SEC & CFTC Fraud
Dodd-Frank rules govern Wall Street whistleblowers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 created whistleblower programs in both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) that authorize cash rewards to whistleblowers who voluntarily provide those agencies with information leading to the successful prosecution of violations of securities and commodities laws.
Cash rewards for critical information
Under the Dodd-Frank Act, the SEC and CFTC are required to pay whistleblowers cash rewards of 10 to 30 percent of any monetary sanctions in excess of $1 million that the government, as a result of the whistleblowers' assistance, recovers through either civil or criminal proceedings. In order to qualify for such rewards, whistleblowers must provide the SEC with "original information":
- Derived from independent knowledge or analysis of a whistleblower
- Not known to the agency from any other source
- Not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit, or investigation, or from the news media
The Dodd-Frank Act gives the agencies wide discretion to determine the specific dollar amount of any cash reward within the 10 to 30 percent range by considering, among other factors:
- The significance of the information provided by the whistleblower
- The degree of assistance provided by the whistleblower
- The programmatic interest of the agency in deterring violations of the relevant securities and commodities laws
How SEC and CFTC whistleblower claims work
Unlike qui tam claims filed under the Federal False Claims Act (FCA), SEC and CFTC whistleblower claims do not involve the filing of a suit against the party who has committed the fraud. Rather, the whistleblower typically hires an attorney to:
- Research the transactions in question
- Hire and advance the costs of experts in finance, accounting, or securities regulation
- Prepare forms and disclosures to be filed with the SEC or CFTC Whistleblower Office
- Interface between the SEC or CFTC Whistleblower Office, the whistleblower, and the expert witnesses for the duration of the investigation, which may require several years to conclude
Anonymity and protection under Dodd-Frank
Dodd-Frank whistleblower claims can be filed anonymously, but only if the whistleblower acts through an attorney. In addition to permitting anonymous filings, which itself offers significant protection for the whistleblower, the Dodd-Frank Act provides several robust whistleblower protection provisions, including three additional whistleblower retaliation causes of action and enhancements to the retaliation provisions of the Sarbanes-Oxley Act and False Claims Act.
Common triggers for securities and commodities whistleblower claims
The types of securities and commodities violations that may be presented to the SEC and CFTC are as varied and complex as the financial, securities, and commodity markets themselves. Areas of SEC interest include:
- Insider trading
- Market manipulation
- Ponzi schemes
- Financial reporting in violation of standards established by the Financial Accounting Standards Board
- Violations of the Foreign Corrupt Practices Act
The CFTC's primary area of interest is trading in agricultural, energy and metals commodity futures and options.
Tapping into the extensive resources of Waters & Kraus
In selecting counsel to pursue a security or commodity whistleblower claim, an important consideration may be the financial resources available to the whistleblower's counsel to retain the very best experts in the fields of finance, accounting, and securities regulation to substantiate the whistleblower's claims before the SEC or CTFC. As a mid-size national plaintiffs' firm with extensive resources at our command, Waters & Kraus routinely works with expert witnesses in many different fields. We do not hesitate to retain the services of the best experts in their fields required to bring cases to successful resolution.
How Waters & Kraus can help whistleblowers
With a national presence and in-depth experience fighting fraud against the government, Waters & Kraus, LLP, provides aggressive representation of whistleblowers in qui tam actions and related complaints. The firm currently represents whistleblowers seeking to recover funds on behalf of the federal and state governments in a variety of cases, which may involve defendants such as large pharmaceutical companies, government contractors, school district contractors, and hospice and nursing home care providers.
To learn more about qui tam representation at Waters & Kraus, or to have one of our attorneys review your potential case, email us or call 800.226.9880.