In November, the Securities and Exchange Commission published its annual report to Congress on the Dodd-Frank Whistleblower Program for the 2014 fiscal year. The report outlines several important milestones that occurred in 2014. Since the inception of the whistleblower program in 2011, a total of 14 individuals have received awards for. Nine of these awards were authorized in 2014 – more than all of the other years combined. The award amounts also increased in 2014; the Report cites to one individual who received a $30 million award for information provided. The SEC was also able to provide previous whistleblowers with additional payments as additional amounts were recovered in actions they helped bring to fruition.
The Dodd-Frank Act directed the SEC to provide monetary awards, retaliatory protection, and confidentiality protection to individuals who voluntarily provide original information which leads to successful enforcement actions resulting in monetary sanctions over $1,000,000 – or whistleblowers. Awards to whistleblowers must be made in an amount of 10%-30% of the monetary sanctions collected through the action. The Act further prohibits retaliation by employers against an employee who reports possible wrongdoing based on a reasonable belief that a securities violation has occurred, is occurring, or is about to occur.
Just this year, the SEC charged a company for its retaliatory actions for the first time. An employee reported information to the SEC regarding prohibited trading activities. Upon learning of the report, the employer demoted the employee and tasked him with investigating the report he had made, without giving him access to any of the information necessary to do so. The employer agreed to settle the claims of retaliation for $2.2 million. This case is important not only because it is the first time the SEC has pursued sanctions based on retaliation, but also because it illustrates an employee does not have to be terminated to have a viable retaliation claim.
Mr. Karam currently represents one of the original whistleblowers to file a claim under the Dodd-Frank Act, and has extensive expertise in representing whistleblowers and other witnesses to corporate fraud. For more information, please contact our office.
To see the SEC’s full report, click here.