On Friday, August 12, 2011, the Securities and Exchange Commission’s much discussed whistleblower program became effective with the launch of a new webpage for people to report a violation of the federal securities laws and apply for a financial award and the introduction of the new Office of the Whistleblower.
To be considered for an award, the final rules require that a whistleblower must:
- Voluntarily provide the SEC …
- In general, a whistleblower is deemed to have provided information voluntarily if the whistleblower has provided information before the government, a self-regulatory organization or the Public Company Accounting Oversight Board asks for it directly from the whistleblower or the whistleblower’s representative.
- … with original information …
- Original information must be based upon the whistleblower’s independent knowledge or independent analysis, not already known to the SEC and not derived exclusively from certain public sources.
- … that leads to the successful enforcement by the SEC of a federal court or administrative action …
- A whistleblower’s information can be deemed to have led to a successful enforcement action if:
- The information is sufficiently specific, credible and timely to cause the Commission to open a new examination or investigation, reopen a closed investigation, or open a new line inquiry in an existing examination or investigation.
- The conduct was already under investigation when the information was submitted, and the information significantly contributed to the success of the action.
- The whistleblower reports original information through his or her employer’s internal whistleblower, legal, or compliance procedures before or at the same time it is passed along to the SEC; the employer provides the whistleblower’s information (and any subsequently-discovered information) to the SEC; and the employer’s report satisfies prongs (1) or (2) above.
- … in which the SEC obtains monetary sanctions totaling more than $1 million.
- The rules permit aggregation of multiple SEC cases that arise out of a common nucleus of operative facts as a single action. These may include proceedings involving the same or similar parties, factual allegations, alleged violations of the federal securities laws, or transactions or occurrences.
A successful blower may be entitled to 10-30% of the SEC sanctions over $1 million.
Contact Evans & Kob for experienced regulatory and legal counsel regarding whistleblower claims or any broker-dealer and investment adviser, arbitration, regulatory or securities matter at email@example.com.