SEC WHISTLEBLOWER PROGRAM UP AND RUNNING
By Reed R. Kathrein
Reed R. Kathrein, partner, leads Hagens Berman’s San Francisco office. He focuses on financial fraud and securities litigation.
The Dodd-Frank Wall Street Reform Bill passed in July 2010, established a new whistleblower program to be administered by the SEC. Although it took several months to write and ratify the rules for the program, it is now up and running.
The program will provide rewards for whistleblowers who report violations of the securities laws. If the whistleblower provides original information that leads to a successful enforcement action by the SEC, they may qualify for a reward equaling 10 to 30 percent of any funds recovered.
The SEC proposed an initial set of rules for the program in November 2010. It received hundreds of comments on various rules and fine-tuned its proposal based on the feedback. The rules were finally passed on May 25, 2011, and went into effect in August. Last November, the SEC released its first annual report on the program. This report was promising because it suggested that the SEC program was already beginning to work.
In its report, the SEC noted that although only seven weeks of data were available, in those seven weeks, it received 334 whistleblower tips.
Furthermore, the SEC reported that the most frequent subjects of the tips were market manipulation, false or misleading corporate disclosures, and offering fraud.
For those of us who are still concerned that the rules are too lenient and that corporate fraud is still too often left uncovered, the SEC‘s data offers some hope. The SEC will begin to process tips and prosecute promising cases, including many cases it might have otherwise missed.
Still, the SEC is overburdened and will have to turn down what might be worthwhile cases simply because they have not been fully developed or adequately developed into solid legal arguments.
To get the SEC’s attention, whistleblowers will need to gather evidence, develop a credible story and present it persuasively to the commission’s team of investigators.
That is where private law firms like Hagens Berman come in.
Hagens Berman has working relationships with government officials and a deep understanding of securities law as well as traditional whistleblower, or qui tam, cases.
The fusion of these practice areas will enable Hagens Berman to provide excellent counsel to potential SEC whistleblowers.
We can help whistleblowers develop their claims and create an effective presentation for the SEC. Individuals who believe they may have information regarding fraud committed in violation of the securities laws are encouraged to contact Hagens Berman.
Learn more about Hagens Berman's SEC Whistleblower practice.