New SEC and CFTC whistleblower programs allow for substantial rewards for blowing the whistle and reporting securities fraud.

The recent financial overhaul law, known as the Dodd-Frank Wall Street Reform and Protection Act, contains provisions establishing whistleblower reward programs at the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”).  Whistleblowers who report securities law violations, including insider trading or money laundering, will receive a reward if the SEC or any other government authority recovers more than $1 million based on the whistleblower’s information.  The whistleblower is not required to be an employee of the company to submit information regarding the company.

These Whistleblower programs provide for rewards of between 10% to 30% of the recovery that the SEC, CFTC and other agencies collect based on the whistleblower’s information, if more than $1 million is collected.  Certain factors will be considered in determining the amount of the reward, including the significance of the information provided, the assistance of the whistleblower and his/her attorney, and the “programmatic interest” of the SEC and CFTC “in deterring violations of the securities laws.”  The reward may also be reduced if the whistleblower participated in or was culpable for the reported securities violations or interfered with the company’s internal compliance and reporting systems.

The new Whistleblower programs also prohibit retaliation by employers against employees for providing the SEC and CFTC with information about possible securities violations.  The Dodd-Frank law specifically states that employers may not fire, demote, suspend, threaten, harass or discriminate against a whistleblower.  If they do, whistleblowers may sue for reinstatement, back pay and any other damages that occurred.

Whistleblowers may report the securities fraud anonymously, through an attorney, with their identities sometimes remaining unknown to the SEC and CFTC until the payment of the reward.  Alternatively, the SEC and CFTC will protect the whistleblower’s identity to the fullest extent possible.  These Programs have the strongest confidentiality provisions out of any of the federal whistleblower programs.

If you are aware of any securities law violations and would like to discuss the SEC or CFTC Whistleblower Programs with Ashcraft & Gerel, LLP, please either email us, fill out and submit the inquiry form on the left side of this page or call us at 301-459-8400 or toll free 1-888-221-6529. If you call, please ask to speak to Jamie Bennett or Melissa Roover.