The United States capital markets have whistleblower programs that are administered by the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”). The programs’ purpose is to encourage whistleblowers to report violations of securities and commodity-related laws by offering financial rewards. In addition, there are laws that protect the whistleblowers from retaliation after reporting such violations. They are led by the anti-retaliation provision of the Sarbanes-Oxley Act and the whistleblower protections in the Dodd-Frank Act.
It is vital that the United States capital markets continue to fund businesses that provide goods and services to consumers. The SEC and CFTC are the main federal regulators of the capital markets. These agencies aim to prevent violations of the capital markets. However, due to the massive size of the markets and the agencies’ limited resources, the agencies rely on whistleblowers to report violations. To reward and incentivize the whistleblowers, the SEC and CFTC provide the whistleblower programs to counter the risks inherent in reporting violations.
The SEC’s whistleblower rewards program is in its eighth year of existence and has paid out almost $200 million dollars in financial rewards to over 50 whistleblowers. The program was established by the Dodd-Frank Wall Street Reform and Consumer Protections Act of 2010 (“Dodd-Frank Act”). Dodd-Frank Act followed other financial reforms act such as Sarbanes-Oxley Act (“SOX”) in 2002 that provided rules designed to prevent accounting fraud by publicly-traded companies. SOX also has a whistleblower protection provision to protect employees from retaliation by their employers for reporting fraud.
The SEC Whistleblower Program
The SEC Whistleblower program awards whistleblowers who provide the SEC with original information (or “tips”) leading to successful enforcement actions to recover monetary sanctions over $1 million dollars. Accordingly, the whistleblower may be entitled to an award of 10-30 percent of the amount recovered by the SEC. Our attorneys work with the whistleblower to submit the information to the SEC Office of the Whistleblower. There are specific guidelines that must be followed for the SEC to accept such a tip and proceeding to investigate it. In 2017, there were more than 4,400 tips. Therefore, the right attorney is needed to know the optimal ways to submit and describe the information for the SEC to take action.
The CFTC Whistleblower Program
Similar to the SEC, the CFTC is an agency with regulatory authority. It focuses on futures trading subject to the Commodities Exchange Act (“CEA”). The CEA’s authority spans widely to commodities (grains, wheat, corn, oats, cotton, oil, gasoline, and stock futures such as stock index futures, currencies and cryptocurrencies). The CFTC Whistleblower Program was also established by Dodd-Frank Act. It has similar requirements as its SEC counterpart and provides whistleblowers with anti-retaliation protections.
Our firm has obtained experience in the anti-retaliation provisions of SOX and CFTC. Simply put, SOX prohibits retaliatory personnel actions against employees who report corporate fraud and violations of securities laws. To establish a claim of retaliation, our firm has shown that:
(1) the employer retaliated against the Plaintiff;
(2) because she provided information about, or participated in an investigation relating to; and
(3) what she reasonably believed constituted a violation of fraud (or any SEC rule or regulation).
It is crucial that the Plaintiff provide this information to:
(1) a federal regulatory or law enforcement agency;
(2) a member of Congress or any committee of Congress;
(3) a person with supervisory authority over the employee; or
(4) a person working for the employer who has the authority to investigate, discover, or terminate the misconduct. (18 U.S.C. Section 1514A or SOX 806)