Do you Need an SEC or CFTC Whistleblower Attorney?

What is the SEC Whistleblower Program?

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, established an unprecedented SEC Whistleblower Program to reward whistleblowers for reporting violations of securities laws. Under the new provisions, whistleblowers receive an award of 10-30% of the amount recovered from an investigation sparked by their information.

VSG played a significant role in helping the SEC develop rules implementing the new SEC whistleblower provision. In addition to personally meeting with SEC staff to help them understand the impact of proposed rules on whistleblowers, VSG submitted extensive written comments and suggestions addressing various aspects of the rules. In its final rule, the SEC adopted virtually all of VSG’s recommendations.

To qualify for an award under the SEC program, the whistleblower must come forward voluntarily and must provide original information that causes the government to open an investigation or contributes significantly to the success of an ongoing investigation. In addition, the SEC must recover at least $1 million in the resulting action.

Common types of securities fraud include falsifying information on SEC filings or otherwise misrepresenting information to investors or shareholders; falsifying information on SEC filings; insider trading; accounting fraud; and bribery of a foreign government official that violates the Foreign Corrupt Practices Act. Associated violations of U.S. tax laws may be actionable under the IRS Whistleblower Program.

The Act also strengthens the laws protecting whistleblowers from retaliation by employers and prohibits interference with whistleblowers’ efforts to report violations to the SEC. Employees who have been terminated, harassed or discriminated against for reporting fraudulent practices may sue for damages and reinstatement.

What is the CFTC Whistleblower Program?

The U.S. Commodity Futures Trading Commission (CFTC) has established a whistleblower program to reward whistleblowers who disclose information about significant violations of the Commodities Exchange Act (CEA).

Under the CFTC whistleblower program, eligible whistleblowers are entitled to a monetary award if they voluntarily provide the CFTC with original information about violations of the CEA that leads to an agency enforcement action that results in sanctions against the wrong-doer of at least $1 million.

Whistleblowers are entitled to between 10% and 30% of the total monetary sanctions recovered by the agency as a result of the information provided by the whistleblower. Additionally, the whistleblower program allows whistleblowers to remain anonymous if they so choose, and it provides remedies for whistleblowers who are identified and suffer retaliation.

The scope of the CFTC’s regulatory authority is vast, and includes essentially all transactions conducted in the commodities and derivatives markets. Any violation of the Commodities Exchange Act (which was recently strengthened and expanded significantly by the Dodd-Frank Act) may serve as the underlying wrong that could lead to a whistleblower award. Common types of violations of the CEA include:

• Manipulation of financial benchmarks, such as LIBOR
• Manipulation of physical commodities markets
• Violation of swap data reporting requirements
• Position limits violations
• Commodities-based insider trading
• Disruptive trade practices, such as spoofing
• Customer protection failures, such as commingling customer and proprietary funds

The CFTC recently granted a whistleblower award of over $10 million, and CFTC officials have made comments that indicate that the agency has recognized the value that whistleblower programs provide. The CFTC appears to be ready and willing to approve large awards in order to help incentivize whistleblowers to come forward in order to stop illegal practices in the commodities and derivatives markets.

VSG whistleblower attorneys are experienced in representing whistleblowers in cases involving complex financial fraud. A VSG partner obtained multimillion dollar recoveries for the Government in actions involving foreign corrupt practices, violations of federal and state bribery and anti-kickback laws, and accounting fraud. Another VSG partner successfully prosecuted defendants, including major corporations, for accounting fraud, Ponzi schemes, false financial statements and other financial wrongdoing.