What is the SEC/CFTC Statute?

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Whistleblowers who report securities law violations are entitled to a reward if the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), or any other government entity or regulatory authority recovers funds as a result of the whistleblower’s information.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), commonly known as the financial reform bill. The Act contains provisions that create SEC and CFTC whistleblower reward programs.

The SEC and CFTC whistleblower programs provide for the following:

  1. Whistleblower Rewards: Under the Dodd-Frank Wall Street Reform Act, the SEC and CFTC will pay a whistleblower reward to individuals who provide original information to the SEC or CFTC which results in monetary sanctions exceeding $1 million. The award will range from 10-30% of the amount recovered, and the amount of the award will be determined by the SEC or CFTC. Factors affecting the value of the whistleblower reward include:
  • The significance of the information provided by the whistleblower
  • The degree of assistance provided by the whistleblower and the whistleblower’s counsel
  • The programmatic interest of the SEC in deterring violations of the securities law
  • The extent to which the whistleblower cooperated with the internal compliance department of his or her employer

However, certain whistleblowers are not entitled to receive a reward. These include:

  • Officers or employees of certain government or self-regulatory organizations or those who were officers or employees at the time the information was learned
  • Whistleblowers who are convicted of a criminal violation related to the action for which they supplied the information
  • Whistleblowers who gained the information through performance of an audit required under the securities laws
  1. Job Protection: The new law contains provisions that protect whistleblowers from retaliation state that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. If such retaliation occurs, the whistleblower may sue for reinstatement, back pay, and any other damages that were incurred.
  1. Confidentiality: The new law allows whistleblowers to report fraud anonymously, provided that they have secured legal representation. In certain instances, the whistleblower’s identity may not be revealed to the SEC or the CFTC until it is time to pay the whistleblower reward. No other federal whistleblower program, including the Tax Whistleblower Program and the qui tam provisions of the False Claims Act, safeguard the whistleblower’s confidentially this strongly.

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