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Types of Whistleblower Cases

Securities and Commodities Fraud

Blowing the Whistle on Securities and Commodities Fraud

Following the financial crisis of 2008, and the disclosure of the massive Bernie Madoff Ponzi scheme, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. That law created a new program designed to award whistleblowers who disclose violations of securities laws to the U.S. Securities Exchange Commission (SEC), and to protect those whistleblowers from retaliation by their employers. Under the program, a securities whistleblower may provide information relating to a violation of the securities laws to the SEC. If the information is presented to the SEC using the correct procedures, and if the government collects at least $1 million as a result, then the SEC will award the securities whistleblower between 10-30% of the total amount of money collected. The Dodd-Frank Act created a special fund of over $400 million to be used by the SEC specifically to pay securities whistleblower awards.

Types of Securities Fraud

The nature and form of securities fraud can vary widely, but may include:

  • Market manipulation
  • Misstatements or omissions of fact in disclosures to the SEC
  • Corporate mismanagement resulting in breach of fiduciary duties to shareholders
  • Fraudulent accounting practices that misrepresent corporate assets or liabilities
  • Insider trading
  • Ponzi schemes
  • Fraudulent schemes by stock brokers and dealers
  • Aiding and abetting securities fraud by accountants, lawyers or investment bankers

Commodities Fraud

The Dodd-Frank Act also established a program to encourage whistleblowers to report fraud in connection with the sale of commodities. Under this program, a securities whistleblower may disclose information relating to commodities fraud to the Commodity Futures Trading Commission (CFTC). As is the case with the SEC’s program, if the information leads to a successful judicial or administrative action, then the CFTC will award the whistleblower between 10-30% of the total amount of monetary sanctions obtained by the Government.

Foreign Corrupt Practices Act

The SEC whistleblower program also creates an avenue for whistleblowers to report violations of the Foreign Corrupt Practices Act (FCPA). Under the FCPA’s anti-bribery provisions, it is unlawful for a company, or an individual acting on the company’s behalf, to offer, give, promise to give, or to authorize the giving of anything of value to any foreign official in order to obtain or retain business, or to direct business to a certain person. The FCPA also requires companies whose securities are listed in the United States to satisfy certain accounting requirements. Companies must make and keep books and records that accurately and fairly reflect corporate assets and must create and maintain an accurate set of internal accounting controls. The SEC is responsible for civil enforcement of the FCPA. A securities whistleblower with information concerning FCPA violations is eligible for an award under the SEC’s whistleblower program.

Protection Against Retaliation

In addition to creating a procedure for whistleblowers to disclose fraud in connection with securities and commodities or violations of the FCPA, the Dodd-Frank Act also includes a number of provisions designed to protect whistleblowers from retaliation by their employers. The Act prohibits employers from taking any adverse employment action, or otherwise discriminating against an employee, for providing information to the SEC or CFTC. Any employee that is subjected to discrimination or retaliation has the right to file a lawsuit against his or her employer and seek reinstatement with the same seniority status, two times the amount of back pay owed to the employee, and compensation for litigation costs, including attorneys’ fees.

Anonymous Reporting Allowed

In order to further protect whistleblowers from retaliation, the Act allows a securities whistleblower to anonymously submit information to the SEC or CFTC, as long as the whistleblower is represented by an attorney who submits the information on the securities whistleblower’s behalf. The SEC, CFTC, and any other government agencies assisting the SEC or CFTC in an investigation must also keep the information provided by the whistleblower confidential until the SEC or CFTC is required to disclose the information in connection with a public proceeding. Anonymous reporting is an important option for a securities whistleblower concerned about retaliation, or about industry “black listing.”

Contact a Securities Whistleblower Lawyer

Reporting cases of securities and commodities fraud, or violations of the FCPA, can be complicated, and special procedures must be followed to preserve your right to a securities whistleblower reward. The law firm of Tycko & Zavareei LLP works on the cutting edge of the securities whistleblowing revolution, and understands the complex issues that securities and commodities fraud whistleblowers face. Our qui tam attorneys are available for free, no-commitment initial consultations. To start that process, complete our Case Evaluation Form, or call us at (202) 973-0900.