Several prominent corporate whistleblowers have recently been in the news, and now corporate whistleblowers can obtain even more money. The Securities and Exchange Commission (SEC) has increased the financial incentive for corporate whistleblowers to come forward. Due to several new rules, corporate whistleblowers can receive millions of dollars in reward money and obtain the money faster than in the past.
If you are considering becoming a corporate whistleblower, it is important that you contact an experienced lawyer first. You only receive the reward money when you follow the guidelines set forth by the SEC. An experienced whistleblower attorney can guide you through the process to ensure you obtain the compensation you deserve.
New SEC Rules Provide More Compensation for Whistleblowers
In September 2020, the SEC announced new rules that adjust the amount of money corporate whistleblowers can be paid by the SEC. In June of 2020, the SEC paid 50 million to a whistleblower who reported that the Bank of New York Mellon was overcharging clients during currency trades. Weeks after they made the announcement, they awarded an anonymous corporate whistleblower $114 million. This award is the largest whistleblower award since the current program began eight years ago. The SEC hopes that more whistleblowers will come forward because of the changes in their regulations.
The federal Dodd-Frank Act created the Whistleblower program. Qualified whistleblowers can receive between 10% and 30% of the money collected by the SEC. Potential whistleblowers should remember that the SEC will not pay all whistleblowers this generously. Whistleblowers only recover part of the money collected by the SEC when the collection stems from “original information.” In other words, the whistleblower must provide the SEC with new information that directly leads the SEC to fine the company in question for the whistleblower to recover funds. Whistleblowers can also receive payment from the SEC for information “arising out of the related actions of another agency.”
Most Awards are for $5 Million or Less
The amount of the award paid to a corporate whistleblower depends on the number of SEC fines imposed on the corporation. The majority of whistleblower awards given by the SEC are not as significant as those mentioned above. Three-quarters of the SEC awards are for $5 million or less. However, the new SEC rules will allow qualified whistleblowers to obtain these smaller Awards more quickly. Previously, whistleblowers and their lawyers have complained that obtaining their awards could take years. This is problematic when whistleblowers may need to quit their jobs and do not have an income. The SEC hopes that making whistleblower awards more quickly will inspire more whistleblowers to come forward.
The new SEC rules establish a default award amount of 30% of the amount collected by the SEC when the resulting award is $5 million or less..this rule only applies when there are not any negative award factors. For example, if the whistleblower himself or herself participated in an SEC violation, this rule will not apply. Instead of deliberating on how much they should payout, the SEC will quickly payout 30%. Doing so will prevent many of the delays that have occurred in the past and will expedite payments to a large degree.
When the whistleblower receives over $5 million, the SEC has tightened the rules. Previously, the SEC considered the significance of the information provided by the whistleblower as well as the whistleblower’s continuing assistance and cooperation. Now the SEC will also consider the amount of the award, and if the award is too large, they could reduce the amount.
Critics of the whistleblower award program note that such large bounties are not a good idea. On the other hand, we have seen throughout history that providing large bounties does incentivize whistleblowers. Whistleblowers are protected by federal law from their employer’s retaliation, but they still risk losing their job. Additionally, if they become known to the public, they may not practice in their industry because of the stigma against them. Becoming a whistleblower is extremely risky, both personally and financially.
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Contact an Experienced Whistleblower Attorney
If you are considering becoming a corporate whistleblower, you need an experienced lawyer on your side. To obtain the reward through the SEC, you will need to follow their guidelines and process. The experienced Alabama whistleblower lawyers at Heninger Garrison Davis will protect your legal rights and guide you through the process. Contact us today to schedule your initial consultation.