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SEC Whistleblower Lawyer Blog

Articles Posted in SEC Whistleblower

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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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Through three orders, the SEC issued awards to four people that totaled over $40 million. In the first proceeding, the SEC awarded two individuals a bounty of $37 million that provided crucial evidence leading to the success of the covered action. One individual helped SEC staff understand the evidence provided, and led to additional relevant information. The continuing assistance of both gave staff more information that helped to advance the investigation. Another governmental agency was involved with this action with its own separate “covered action.” Both whistleblowers received 50% of the bounty amount. In the second proceeding, the SEC awarded one individual $1.8 million for the new information they provided that saw SEC staff open a new investigation into misconduct. The individual quickly offered an internal report, and continued to provide SEC staff with information, documentation, and other assistance throughout the investigation. Charges in the affiliated covered action were a direct result of this individual’s contributions, which caused them to suffer hardships as a result. In the third proceeding, a whistleblower received an SEC bounty of $1.5 million for information and assistance in an existing investigation that led to a successful enforcement action. As with the previous two, this individual gave continued and substantial assistance to SEC staff throughout the investigation. This whistleblower provided new information that saved staff time and resources and helped staff to understand the issues involved.Through three orders, the SEC issued awards to four people that totaled over $40 million.

  • In the first proceeding, the SEC awarded two individuals a bounty of $37 million that provided crucial evidence leading to the success of the covered action. One individual helped SEC staff understand the evidence provided, and led to additional relevant information. The continuing assistance of both gave staff more information that helped to advance the investigation. Another governmental agency was involved with this action with its own separate “covered action.” Both whistleblowers received 50% of the bounty amount.
  • In the second proceeding, the SEC awarded one individual $1.8 million for the new information they provided that saw SEC staff open a new investigation into misconduct. The individual quickly offered an internal report, and continued to provide SEC staff with information, documentation, and other assistance throughout the investigation. Charges in the affiliated covered action were a direct result of this individual’s contributions, which caused them to suffer hardships as a result.
  • In the third proceeding, a whistleblower received an SEC bounty of $1.5 million for information and assistance in an existing investigation that led to a successful enforcement action. As with the previous two, this individual gave continued and substantial assistance to SEC staff throughout the investigation. This whistleblower provided new information that saved staff time and resources and helped staff to understand the issues involved.

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The Securities and Exchange Commission has kept busy, even through the holidays. On January 10th, 2022, the SEC put out a press release announcing that three more people have received bounties after working with SEC staff to identify and discontinue wrongdoing in the financial sector. The first whistleblower reported their concerns internally prior to notifying the SEC. This information contributed significantly to an existing investigation. The SEC was not previously aware of this misconduct. This whistleblower’s information assisted the staff in developing a well-organized and effective investigation leading to the enforcement action. The whistleblower kept in touch with the staff throughout the investigation to help uncover the full extent of misconduct as well as identify all possible witnesses. This information as well as other assistance also helped the SEC staff to obtain evidence of wrongdoing that was occurring overseas. Without this information from the whistleblower, the activity would have been difficult to uncover. In this case, the first whistleblower received an award of $2.6 million.The Securities and Exchange Commission has kept busy, even through the holidays. On January 10th, 2022, the SEC put out a press release announcing that three more people have received bounties after working with SEC staff to identify and discontinue wrongdoing in the financial sector. Continue reading

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Given both the breadth of the activities that can constitute violations of the Foreign Corrupt Practices Act (FCPA) (since it precludes giving anything of value) and the severity of the possible penalties (prison terms and millions of dollars in fines), the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have created lists of “red flags,” so executives can know when they are in danger of violating the law. Red flags include: The business transaction takes place in a nation known for corruption The involved parties have a history of previous bribery allegations The involved parties have a poor business reputation The involved parties are known for having a poor (or nonexistent) compliance program There is a lack of due diligence by the involved parties Since FCPA (backlink to FCPA blog when Justia puts up) violations often involve a third party acting as an intermediary between the covered person and entity and a foreign official, there are also red flags for third parties: The third party is involved at request of the foreign official The third party is a relative or close ally of the foreign official The third party will receive excessive compensation or unreasonably large discounts The third party has vaguely described services (even in agreements) The third party isn’t normally engaged in this type of business The third party is a shell company for an offshore jurisdiction or requests payment to offshore bank accountsGiven both the breadth of the activities that can constitute violations of the Foreign Corrupt Practices Act (FCPA) (since it precludes giving anything of value) and the severity of the possible penalties (prison terms and millions of dollars in fines), the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have created lists of “red flags,” so executives can know when they are in danger of violating the law. Continue reading

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Both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are responsible for enforcement of the Foreign Corrupt Practices Act (FCPA). And as this dual-enforcement mechanism suggests, FCPA violators can face criminal and civil penalties, and there are punishments for both the responsible individuals and the entities involved. For individuals convicted of FCPA violations, penalties can include: Up to five years in imprisonment Up to $100,000 in criminal penalties Up to $10,000 in civil penalties For entities convicted of FCPA violation, penalties can include: Up to $2,000,000 in criminal penalties Up to $10,000 in civil penaltiesBoth the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are responsible for enforcement of the Foreign Corrupt Practices Act (FCPA). And as this dual-enforcement mechanism suggests, FCPA violators can face criminal and civil penalties, and there are punishments for both the responsible individuals and the entities involved. Continue reading

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