Sage Counsel: Tips for SEC Whistleblowers

Q What violations qualify for the SEC Whistleblower Program?

A An SEC whistleblower may report any violation of the federal securities laws that has occurred, is ongoing, or is about to occur. The reported misconduct may occur anywhere in the world. In most cases, SEC enforcement actions involve manipulative and deceptive practices associated with the purchase or sale of a security. Beyond stocks and bonds, the federal securities laws have interpreted “security” broadly to include investment contracts, notes and other non-traditional investments.

Q When should SEC whistleblowers report to the Commission?

A We can’t say it enough: Timing matters…The early bird really does get the worm. Similar to other bounty programs, the SEC Whistleblower Program was designed to encourage prompt reporting by rewarding whistleblowers who report “original information.” To that end, only the first whistleblower to report a securities violation will be eligible to receive an SEC Whistleblower Program award, unless subsequent whistleblowers are found to have significantly contributed to the success of the enforcement action. Even in cases where this higher standard is met, the Commission regularly reduces monetary awards to SEC whistleblowers for unreasonable delay in reporting.

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