The mission of the U.S. Securities & Exchange Commission (SEC) is twofold – to protect investors and to maintain the integrity of the securities markets. In response to the public outcry over the corporate and financial industry scandals which followed the 2008 Financial Crisis, Congress vastly improved the SEC’s ability to achieve these goals. It authorized, as part of the Dodd-Frank Act, the establishment of the SEC Whistleblower Program. A dedicated whistleblower lawyer can help you take advantage of this program to hold the perpetrators of securities fraud accountable.
SEC Whistleblower Program Basics
Under the rules of the SEC Whistleblower Program, individuals who voluntarily provide the SEC with “original information” regarding violations of United States securities laws that leads to successful SEC enforcement actions resulting in monetary sanctions of more than $1 million are eligible to share in the recovery. In particular, they may be entitled to receive 10-30 percent of the monetary sanctions collected.
How SEC Whistleblower Tips are Submitted
The Ability to Proceed Anonymously
Claiming Awards Under the SEC Whistleblower Program
Who are SEC Whistleblowers?
SEC whistleblowers typically reside in the United States but need not be. In fact, the SEC has received submissions from whistleblowers in dozens of foreign countries, including, primarily: Australia, Canada, China, Chile, Germany, India, Russia, South Africa, and the United Kingdom.
There is also no requirement that a whistleblower be an insider or employee of the financial institution, corporation, or other alleged violator that is the subject to the tip. While this is usually the case, actionable tips have also been received by the SEC from victims of the alleged securities law violations and individuals working elsewhere in the same industry as the alleged violator. Tips have also been received from individuals who learned of the misconduct in question through a personal relationship with the violator or who simply have expert knowledge of the industry.
Fraud is their game.
Integrity is yours.
Types of Securities Law Violations That Can Form the Basis for an SEC Whistleblower Tip
Corporate Disclosures and Financials
Corporate Disclosure and Financial violations relate to allegations that a corporation or other issuer of securities filed disclosures or financial statements with the SEC that contained materially false or misleading statements or omissions.
Offering Fraud
Offering Fraud occurs when a company offers securities for sale by means of offering documents that contain materially false or misleading statements or omissions. The offering in question can involve equity, debt, or hybrid securities. It can also involve securities that are registered with the SEC and traded on an exchange or that are exempt from registration and sold to accredited or institutional investors in “private placements.” It can also involve municipal securities, i.e., debt securities issued by state and local governments and public authorities.
Market Manipulation
Market Manipulation is a catch-all term encompassing various methods of artificially distorting or rigging the supply or demand of a particular security or market with the goal of misleading investors. It includes Pumping and Dumping (hyping a company’s stock through false or misleading statements, then abruptly selling the shares), Bear Raiding (selling a target stock short while disseminating false rumors about the company), Painting the Tape and the related practices of Wash Trading and Matched Orders (coordinated purchases and sales for the purpose of influencing a security’s price or to create the false impression of demand, trading activity, or volume), and Spoofing (a trader placing orders with the intent to cancel the order prior to execution).
Insider Trading
Insider Trading consists of buying or selling securities while in possession of material nonpublic information about the securities, the company, or the issuer. Most insider trading violations are committed by corporate insiders. However, anyone privy to nonpublic information who has a legal duty to keep that information confidential may be subject to insider trading liability. This can include individuals (tippees) who receive information from others (tippers).
Trading & Pricing
Trading & Pricing refers to a number of illegal trading tactics, including Late Trading (recording mutual fund trades after the fund has already declared its net asset value for the day), Marking the Close (trading moments before the end of a session in order to influence the closing price), Front Running (trading ahead of customers or other investors while having advance knowledge of their orders), Dark Pool Violations (misrepresenting to investors that high-frequency traders are being excluded from a dark pool when, in fact, they are being allowed to participate), Freeriding (buying and then selling a position in a cash account without first depositing the funds necessary to settle the purchase), Stock Parking (selling securities to a friendly trader at another firm with an agreement to repurchase the position at a later time for the purpose of evading regulatory or disclosure requirements that would have applied if the securities had remained on the seller’s books), Naked Shorting (short-selling without owning the stock or ensuring that it is available to borrow), and Churning (excessively trading a discretionary customer account for the purpose of generating commissions).
Violations of the Foreign Corrupt Practices Act (FCPA)
The Foreign Corrupt Practices Act (FCPA) generally prohibits companies from paying, offering, or arranging to pay bribes to officials of foreign governments to secure business. The bribe need not be in the form of money but can be anything of value. The statute also imposes certain corporate accounting requirements to prevent violative payments from being concealed from auditors, shareholders, and the SEC.
Unregistered Offerings
Unregistered Offerings. Under the federal securities laws, securities offerings and sales must be registered with the SEC unless they meet an exemption. The exemptions from registration are set forth in Regulation D of the Securities Ac. It is a serious violation to sell unregistered securities without meeting all the requirements and conditions for an exemption.
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Whistleblower Practices
- False Claims Act/Whistleblower Lawsuits
- Import Duty Evasion & Customs Fraud
- COVID-19 Relief Fraud
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- Securities Law Violations & the SEC Whistleblower Program
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