Federal law protects and incentivizes whistleblowers who report financial frauds to the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”). The SEC prosecutes frauds related to stocks, bonds, and other securities. The CFTC prosecutes frauds related to commodity and financial futures, derivatives, swaps, and other financial instruments.
Financial fraud often involves false statements or fraudulent accounting designed to inflate the price of securities. Illegal profits are then made by selling at the inflated price. Other common types of financial and securities frauds involve:
- Insider Trading: Trading on the basis of non-public information, typically obtained from a corporate insider in breach of fiduciary duty;
- Foreign Corrupt Practices Act: Any business based on the bribery of foreign officials; and,
- Money Laundering: Activities designed to hide the true source of income.
The key aspects of the SEC and CFTC whistleblower programs provide the following:
Whistleblowers can receive between 10 and 30 percent of the amount that the SEC or CFTC receives as a result of the information provided by the whistleblower, if more than $1 million is recovered. Amounts collected by other agencies will count toward the total recovery. The factors considered in determining the amount of the award include:
- The significance of the information provided;
- The assistance provided by the whistleblower and the whistleblower’s attorney;
- The “programmatic interest” of the SEC “in deterring violations of the securities law”; and,
- The extent to which the whistleblower cooperated with the internal compliance department of his or her employer.
Employers may not fire, demote, suspend, threaten, harass, or discriminate against an individual who provides information to or assists the SEC or CFTC. Whistleblowers who suffer retaliation may sue for reinstatement, back pay, and any other damages that occurred.
Whistleblowers may report fraud anonymously, as long as they have legal representation. In certain cases, their identities may remain unknown to the SEC and the CFTC until it is time for the payment of a reward. This is the strongest confidentially provision available out of any of the federal whistleblower programs, including “qui tam” cases under the False Claims Act and the Internal Revenue Service (IRS) whistleblower program.
If you have knowledge of financial fraud and would like to discuss your options for proceeding under the SEC or CFTC whistleblower programs, contact the attorneys at Behn & Wyetzner. Our experienced lawyers can help you pursue any claim you might have. All consultations are confidential and without cost to you.