Whistle-blowing for a Good Cause

In July 2010, the whistle-blower U.S Securities and Exchange Commission (SEC) program came into effect. It happened after the President signed law (Dodd-Frank Wall Street Reform and Consumer Protection Act). The bill establishes a whistle-blower incentive program. The program aims to incentivize reporting of Commodity Exchange Act violations.

Christopher C. Ehrman, a former senior enforcement attorney, runs the SEC whistleblower program. The program offers the ability to report violations anonymously. It also provides a monetary award and robust employment protections to whistle-blowers. A SEC whistle-blower receives 10-30% of financial sanctions collected because of your tips. SEC makes payments via an Investor Protection Fund.

With the current program, SEC has authority to give monetary awards to voluntary whistle-blowers. The whistle-blowers need to provide original information leading to successful enforcement actions. SEC had another program known as ‘bounty,’ before the whistle-blower program. The program failed to tame rogue players. Even a report from the Office of the Inspector General (2013) termed it not well-designed. The new whistleblowers’ program is an enhancement of the bounty project.

Tips for Whistleblowers

A whistleblower can report violations of federal security laws about to occur, ongoing, or those that have happened. You can report violations happening anywhere in the world. SEC enforcement actions cover deceptive and manipulative practices about security transactions. The term ‘security’ refers to stocks, bonds, notes, investment contracts. It also covers other non-traditional investments. Consider the following SEC whistle-blowing tips:

Timing– The early bird gets the SEC worm. It is because the program’s design encourages prompt reporting. The first one to provide original information about a violation is eligible for a SEC award. Thus, a whistle-blower needs to establish a material breach promptly.

The rules– It is vital for whistle-blowers to understand SEC regulations. It helps to avoid unnecessary delays or rejection. SEC has a set of rules any serious whistle-blower ought to follow.

You can report any violation of federal security laws. SEC has wide-ranging jurisdiction covering many industries and entities (private and public. A whistle-blower needs experienced SEC whistle-blower lawyers. Such lawyers assist in file tips.

Submitting Tips to SEC

To provide original information to SEC, participants need a SEC Form TRC. Whistle-blowers (and their attorneys) use this form when submitting tips. The form contains many sections. Here are the vital ones:

  • Section B- It is where a whistleblower fills out information about his/ her attorney. If you have an attorney, you can skip section A, which requires your personal information. Having a lawyer and filling out section B keeps your tips anonymous.
  • Section D- Here, you describe your tips. Many of the questions in this section will determine whether you are eligible for awards.

To maximize your chances of receiving an award, fill out section D carefully. Start by evaluating factors SEC uses to determine awards. You should then stress this factors in your submission. SEC regulations will guide you in completing some parts of the Section D. For a fool-proof process, employ the services of a SEC whistle-blower lawyer.