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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.

Continue reading

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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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After a broker or investment advisor leaves a FINRA member firm, a broker dealer is required to file a Form U5 with FINRA. This form details the broker's termination. This is the case even if the broker voluntarily terminates his or her employment, or the individual is no longer working as a broker, but is still working for the firm in a different capacity. Many brokers have found after leaving that some firm uses the Form U5 to damage the brokers reputation as a securities representative. This is similar to employees who leave other types of jobs, sometimes on good terms, but are either refused a reference or given a bad one. In either case, the individual changing employment finds him or herself in a difficult position. This is particularly true if the employment was not terminated voluntarily. Brokers who feel like they have been maligned by former employers have increasingly sought legal counsel in order to defend themselves, clear their name, and usually with a financial settlement from their former firm as well as FINRA.After a broker or investment advisor leaves a FINRA member firm, a broker dealer is required to file a Form U5 with FINRA. This form details the broker’s termination. This is the case even if the broker voluntarily terminates his or her employment, or the individual is no longer working as a broker, but is still working for the firm in a different capacity. Continue reading

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The U.S. Congress has established whistleblower programs with monetary awards to incentivize individuals to report possible violations of the federal securities laws to the Securities & Exchange Commission and the Commodities Futures Trading Commission. The information reported to these agencies can be past, ongoing, or future fraudulent activities. They include: Ponzi or Pyramid schemes or High-Yield Investment Programs Theft or misappropriation of funds or securities Manipulation of a security's price or volume Front running, in which a trader is aware of pending customer orders for a security and buys or sells unfairly. Accounting fraud, in which accountants fail to identify false information made by clients regarding their financial status Pump-and-dump schemes and stock manipulation, including false statements regarding a public company's financial reports and lying to corporate auditors Mutual fund fraud, which entails deceptive acts that disadvantage investors Bribery to obtain or retain business, including with foreign officials Insider trading Fraudulent or unregistered securities offerings Abusive naked short selling Fraudulent conduct associated with municipal securities transactions or public pension plans Initial Coin Offerings and Cryptocurrencies The U.S. Congress has established whistleblower programs with monetary awards to incentivize individuals to report possible violations of the federal securities laws to the Securities & Exchange Commission and the Commodities Futures Trading Commission. The information reported to these agencies can be past, ongoing, or future fraudulent activities. They include: Continue reading

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