In the summer of 2010, Congress passed a sweeping financial regulatory overhaul as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes whistleblower provisions for violations of the nation’s securities laws. Although Congress previously afforded protection to whistleblowers that provided information concerning the violations of the securities laws under the Sarbanes-Oxley Act of 2002, those provisions were deemed weak and insufficient. The new law, for the first time, provides for payments to whistleblowers who provide information that the Securities and Exchange Commission (“SEC”) uses in furtherance of an enforcement action.
SEC whistleblowers may file complaints with their identity disclosed or anonymously. Whistleblowers that submit complaints anonymously must be represented by counsel. The identity of a whistleblower must be revealed only prior to the payment of an award. The SEC whistleblower provisions, subject to various criteria, allow a whistleblower to collect between 10% and 30% of the total of monetary sanctions recouped through an SEC enforcement action in which the monetary sanctions exceed $1 million. Monetary sanctions include any monies, including penalties, disgorgement and interest.
Unlike the Federal False Claims Act, however, SEC whistleblowers do not file a lawsuit in furtherance of their claims. Rather, the whistleblower submits a complaint directly to the SEC. The SEC then investigates to determine whether to bring an enforcement action against the purported violators. Any determinations under the new law may be appealed to the appropriate United States Court of Appeals.
The SEC whistleblower provisions also prohibit any corporation that is subject to a whistleblower claim or investigation from retaliating against a whistleblower. Any whistleblower that has been retaliated against may file a civil lawsuit in a federal court for damages resulting from the retaliatory conduct. A whistleblower who has been retaliated against may receive reinstatement, two times the amount of back pay, and compensation for litigation costs, expert witness fees and attorney fees.
As a result of the important substantive and procedural provisions, potential securities whistleblowers should obtain the support of experienced legal counsel. The lawyers in our global qui tam whistleblower practice group have the unique skills and experiences needed to protect the interests of securities whistleblowers.