New Laws Enacted to Reward Those Who Report Financial Fraud

Following the catastrophic losses caused by Enron, the Bernie Madoff ponzi scheme, and other high profile financial scams, the Securities and Exchange Commission is offering monetary rewards for those that help the SEC identify possible fraud and other violations. This program is intended to offer incentives that would minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.

Under the Act, a whistleblower who provides original information to the SEC or CFTC that leads to a successful enforcement action resulting in over $1,000,000 of monetary sanctions may be awarded by the SEC or CFTC an amount not less than 10% and not more than 30% of the monetary sanctions collected. Penalties, disgorgement and interest paid count toward the $1 million threshold. The determination of the amount of the award is within the discretion of the SEC, which must take into consideration the significance of the information provided, the degree of assistance provided, the “programmatic interest” of the SEC in deterring violations of the securities laws by rewarding whistleblowers, and other factors the SEC may establish by rule or regulation.

It is important for a whistleblower to move as quickly as possible, as the government applies a “first to file” rule, meaning that the first person who brings suit against an entity allegedly defrauding the government – and only the first person, no matter if that suit is the “best” or most detailed – is entitled to the government reward. The rule is intended to prompt fast reporting of fraud.

There are important protections that are provided to whistleblowers to encourage them to come forward. The Frank Dodd whistleblower law offers anonymity to a whistleblower when that person files his securities fraud complaint through a whistleblower attorney. Employers may not discharge, demote, suspend, harass, or in any way discriminate against a whistleblower because of any lawful act in providing information to the SEC under the whistleblower program or assisting the SEC in any investigation or proceeding based on the information submitted.

If you would like Bailey and Galyen to consider handling your potential whistleblower case, please contact us at 817.276.6000 or Baileygalyencriminallaw.com

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