SEC Whistleblower Program

In response to the 2007-08 financial crisis and a salvo of punishing corporate scandals such as Enron, Tyco, and Madoff, Congress established a whistleblower program to empower individuals to report possible violations of the federal securities laws to the SEC. This program offers eligible whistleblowers substantial monetary awards, employment protections, and—when working with an attorney—the ability to report anonymously.

Whistleblowers may be eligible for 10-30% of the monetary sanctions collected in a successful SEC enforcement action in which the total penalties exceed $1 million. To provide a sense of scope, in FY2024, the SEC ordered $8.2 billion in financial remedies and made $255 million in whistleblower awards to 47 individuals. 

What’s more, SEC whistleblowers are eligible for awards in related actions built on the information they provided to the SEC. So, for instance, if the Department of Justice initiates an action against a wrongdoer, the whistleblower can secure a percentage of that penalty as well. In FY2024, seven whistleblowers received awards in related actions. 

Numerous factors can impact an award percentage. For instance, SEC whistleblowers receive larger awards based on the significance of the information and the assistance they provide to the Commission; the seriousness of the wrongdoing; and their participation in internal compliance programs. The SEC also considers culpability, reporting delay, and interference with internal compliance systems when determining awards.

An individual or group of individuals can report to the SEC using a Tip, Complaint, or Referral (TCR) form. It also may be beneficial to talk to a lawyer to determine the quality and scope of allegations, and what evidence best supports the allegations and how to legally obtain it, among other complex issues. These attorneys can prepare robust submissions to the SEC based on their knowledge of both the federal securities laws and the current enforcement focus of the federal authorities. Importantly, only by working with an attorney can whistleblowers file with the SEC while maintaining their anonymity. 

To qualify for an award, a whistleblower must meet strict criteria established by Congress and the SEC. The information provided must be original, shared voluntarily, and it must cause the Commission to open an investigation or substantially contribute to an ongoing investigation. (There is no reward for a whistleblower who provides information the SEC has already received from another source. Timing matters!) The whistleblower’s report must be gleaned from independent knowledge and analysis. The stronger the submission, the more likely the SEC will open an investigation. To mitigate risk and exposure, an individual should speak with an SEC whistleblower lawyer prior to gathering evidentiary information to bolster their report. 

A whistleblower does not have to be an employee of the bad actor. A personal trainer, bartender, colleague, sibling… how the whistleblower learns of the misconduct is less relevant than the quality of the information provided.

Yes. Given the risks, and very real fear, of reporting misconduct, Congress baked into the statute the ability for whistleblowers to file their submissions anonymously when working through an attorney. Outten & Golden’s whistleblower attorneys have a wealth of experience navigating the employment issues that arise for whistleblowers when anonymity may have already been compromised.

Any violation of the federal securities laws can qualify for an SEC whistleblower submission. Common allegations relate to market manipulation, offering fraud, Ponzi schemes, insider trading, fraud by major financial institutions, violations of the Foreign Corrupt Practices Act, and false or misleading disclosures and financials.

The short answer is no, but there are some benefits to reporting internally.

In designing the whistleblower program, the SEC was careful to recognize the importance of internal reporting so as not to undermine a company’s compliance policies and programs. That said, internal reporting carries with it great risk for retaliation. The SEC has numerous tools in its arsenal to go after companies that retaliate against whistleblowers… but those protections only go into effect once a whistleblower has reported to the SEC. 

When, how and if an employee should report internally is an extremely complicated decision. We encourage individuals to talk to a whistleblower lawyer to determine how, when and to whom it’s best to report misconduct.

Robust employment protections are a hallmark of the SEC whistleblower program. In short, it is illegal for employers to demote, suspend, terminate, harass, or discriminate against a whistleblower who, in earnest, reports a suspected violation of the federal securities laws to the SEC. The statute also gives whistleblowers who experience retaliation the ability to file a private action in federal court seeking double back pay with interest, reinstatement, attorneys’ fees and certain litigation costs. (Other state and federal laws may also apply: experienced anti-retaliation attorneys can advise on the myriad protections available to employee whistleblowers).

Let’s be clear: The SEC can and will go after companies that retaliate against truthtellers.

No. It is unlawful for an employer to impede an individual’s ability to report misconduct to law enforcement. Employees cannot be silenced through any restrictive language or agreements, including employment and separation agreements, training manuals, and codes of conduct. Even if an employee signs a severance agreement releasing various legal claims, you never waive your right to report securities law violations to the SEC and you can never waive your right to secure a whistleblower reward for reporting wrongdoing.