SEC Whistleblower Process: Insider’s Guide

Whistleblowers who report original information that significantly contributes to a successful enforcement action remain eligible for an award, even if the Commission is already looking into the company. In cases like this, SEC Whistleblower Advocates looks for and helps whistleblowers to identify and report hidden aspects of the alleged fraud that investigators might have missed, including new violations, bad actors, and sources of potentially relevant evidence. For instance, in a market manipulation case, we might hire an expert to assist the Staff; or, in an offshore Ponzi scheme, we might hire investigators to secure documentary evidence. By adding value to an ongoing investigation, we help our whistleblower clients secure their place in the awards claims process.

For more information about SEC investigations, check our SEC Insider's Guide.

SEC Insider Tip: Sophisticated whistleblowers carefully weigh the inherent risks associated with blowing the whistle and meeting the higher "significantly contributes" standard against the likelihood and size of a future whistleblower award, before they report to the Commission.

Yes. The SEC whistleblower program has a global reach, covering all federal securities violations, regardless of where the misconduct occurred or the citizenship of the whistleblowers. Whistleblowers from more than 100 countries have submitted tips to the Commission. In fact, early in the program's history, an international whistleblower received a $30 million award. SEC Whistleblower Advocates regularly work with international whistleblowers, helping them to report a wide variety of violations, including those involving corporate disclosures and financials, market manipulation, and the Foreign Corrupt Practices Act. In these representations, we coordinate with other law enforcement and regulatory organizations, including foreign authorities, to ensure that their enforcement actions are successful and to ensure every dollar of the monetary sanctions collected is counted toward our clients' final whistleblower award.

For more information about the federal securities laws, check our Securities Law Primer.

Reporting internally can be a minefield for corporate insiders. Too often, unsophisticated whistleblowers are retaliated against and blacklisted by their companies. SEC Whistleblower Advocates provides a free legal consultation to evaluate the potential risks and rewards of internal reporting, the best practices for doing so, and advise on the robust employment protections available under the Dodd-Frank Act. Our goal is to help whistleblowers navigate this tricky legal terrain without sacrificing the right to remain anonymous or losing the financial incentive provided by the SEC Whistleblower Program.

SEC Insider Tip: Sophisticated whistleblowers are skeptical of the "See something, say something" propaganda put out by companies and strategically blow the whistle internally, if they choose to do so at all.

General practice law firms often lack the "insider" knowledge, experience and relationships to help senior executives on Wall Street and in Corporate America navigate the high-stakes and treacherous whistleblower process. At SEC Whistleblower Advocates, we tend to represent senior executives who have a lot to lose. They know the long odds of the Commission investigating a tip, the investigation being successful, and them receiving a life-changing whistleblower award. So, they are unwilling to hire amateurs and seek SEC whistleblower specialists. We were the first legal practice in the country to exclusively focus on representing SEC whistleblowers and are led by a principal architect of the program, meaning we understand the written and unwritten rules of the program. This unique expertise prevents common procedural errors that could disqualify you from a whistleblower award and increases the probability that you will receive the maximum possible whistleblower reward.

For more information about what makes SEC Whistleblower Advocates different from other law firms, check our Practice Manifesto.

The Dodd-Frank Wall Street Reform and Consumer Protection Act provides anti-retaliation provisions that are among the strongest in federal whistleblower laws. If a company fires, demotes, or otherwise discriminates against you, SEC Whistleblower Advocates will pursue legal relief on your behalf, which may include reinstatement and double back pay. We use our history of landmark victories, including representing the first SEC whistleblower whose company was charged by the Commission with retaliation, to discourage companies from targeting our clients.

The best protection for whistleblowers against retaliation and blacklisting is to report possible securities violations anonymously, within the company, and to the Commission. Rule 7(b) allows whistleblowers to report anonymously, if represented by a lawyer. Since our clients tend to be senior executives on Wall Street and in Corporate America, with a lot to lose, the majority of them report anonymously. In these cases, SEC Whistleblower Advocates acts as the formal face of the tip, meaning the whistleblower's identity is shielded from the Commission and the target company.

SEC Insider Tip: Sophisticated whistleblowers not only retain an SEC whistleblower attorney to file a Form TCR on their behalf, but they also carefully curate the information and materials provided to the Staff to ensure total anonymity and avoid the inadvertent disclosure of their identity.

Whistleblower payments come from the Investor Protection Fund, a fund established by the Dodd-Frank Act, and is a separate account from the one used to compensate harmed investors. The fund stays full by replenishing investor protection fund levels with monetary sanctions collected from securities law violators, up to the statutory maximum of $500 million. Typically, these funds come from the monetary sanctions associated with cases where there were no identifiable harmed investors or where there were residual funds available after required distributions to harmed investors had been made.

In whistleblower cases, everything starts with a specific, credible, and timely tip about possible federal securities law violations that causes the Commission to open a new investigation or examination or significantly contributes to the success of an ongoing investigation. Tips that are: detailed; objectively verifiable; backed by corroborating evidence, such as internal documents and financial statements; identify other potential sources of documentary and testimonial evidence, and are narrow enough to be investigated efficiently, stand the best chance of moving from a preliminary inquiry to further investigation and eventually to a successful enforcement action.

Once a successful enforcement action results in over $1 million in monetary sanctions, the Office of the Whistleblower posts a Notice of Covered Action on its website. Within 90 days of that notice, whistleblowers are required to mail or fax a completed application for an award, SEC Form WB-APP, to the SEC Office of the Whistleblower. SEC Whistleblower Advocates regularly monitors these notices and files lengthy and substantive applications for awards on behalf of our clients that address the governing law and their many contributions to the Commission's successful investigations and other related actions.

SEC Insider Tip: Sophisticated whistleblowers don't let the two-page SEC Form WB-APP fool them, they know that their eligibility for an award and award percentage depend upon the quality of their application for award.

People in internal compliance systems or audit roles are excluded from the SEC whistleblower program, unless reporting is necessary to prevent substantial injury to the financial interest or property of the company or investors; the company is engaging in conduct that will impede an investigation of the misconduct; 120 days have elapsed since the information was reported internally; or the information was obtained from outside their compliance and audit role.

Due to the high stakes and special procedural requirements, compliance personnel and auditors are encouraged to consult with legal counsel before reporting to the Commission. SEC Whistleblower Advocates has regularly advised gatekeepers about their eligibility, including representing the first officer of a public company to receive a whistleblower award.

For more information about the eligibility of compliance personnel and auditors to participate in the whistleblower program, check out our article in CFO Magazine, "An 'Impossible Position' for Corporate Fraud Gatekeepers."