The U.S. Securities and Exchange Commission aims to protect investors and maintain fair markets. Part of this mission includes investigating possible securities fraud.
If you have independent information about fraud related to a securities transaction, you may be eligible for a financial award from the SEC Whistleblower Program. Before providing information, though, you should understand how the program works.
The legal basis for the program
Following the 2008 financial crisis, President Obama signed the Dodd-Frank Wall Street Reform and Protection Act into law. Among many other things, this wide-sweeping legislation enacted the SEC Whistleblower Program. When enforcing the country’s securities law, the SEC may now accept information from insiders or others about potential securities fraud.
Whistleblower claim elements
If you have material information about securities fraud, the SEC may give you between 10% and 30% of any financial recovery the commission receives. For a valid whistleblower claim, though, you must meet the following elements:
- You must provide information that significantly contributes to an SEC investigation.
- You must provide original information that is not publicly available.
- You must provide information voluntarily and not in response to an official request for information.
A potential monetary award
The SEC has authority to award whistleblowers who help uncover securities fraud. While the commission may give you up to 30% of its recovery, the exact amount you may receive depends on a few factors. That is, the SEC is likely to consider both the value of the information and the extent of your assistance when determining how much to award you for your tip.
Unfortunately, those who expose fraud are often vulnerable to retaliation. Nevertheless, federal law has specific protections for whistleblowers. For example, your employer may not take adverse employment action against you because of your SEC complaint.
While you do not have to worry about retaliation for giving information about securities fraud to the SEC, you should carefully understand your rights and responsibilities before doing so. Still, if your information provides meaningful assistance to the investigation, the SEC may express its gratitude by giving you financial compensation.