SEC Whistleblower Reward

With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Congress created monetary incentives for private citizens to assist the government in rooting out violations of the federal securities law.  By the monetary reward provisions of the Dodd-Frank Act, Congress intended to “motivate those with inside knowledge to come forward and assist the Government to identify and prosecute persons who have violated securities laws and recover money for victims of financial fraud.”  According to Senate Report 111-176, whistleblower tips identified 54.1% of uncovered fraud schemes in public companies, while external auditors, including the SEC, detected only 4.1% of uncovered fraud schemes.

Under the Dodd-Frank Act, a whistleblower who provides original information to the SEC or CFTC that leads to a successful enforcement action resulting in over $1,000,000 of monetary sanctions may be awarded by the SEC or CFTC an amount not less than 10% and not more than 30% of the monetary sanctions collected.  Penalties, disgorgement and interest paid count toward the $1 million threshold.  The determination of the amount of the award is within the discretion of the SEC, which must take into consideration the significance of the information provided, the degree of assistance provided, the “programmatic interest” of the SEC in deterring violations of the securities laws by rewarding whistleblowers, and other factors the SEC may establish by rule or regulation.  A whistleblower can appeal the denial of an award directly to a federal court of appeals, but cannot appeal the determination of the amount of an award that conforms with the program’s dictates.  Any appeal must be made within 30 days of the SEC’s determination.

Recent examples of monetary sanctions collected or to be collected by the SEC demonstrate the strong financial incentive whistleblowers have under the Dodd-Frank Act to blow the whistle on violations of the securities laws.  For example, if the Dodd-Frank Act were applicable to the Goldman Sachs case, which recently settled for $550 million, a qualified whistleblower would receive between $55 million and $165 million, or 10-30% of the $550 million settlement.  If the Dodd-Frank Act were applicable to the Dell Corp. accounting fraud case that recently settled for $110 million, a qualified whistleblower would receive between $11-$33 million.

Bernstein Liebhard LLP is dedicated to providing experienced, dedicated, and aggressive representation for whistleblowers looking to report violations of the federal securities laws to the SEC.  Our attorneys will work closely with you and assist you in presenting original information that can result in a reward from the SEC.  If you want to blow the whistle or have questions about your eligibility as a whistleblower under the SEC Whistleblower Program, contact Michael S. Bigin or Laurence J. Hasson.