Feb 10, 2022 | Whistleblower
SEC Proposes Changes To Two Whistleblower Program Rules
On February 10, 2022, the Securities and Exchange Commission (“SEC”) announced that it has proposed two amendments to the rules governing its whistleblower program. The first proposed amendment concerns award claims for related actions that would be otherwise covered by an alternative whistleblower program. The second proposed amendment affirms the SEC’s authority to consider the dollar amount of a potential award for the limited purpose of increasing an award, but not to lower an award.
Specifically, the SEC is proposing two amendments to Exchange Act Rules 21F-3 and 6, the rules governing its whistleblower program:
● The first proposed amendment addresses instances when a whistleblower from the SEC’s program receives an award from another, non-SEC, whistleblower program.
● The second affirms the SEC’s authority to consider the dollar amount of a potential award for the limited purpose of increasing an award, but not to lower an award.
Why This Is Important
Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 21F to the Securities Exchange Act of 1934, establishing the SEC’s whistleblower program. Among other things, Section 21 authorizes the SEC to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful SEC enforcement actions resulting in monetary sanctions exceeding $1 million and certain successful related actions. Awards must be made in an amount equal to 10-30 percent of the monetary sanctions collected.
Since the program’s inception, the SEC has ordered more than $1.2 billion to 245 individuals whose information and cooperation assisted the SEC in bringing successful enforcement actions.
How This Rule Applies
Related Action Claims Covered By Another Whistleblower Program
● Under Exchange Act Section 21F(b) and Rule 21F-11, a whistleblower who obtains an award based on an SEC covered action also may be eligible for an award based on monetary sanctions that are collected in an action brought by other statutorily-identified authorities.
● The proposing rule would allow the SEC to make an award for a related action that might otherwise be covered by an alternative whistleblower program, even where the alternative whistleblower program has the more direct or relevant connection to the related action in certain circumstances. The proposing rule offers multiple potential approaches:
Comparability: Under this approach, if a claimant files a related-action award application, and the alternative award program is not comparable to the SEC’s program, because the statutory award range is more limited, awards are subject to an award cap, or the other award program is discretionary and not mandatory, the SEC would treat the non-SEC action as “related” for purposes of the SEC’s award program, regardless of whether the alternative award program has a more direct or relevant connection to the action. The SEC also would make an award on a potential related action without regard to which program had the more direct and relevant connection to the action if the maximum award that the SEC could pay on the action would not exceed $5 million.
Whistleblower Choice: The proposed release offers an alternative option that would allow a meritorious whistleblower to decide whether to receive a related-action award from the SEC or the authority administering the other award program. The whistleblower would not be required to select which program to receive the award from until both programs had determined the award amount they would pay.
Offset Approach: The SEC would determine the award percentage it would pay on the related action but offset from the SEC’s total award payment by the dollar amount the whistleblower received for the related action from the other award program.
Topping Off Approach: The SEC would have the discretion to increase the award on the SEC covered action (up to 30 percent) if the SEC concludes that the other whistleblower program’s award for the related action was inadequate for any reason.
● Under the Comparability or Whistleblower Choice approach, the whistleblower would be required to make an irrevocable waiver of any claim to an award from the other whistleblower award program.
Discretion To Consider The Dollar Amount Of The Award
● In 2020, amendments added language to Rule 21F-6 stating that the SEC has discretion to consider the dollar amount of a potential award when making an award determination.
● The proposed changes would affirm the SEC’s authority to consider the dollar amount of a potential award for the limited purpose of increasing the award amount, but would eliminate the SEC’s authority to consider the dollar amount of a potential award for the purpose of decreasing an award.
The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
Source: SEC.gov
Questions Or Concerns About Voluntarily Providing Information To The SEC And Whistleblower Award Eligibility?
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. SEC whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
If you have questions or concerns about voluntarily providing information to the SEC regarding violations of the federal securities laws, including questions about whistleblower award eligibility, or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C. by completing the form above on the right, sending an e-mail to [email protected] or by contacting either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.
Jan 21, 2022 | Whistleblower
On January 21, 2022, the Securities and Exchange Commission (“SEC”) announced three awards totaling more than $40 million to four whistleblowers who provided information and assistance in three separate covered actions.
In the first order, the SEC issued an award of approximately $37 million to two joint whistleblowers who provided key evidence that contributed to the success of the covered action. The whistleblowers also provided ongoing assistance and helped SEC staff identify additional information that advanced the investigation.
In the second order, the SEC issued approximately $1.8 million to a whistleblower who provided important, new information that prompted SEC staff to open an investigation into the misconduct. The whistleblower continued to assist SEC staff by providing interviews and additional documents.
In the third order, the SEC awarded approximately $1.5 million to a whistleblower who provided new information that shaped the SEC staff’s investigative strategy and significantly contributed to the success of the covered action. The whistleblower also provided substantial and ongoing assistance by helping SEC staff identify issues.
The SEC has awarded approximately $1.2 billion to 245 individuals since issuing its first award in 2012.
All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.
As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity.
Source: SEC.gov
Questions Or Concerns About Voluntarily Providing Information To The SEC And Whistleblower Award Eligibility?
If you have questions or concerns about voluntarily providing information to the SEC regarding violations of the federal securities laws, including questions about whistleblower award eligibility, or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C. by completing the form above on the right, sending an e-mail to [email protected] or by contacting either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.
Nov 22, 2021 | Whistleblower
On November 22, 2021, the Commodity Futures Trading Commission (“CFTC”) announced awards totaling nearly $1 million to two whistleblowers whose information led the CFTC to bring a successful enforcement action. Both whistleblowers provided significant information and substantial assistance to CFTC staff during the underlying investigation.
While each whistleblower’s information supported and, ultimately, led to different charges the CFTC brought in the enforcement action, the CFTC allocated a higher award percentage to one claimant because of the key role that claimant’s information played in causing the CFTC to open the investigation in question and focusing CFTC staff’s efforts during the investigation’s earliest stages. The other claimant reported to the CFTC after that investigation was already underway. Opening investigations is crucial to the success and effectiveness of the CFTC’s enforcement program, and the first claimant’s provision of information during the earliest stages of the matter also helped CFTC staff conserve time and resources and better focus their investigative efforts. Granting a larger award to the first claimant recognized this added value.
The CFTC’s Whistleblower Program
The CFTC’s Whistleblower Program was created under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFTC issues awards related not only to the agency’s enforcement actions, but also in connection with actions brought by other domestic or foreign regulators if certain conditions are met. Since issuing its first award in 2014, the CFTC has granted whistleblower awards amounting to approximately $300 million. Those awards are associated with enforcement actions that have resulted in monetary sanctions totaling more than $3 billion.
The Commodity Exchange Act (“CEA”) provides confidentiality protections for whistleblowers. Regardless of whether the CFTC grants an award, the CFTC will not disclose any information that could reasonably be expected to reveal a whistleblower’s identity, except in limited circumstances. Consistent with this confidentiality protection, the CFTC will not disclose the name of the enforcement action in which the whistleblower provided information or the exact dollar amount of the award granted.
Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected. All whistleblower awards are paid from the CFTC Customer Protection Fund, which was established by Congress, and is financed entirely through monetary sanctions paid to the CFTC by violators of the CEA. No money is taken or withheld from injured customers to fund the program.
How Does One Become Eligible For A Whistleblower Award?
The first step to becoming eligible for a whistleblower award is for an individual or group of individuals to submit a tip, complaint, or referral on a Form TCR that contains information about a potential violation of the CEA. Whistleblowers can be anyone, such as corporate insiders, market observers, investors, customers, and fraud victims. A whistleblower need not be a company insider. But entities cannot be eligible for awards themselves, and not every whistleblower will be eligible for an award.
Information provided by a whistleblower could lead the CFTC to open a new investigation, re-open a closed investigation, pursue a new line of inquiry in an ongoing investigation, or significantly contribute to the success of an enforcement action. This could result in a successful enforcement action or a Related Action, which could be brought by another governmental authority. Only those whistleblowers who submit information before the CFTC contacts them will be eligible for an award. In order for information to be voluntarily submitted, it must be submitted before the CFTC or certain other authorities request, inquire, or demand information from the whistleblower related to the original information being provided.
Individuals can submit a tip anonymously, with or without a lawyer’s help. Because the CFTC may need to contact a whistleblower for more information, individuals should provide some means of contact, such as an email address or telephone number. Likewise, there are detailed requirements for submitting an award application anonymously. If you have any questions about submitting anonymously, you are encouraged to contact the Whistleblower Office before you file.
Whether or not an individual submits anonymously, the CFTC is committed to protecting the identities of whistleblowers. The CFTC treats information learned during the course of an investigation—including the identity of sources—as non-public and confidential.
The exception to this policy is that in an administrative or court proceeding, the CFTC may be required to produce documents or other information which would reveal a whistleblower’s identity. Likewise, the CFTC may also provide the information provided by whistleblowers, subject to confidentiality requirements, to other government or regulatory entities.
CFTC Whistleblower Prerequisites & Eligibility Requirements
The Whistleblower Rules specify the prerequisites and eligibility requirements. The prerequisites include the following:
- Whistleblower information must be provided voluntarily, prior to a request, inquiry, or demand for information;
- The information must be original information not previously known to the CFTC, but if the whistleblower is the original source of the information, it would be deemed original information;
- The information must have led to a successful resolution of CFTC action or a Related Action;
- The whistleblower, upon CFTC staff’s request, must provide certain additional information;
- The whistleblower must have submitted an award application (Form WB-APP) in response to a Notice of Covered Action or a final judgment in a Related Action or both.
Source: CFTC.gov
Nov 1, 2021 | Whistleblower
Approximately $1.1 billion Awarded To 224 Individuals Since SEC Issued Its First Whistleblower Award in 2012
On October 29, 2021, the Securities and Exchange Commission announced an award of more than $2 million to a whistleblower who provided information that led to a successful related action by the U.S. Department of Justice.
The whistleblower previously received an award for contributions to an SEC enforcement action based on the same information that supported the award for the related action, and was eligible for the award announced today due to recent amendments clarifying the types of actions that may be considered “related” under the whistleblower rules. The whistleblower’s information prompted the opening of investigations by both the SEC and the DOJ. The whistleblower also provided extensive, ongoing assistance to both investigations.
“The SEC’s whistleblower rule amendments make clear that non-prosecution and deferred prosecution agreements entered into by the DOJ are related actions upon which whistleblowers may receive awards,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower.
All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million.
As set forth in the Dodd-Frank Act, the SEC protects the confidentiality of whistleblowers and does not disclose any information that could reveal a whistleblower’s identity.
Do You Qualify As An SEC Whistleblower?
If you voluntarily provide original, high-quality information (i.e., information derived from your independent knowledge, NOT facts derived from publicly-available information) about the possible violation of the federal securities laws that has occurred, is ongoing or is about to occur AND which leads to a successful SEC enforcement action, resulting in an order of monetary sanctions exceeding $1 million, then you MAY be eligible for an SEC whistleblower award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.
Remember, information is voluntarily provided if you provide information to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.
Can You Submit Information Anonymously To The SEC?
Yes, but if you wish to submit information to the SEC anonymously, you MUST be represented by an attorney in connection with the anonymous information submission to be eligible for an award.
Source: SEC.gov
Kehoe Law Firm’s legal team understands the issues associated with making the difficult decision to voluntarily come forward with information about securities fraud or other wrongdoing. Moreover, the Firm’s legal staff has extensive experience investigating and prosecuting fraud, as well as interacting with sources of information, especially brave, honest individuals who are willing to expose fraud committed against the United States government.
If you have questions or concerns about voluntarily providing information as a whistleblower to the SEC about violations of the federal securities laws, including questions about whistleblower award eligibility or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C., [email protected], [email protected]. If you prefer to speak privately with an attorney, please contact either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.
Oct 21, 2021 | Whistleblower
On October 21, 2021, the Commodity Futures Trading Commission (“CFTC”) announced an award of nearly $200 million to a whistleblower whose specific, credible, and timely original information significantly contributed to an already open investigation and led to a successful enforcement action, as well as to the success of two related actions, by a U.S. federal regulator and a foreign regulator.
According to the order, the whistleblower’s information led the CFTC to important, direct evidence of wrongdoing. In order to qualify for an award, a whistleblower who significantly contributed to the success of an enforcement action must demonstrate that there is a “meaningful nexus” between the information provided and the CFTC’s ability to successfully complete its investigation, and to either obtain a settlement or prevail in a litigated proceeding. In this latest award, the CFTC determined that the whistleblower met this standard.
The whistleblower’s claim in connection with a third related action by a state regulator was denied, because the whistleblower’s information was never shared with the state regulator.
With this award, the CFTC has granted whistleblower awards associated with enforcement actions that have resulted in monetary sanctions totaling more than $3 billion.
The CFTC’s Whistleblower Program
The CFTC’s Whistleblower Program was created under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFTC issues awards related not only to the agency’s enforcement actions, but also in connection with actions brought by other domestic or foreign regulators if certain conditions are met.
The Commodity Exchange Act (“CEA”) provides confidentiality protections for whistleblowers. Regardless of whether the CFTC grants an award, the CFTC will not disclose any information that could reasonably be expected to reveal a whistleblower’s identity, except in limited circumstances. Consistent with this confidentiality protection, the CFTC will not disclose the name of the enforcement action in which the whistleblower provided information or the exact dollar amount of the award granted.
Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected. All whistleblower awards are paid from the CFTC Customer Protection Fund, which was established by Congress, and is financed entirely through monetary sanctions paid to the CFTC by violators of the CEA. No money is taken or withheld from injured customers to fund the program.
How Does One Become Eligible For A Whistleblower Award?
The first step to becoming eligible for a whistleblower award is for an individual or group of individuals to submit a tip, complaint, or referral on a Form TCR that contains information about a potential violation of the CEA. Whistleblowers can be anyone, such as corporate insiders, market observers, investors, customers, and fraud victims. A whistleblower need not be a company insider. But entities cannot be eligible for awards themselves, and not every whistleblower will be eligible for an award.
Information provided by a whistleblower could lead the CFTC to open a new investigation, re-open a closed investigation, pursue a new line of inquiry in an ongoing investigation, or significantly contribute to the success of an enforcement action. This could result in a successful enforcement action or a Related Action, which could be brought by another governmental authority. Only those whistleblowers who submit information before the CFTC contacts them will be eligible for an award. In order for information to be voluntarily submitted, it must be submitted before the CFTC or certain other authorities request, inquire, or demand information from the whistleblower related to the original information being provided.
Individuals can submit a tip anonymously, with or without a lawyer’s help. Because the CFTC may need to contact a whistleblower for more information, individuals should provide some means of contact, such as an email address or telephone number. Likewise, there are detailed requirements for submitting an award application anonymously. If you have any questions about submitting anonymously, you are encouraged to contact the Whistleblower Office before you file.
Whether or not an individual submits anonymously, the CFTC is committed to protecting the identities of whistleblowers. The CFTC treats information learned during the course of an investigation—including the identity of sources—as non-public and confidential.
The exception to this policy is that in an administrative or court proceeding, the CFTC may be required to produce documents or other information which would reveal a whistleblower’s identity. Likewise, the CFTC may also provide the information provided by whistleblowers, subject to confidentiality requirements, to other government or regulatory entities.
CFTC Whistleblower Prerequisites & Eligibility Requirements
The Whistleblower Rules specify the prerequisites and eligibility requirements. The prerequisites include the following:
- Whistleblower information must be provided voluntarily, prior to a request, inquiry, or demand for information;
- The information must be original information not previously known to the CFTC, but if the whistleblower is the original source of the information, it would be deemed original information;
- The information must have led to a successful resolution of CFTC action or a Related Action;
- The whistleblower, upon CFTC staff’s request, must provide certain additional information;
- The whistleblower must have submitted an award application (Form WB-APP) in response to a Notice of Covered Action or a final judgment in a Related Action or both.
Source: CFTC.gov
Oct 29, 2020 | Whistleblower
Kehoe Law Firm, P.C. is making individuals aware that the Securities and Exchange Commission (“SEC”) recently announced an award of over $114 million to a whistleblower whose information and assistance led to the successful enforcement of SEC and related actions.
The $114 million award consists of an approximately $52 million award in connection with the SEC case and an approximately $62 million award arising out of the related actions by another agency. The combined $114 million reward marks the highest award in the program’s history, and eclipses the next highest award of $50 million made to an individual in June 2020.
The SEC also recently announced an award of over $10 million to a whistleblower whose information prompted the opening of an investigation and provided substantial, ongoing assistance to SEC staff throughout the investigation. In more than a dozen communications with the staff, the whistleblower provided key evidence, helped decipher communications, and distilled complex issues.
The SEC has awarded approximately $687 million to 109 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
Do You Qualify as An SEC Whistleblower?
If you voluntarily provide original, high-quality information (i.e., information derived from your independent knowledge, NOT facts derived from publicly-available information) about the possible violation of the federal securities laws that has occurred, is ongoing or is about to occur AND which leads to a successful SEC enforcement action, resulting in an order of monetary sanctions exceeding $1 million, then you MAY be eligible for an SEC whistleblower award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.
Remember, information is voluntarily provided if you provide information to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.
Can You Submit Information Anonymously to the SEC?
Yes, however, if you wish to submit information to the SEC anonymously, you MUST be represented by an attorney in connection with the anonymous information submission to be eligible for an award.
If so, please know that Kehoe Law Firm’s legal team understands the issues associated with making the difficult decision to voluntarily come forward with information about securities fraud or other wrongdoing. Moreover, the Firm’s legal staff has extensive experience investigating and prosecuting fraud, as well as interacting with sources of information, especially brave, honest individuals who are willing to expose fraud committed against the United States government.
If you have questions or concerns about voluntarily providing information as a whistleblower to the SEC about violations of the federal securities laws, including questions about whistleblower award eligibility or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C. by completing the form above on the right or sending an e-mail to [email protected], [email protected]. If you prefer to speak privately with an attorney, please contact either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.
