How to Report Securities and Exchange Commission (SEC) Fraud and get a Reward

How to Report Securities and Exchange Commission (SEC) Fraud and get a Reward

SEC whistleblower reward program

A whistleblower who reports securities law violations is eligible for a reward for reporting fraud relating to violations of laws relating to the Securities and Exchange Commission (SEC). This article explains how to report SEC fraud and get a reward.

Overview: The Dodd-Frank Wall Street Reform and Protection Act, created the new SEC reward program. This reward program pays monetary rewards for insider trading violations, any securities law violation, money laundering, or violations of the Foreign Corrupt Practices Act.

Whistleblower Rewards: If you report SEC violations, you can get between 10 to 30 percent of the monies the SEC collects based on your information (provided more than $1 million is collected). The specific percentage is based on the significance of the information provided, the assistance provided by the whistleblower and the whistleblower's attorney, and the SEC's "programmatic interest" "in deterring violations of the securities law."

Requirements: Scrupulously follow the correct format and filing instructions, and provide specific and detailed allegations of SEC violations. Your information must result in the SEC collecting money from the company. Therefore, the manner in which you present the information is critical.

Hire an Attorney: Although it is not necessary to use an attorney to be eligible for a SEC reward, the stakes are high enough that it is warranted. The attorney will take the SEC fraud case on a contingency basis, so will not be out of pocket any money to use an attorney. If you do not use an attorney, you considered acting "pro se" and the government might think you could not find an attorney willing to take your case. If you do use an attorney, not only will the filing be more professional, the SEC will know that the attorney has conducted his own investigation before filing. You also get the benefit of the attorney's reputation, so consider choosing one that has significant prior federal government experience.

Job protection: Even if an employer guesses who reported the fraud to the SEC, the employer may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. Whistleblowers can sue for reinstatement, back pay and damages.

Confidentiality: Whistleblowers can initially file for a SEC reward anonymously, provided they have retained a lawyer to represent them and file the reward application. Only upon a need or to make payment of a reward will the SEC ask for your name if you choose to file anonymously. Of course, you will want to assist the SEC because a reward is based upon money the SEC collects. But the SEC will not disclose your name to the company unless in a rare they need you to testify.

If you meet the requirements, and the SEC collects more than $1 million, you will receive a sizeable reward. Of course, be sure you have specific, detailed, credible evidence. The SEC is not interested in fishing expeditions or general or vague allegations.

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