SEC Whistleblower FAQ

In recent years, federal securities law violations have become front-page news. Most probably recall securities fraud stories covering Bernie Madoff, Wells Fargo, and Merrill Lynch, among others. These and more recent examples underscore the need for a whistleblower law to hold those with culpability accountable. Whistleblowers help increase investor protection and minimize harm to investors.

Uncovering securities fraud is serious business. Congress established the SEC whistleblower program to incentivize individuals to report timely and credible information about federal securities law violations.

Congress recognized that getting help uncovering securities violations was in the government's best interest. The Dodd-Frank Act provides a whistleblower program that rewards individuals who help the Securities and Exchange Commission (SEC) uncover possible securities law violations.

The SEC's whistleblower program encourages individuals to come forward with information. Possible securities law violations come to light in a variety of ways, including:

• An internal whistleblower
• A company's independent analysis
• Internal reporting systems
• Whistleblower tips from the public
• Internal compliance programs

Securities law violations can be uncovered in various ways. Wrongdoers can be subject to SEC enforcement actions.

This article addresses some frequently asked questions about the SEC's whistleblower rules and being an SEC whistleblower.

• What is a whistleblower?
• What is the SEC?
• What is the Dodd-Frank Act?
• What kinds of activities can I report to the SEC?
• How do I report illegal activity to the SEC?
• Can my employer punish me for making a whistleblower claim?
• Can a nondisclosure agreement prevent me from reporting to the SEC?
• How does the SEC reward whistleblowers?
• How are monetary awards for whistleblowers calculated?
• What notable monetary awards has the SEC paid to whistleblowers?
• Are any types of people excluded from being Dodd-Frank whistleblowers?
• Can I anonymously report illegal activity to the SEC?

What is a whistleblower?

A whistleblower is a person who voluntarily reports wrongdoing to the government or other law enforcement agency. Whistleblowers often expose violations of the law committed by their employers.

One or more people can act as a whistleblower. However, companies or other organizations cannot qualify as whistleblowers.

A variety of federal laws protect whistleblowers and those reporting violations of federal securities laws as SEC whistleblowers. For example, the False Claims Act (for qui tam actions) and the IRS whistleblower program represent other government whistleblower programs.

What is the SEC?

The Securities and Exchange Commission (SEC) is an agency of the federal government that regulates the U.S. stock and securities exchanges. It also does the following:

• Enforces federal securities laws
• Proposes new securities rules
• Regulates the securities industries, brokers, investment advisors, and mutual funds

The Securities Exchange Act of 1934 established the SEC. Whistleblowers can report to the SEC violations of federal securities laws committed by employers. The SEC also has responsibilities relating to addressing bribery of public officials. The SEC, along with the Department of Justice, enforces the Foreign Corrupt Practices Act (FCPA).

What is the Dodd-Frank Act?

The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank Act, is a federal law signed by President Obama in July 2010. Congress enacted this law in response to the 2008 financial crisis.

The Dodd-Frank Act represents a congressional effort to prevent another financial crisis and restore stability in the financial systems. The Dodd-Frank Act was a massive overhaul of the financial regulatory system to increase corporate accountability and compliance. It made corporate operations more transparent through banking and financial firm reforms. It also created the Consumer Financial Protection Bureau (CFPB).

What kinds of activities can I report to the SEC?

A whistleblower can report any violation of the laws regulating consumer finance, corporate and accounting fraud, and commodity and currency exchanges. Examples of conduct the SEC investigates include:

• Ponzi schemes
• Theft or misappropriation of funds
• Manipulation of a security's price or volume
• Insider trading
• Pyramid schemes
• Fraudulent or unregistered securities offering
• False or misleading statements made by companies
• High-yield investment programs
• Abusive short-selling
• Bribery of foreign officials
• Other security-related fraudulent conduct

The SEC is limited to investigations involving federal securities laws. It does not have jurisdiction to investigate violations of laws outside the scope of federal securities laws.

How do I report illegal activity to the SEC?

You may report illegal securities activity to the SEC through its online portal. The SEC has an online portal where you can submit information. The significance of the information determines if you are eligible to receive a whistleblower award. The SEC's Office of the Whistleblower treats these submissions as confidential and nonpublic.

You may also report the fraud to:

• The Financial Industry Regulatory Authority (FINRA) for violations related to broker-dealers and investment firms

• Your state securities regulator for violations of state securities laws

When the SEC receives a report, the SEC staff, including its SEC whistleblower lawyers, will determine the type of investigation to initiate.

The SEC provides information about the general SEC complaint process. It includes the following steps:

• Whistleblowers submit tips to the SEC
• The SEC analyzes the tips through an investigation
• Case filing
• If warranted, penalties are ordered
• Notices of covered actions posted
• Whistleblowers file claims
• Analysis of whistleblower claims
• Preliminary determinations made
• Possible record and reconsideration requests
• Additional analysis performed
• Final orders are issued
• Filing of any appeals

The quality and significance of the information provided determines the eligibility and reward amount.

Can my employer punish me for making a whistleblower claim?

The Dodd-Frank Act contains retaliation protections. It prohibits retaliation by employers against whistleblowers. If the whistleblower reasonably believes they have information about a securities violation, they receive the protections.

These provisions apply when individuals report illegal activity to the SEC. According to U.S. Supreme Court precedent, individuals who only report the relevant wrongdoing to their companies but not the SEC are not entitled to the Dodd-Frank Act retaliation protections.

Whistleblower protections prohibit retaliation. For example, an employer cannot fire or discriminate against a whistleblower. In these situations, a whistleblower who provides information to the SEC is protected from employment retaliation.

The SEC implemented rules prohibiting employers from retaliatory conduct against employees who reasonably believe they have information about federal securities law violations. Employers cannot engage in the following based on an employee making an SEC report:

• Discharging
• Demoting
• Suspending
• Harassing
• Discriminating

The act also provides whistleblowers with a private cause of action if they are retaliated against because of their report to the SEC. A whistleblower can bring a federal court action if their employer violates the anti-retaliation provision of the Dodd-Frank Act.

Can a nondisclosure agreement prevent me from reporting to the SEC?

The enactment of Section 21F of the Exchange Act encourages whistleblowers to report possible securities law violations. The SEC adopted Rule 21F, which provides that no person "may take any action to impede an individual from communicating directly with the commission staff about a possible securities law violation, including enforcing or threatening to enforce a confidentiality agreement ... with respect to such communications." The Office of the Whistleblower also provides additional information about Rule 21-F and its protections against actions taken to impede reporting.

If you signed a severance agreement, a nondisclosure agreement, or a confidentiality agreement, it's critical to understand how the whistleblower applies to your situation. It is best to talk with an attorney. They will be able to analyze the specific facts of your case.

How does the SEC reward whistleblowers?

As an incentive to whistleblowers, the Dodd-Frank Act provides that the SEC will pay monetary awards to eligible whistleblowers. Those providing the SEC with original information leading to a successful enforcement action receive whistleblower rewards.

There's a similar whistleblower program for the Commodities Futures Trading Commission (CFTC), which rewards whistleblowers who provide information about violations of federal law in trading commodities. If the claim is successful, the employee may be entitled to the following:

• Reinstatement
• Double back pay
• Litigation costs
• Expert witness fees
• Attorneys' fees

In addition to SEC whistleblower awards, the SEC may also bring an enforcement action against a company that violates the anti-retaliation provisions of the Dodd-Frank Act.

Related actions under Section 806 of the Sarbanes-Oxley Act of 2002 allow an employee of a publicly traded company to file a retaliation complaint in federal court.

How are monetary awards for whistleblowers calculated?

Whistleblowers are entitled to receive an SEC whistleblower award between 10% and 30% of the total monetary sanctions collected by the SEC. Congress authorized the SEC to make whistleblower rules that provide monetary awards to individuals that lead to an enforcement action in which over $1 million is ordered.

The Dodd-Frank Act defines "monetary sanctions" to include any monies — including penalties, disgorgement, and interest — ordered to be paid as a result of any action for the violation of federal law or the settlement of any action.

What notable monetary awards has the SEC paid to whistleblowers?

Since the Dodd-Frank Act's implementation, whistleblowers have received significant monetary awards. In 2024, the SEC reported that enforcement actions from whistleblower tips have resulted in more than $6 billion in financial remedies.

To date, the largest-ever whistleblower award is nearly $279 million. This 2023 award went to a whistleblower whose information and assistance led to successful SEC enforcement actions and related actions. You can find other Top 10 largest whistleblower awards on the SEC website.

Are any types of people excluded from being Dodd-Frank whistleblowers?

Yes. There are whistleblower exclusions. For example, you're excluded if you were any of the following at the time you discovered the information:

• A member, officer, or employee of a regulatory agency
• An employee of the Department of Justice, the Public Accounting Oversight Board
• A member of a law enforcement agency

For example, an SEC whistleblower attorney who receives referrals and additional information about potential covered actions cannot be a whistleblower. Officers and directors of the company at issue may also be excluded from award eligibility.

Anyone convicted of a criminal violation related to the action under which a whistleblower would have otherwise received an award is also excluded.

Can I anonymously report illegal activity to the SEC?

Yes. You can anonymously submit a claim to the SEC. However, to maintain award eligibility, the SEC requires that an attorney represent you. Your attorney must submit your information by any of the following methods:

• SEC's online TCR portal
• Submitting a hard-copy Form TCR

Your attorney must also complete the required attorney certification.

Speak With an Attorney About Your Whistleblower Case

Do you have information about financial misconduct relating to federal securities law violations? If you're considering whistleblowing under the Dodd-Frank Act, you may want to first speak with a professional about your likelihood of success and read more information from the SEC about its whistleblower program. FindLaw.com can help you find an experienced securities attorney near you. Get started today.