEC or other agency policies.As we’ve blogged many times, the SEC pays whistleblowers monetary awards out of funds collected from companies and individuals that violate securities law through administrative fines and other sanctions. Since 2012, when the first award was made, the SEC has awarded $1.2 billion to 245 whistleblowers. Continue reading

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When it comes to legal terminology, there’s one term that is frequently discussed but little understood: Arbitration. Let’s discuss what arbitration is and how it can impact your whistleblowing claim. Arbitration is a sort of private mini-trial to litigate disputes between two or more parties. Rather than going to court for a lawsuit, disputing parties present facts and arguments before a private judge, known as an arbitrator, that the parties have hired to hear their case. The arbitrator makes a decision on the case, just as a judge in a court would do, and the parties must follow the arbitrator’s decision. For example, FINRA arbitration operates the largest dispute resolution program for investor claims against stockbrokers to resolve disputes for claims including claims for unsuitable investments, breach of fiduciary duty, and Ponzi schemes. Since it is a faster, less formal, and cheaper process than court litigation, many companies now require you to agree to “mandatory arbitration” as part of any contract. When mandatory arbitration is in place, with few exceptions, you cannot file a suit against the other side. Instead, you must go to arbitration.When it comes to legal terminology, there’s one term that is frequently discussed but little understood: Arbitration. Let’s discuss what arbitration is and how it can impact your whistleblower claim.

Arbitration is a sort of private mini-trial to litigate disputes between two or more parties. Rather than going to court for a lawsuit, disputing parties present facts and arguments before a private judge, known as an arbitrator, that the parties have hired to hear their case. The arbitrator makes a decision on the case, just as a judge in a court would do, and the parties must follow the arbitrator’s decision. Continue reading

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