The Securities Exchange Commission’s (“SEC”) Whistleblower Program was designed to provide monetary incentives to individuals to come forward and report possible violations of the federal securities laws to the SEC. Some examples of the types of conduct that a whistleblower could report include:

  • Insider trading
  • Manipulation of the price or volume of a security
  • Theft or misappropriate of funds or securities
  • Fraudulent or unregistered security offerings
  • Ponzi or Pyramid schemes
  • Bribery or other improper payments to foreign officials

This list is not exhaustive; any violation of the various federal securities, including violations of prior SEC orders, may be of interest to the SEC.

To be eligible for a reward, a successful whistleblower must do four things: “(1) voluntarily provide the Commission (2) with original information (3) that leads to the successful enforcement by the Commission of a Federal court or administrative action (4) in which the Commission obtains monetary sanctions totaling more than $1,000,000.” This means that a whistleblower must provide the information before they receive a request for information (the “voluntary” requirement), and that information must be the result of either independent knowledge—facts not known to the general public—or independent analysis—the individual’s own evaluation of publicly available information that yields information not generally known or available to the public (the “original information” requirement).

Where the SEC does successfully enforce an action based on information received from a whistleblower, the whistleblower is entitled to an award ranging from ten to thirty percent of any monetary sanctions ordered. This range remains the same whether there is one whistleblower or several, so if the SEC finds that multiple whistleblowers are entitled to an award, the total amount of the awards given to all whistleblowers cannot exceed 30% of the sanctions ordered. The amount of an award is at the discretion of the SEC, and they balance multiple factors: the significance of the information, the amount of assistance provided by the whistleblower, the timeliness of the report, etc.

A whistleblower meeting the above criteria may also be able to eligible to receive an award if the information they provided also led to a successful “related action” brought by another authority. For example, information provided by one whistleblower may spark both an enforcement action by the SEC and an action by the Department of Justice; in this case, the whistleblower may be eligible for awards based on sanctions received from both actions.

For information on how to submit information to the SEC, see How to File a Whistleblower Complaint or contact Lundin PLLC Senior Attorney Alexandra Douglas.