What Types of Securities Fraud Can Whistleblowers Report?

All types of securities fraud are covered by the SEC whistleblower program. Securities fraud—also known as stock or investment fraud—is an act of deceiving the public. The Securities and Exchange Commission acts on original, quality whistleblower information across the spectrum of securities fraud, whether foreign bribery, insider trading, investment fraud, fraud in offerings, false statements in financial filings, market manipulation, accounting fraud or other securities fraud. This is true whether or not a whistleblower is personally affected by the fraud or is an insider or expert analyst. Just a handful of the many examples of securities fraud include:

  • Ponzi schemes, in which investors are paid with their own funds or those of other investors, instead of with profits from their investments.
  • Front running, in which a trader (often operating the trading venue itself) is aware of pending customer orders for a security and buys or sells unfairly.
  • Accounting fraud, in which accountants fail to identify false information made by clients regarding their financial status.
  • Pump-and-dump schemes and stock manipulation, including false statements regarding a public company’s financial reports and lying to corporate auditors.
  • Mutual fund fraud, which entails deceptive acts that disadvantage investors in these funds
  • Insider trading.
  • Bribery to obtain or retain business.
Who Can Become a Securities Fraud Whistleblower?

A whistleblower under the SEC whistleblower program includes any person (including persons living outside the United States and non-U.S. citizens) who voluntarily provides original information about a possible violation of federal securities laws that has occurred, is ongoing or is about to occur. Information provided by whistleblowers must lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million. Whistleblowers are not required to be employees of the company to submit information about that company, or to have been harmed by the securities fraud in question.

What Types of Protections Exist for Those Who Report Securities Fraud?

Because reporting fraud and becoming an SEC whistleblower is such a powerful and impactful decision, the SEC whistleblower program includes an anti-retaliation provision that protects whistleblower employees and allows for complete anonymity with the help of experienced counsel. Read more about these provisions.

Why Should I Become a Securities Whistleblower?

Industry observers have estimated that securities fraud costs investors $40 billion in losses each year. The Dodd-Frank SEC Whistleblower Program has quickly become an important tool for the SEC. In addition, the financial rewards offered to whistleblowers are substantial, potentially numbering in the tens of millions. A whistleblower receives between 10 and 30 percent of amounts recovered as a result of the whistleblower’s information if more than $1 million is recovered.

How Can Whistleblowers Remain Anonymous?

If an experienced SEC whistleblower attorney properly submits your information to the SEC, you need not disclose your identity to the SEC at all. You will maintain complete anonymity. Your attorney will act with the SEC on your behalf. You must only provide the attorney with a completed Form TCR signed under penalty of perjury at the time you make your anonymous submission.

What Monetary Awards are Available to Securities Fraud Whistleblowers?

A person who supplies original information that leads to a successful enforcement action by the SEC can receive between 10 and 30 percent of monetary sanctions if exceeding $1 million. If you are awarded a smaller percentage of the recovery than you believe is proper, as a whistleblower, your attorney may challenge the award first with the SEC and in federal court if necessary.

What Factors Does the SEC Consider in Determining the Amount of the Award?

The SEC is required to consider many factors when determining the amount of an award based on the unique facts and circumstances of each whistleblower case.

The SEC may increase the award percentage based on the following factors:

  • The significance of the information provided by the whistleblower, and its contribution to the success of any proceeding brought against wrongdoers.
  • The extent of the assistance the whistleblower provides the SEC in an investigation and any successful proceeding.
  • Whether, and the extent to which, the whistleblower participated in internal compliance systems, such as reporting the possible securities violations through internal whistleblower, legal or compliance procedures before, or at the same time, you reported them to the SEC through your legal team.

Your potential whistleblower reward could be decreased due to the following factors:

  • Whether the whistleblower participated in, or is guilty of the securities law violation(s) reported.
  • If the whistleblower unreasonably delayed reporting of fraud.
  • If the whistleblower interfered with the company’s internal compliance and reporting systems, such as making false statements that hindered efforts to investigate possible wrongdoing.
Where Can I Read Securities Whistleblower Laws, In Full?

View the SEC’s Dodd-Frank Whistleblower Law page.

How Does a Whistleblower Lawyer Affect My Case?

In order to properly present a claim to the SEC, a whistleblower needs to select a law firm that understands the complexities of the Securities Exchange Act and SEC Regulations, a firm with a national reputation as a leading law firm in securities and financial fraud and one that will assist you in presenting the most comprehensive, well-researched complaint to an already overworked agency. Many whistleblower lawyers and law firms have virtually no experience in securities litigation or securities law whatsoever. Hagens Berman, one of the nation’s leading plaintiff firms, has years of experience in whistleblower law, antitrust, securities, accounting fraud and other areas of financial fraud. Hagens Berman is well-positioned to best present a complaint on your behalf.

In addition to the firm’s expertise in this area, Hagens Berman has worked alongside government officials and regulators for more than 20 years, often retained by those governments, helping our firm establish the credibility necessary to bring important cases to the SEC. Because we set a high standard for ourselves, our clients benefit from our reputation. When Hagens Berman brings a claim, it gets attention.