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Whistleblowing at the Right Time for the SEC

The Securities and Exchange Commission (SEC) Office of the Whistleblower rejected a claim for an award earlier in the summer because it was not “original” under the SEC’s whistleblower law. The claimant originally filed a report of accounting fraud in 2006. The SEC pursued the claim and a consent judgment for penalties, disgorgement and interest was entered. However, the claim was not eligible for an award because it was not original information according to SEC’s whistleblower law.

To collect an award

The SEC pays an award to a tipster when the whistleblower voluntarily provides original information to the SEC that causes a successful enforcement in a federal court or administrative action in which the SEC collects a penalty of more than $1 million.

What is original information?

The SEC’s whistleblower law requires that original information must:

  • Be developed from your own knowledge or independent thinking
  • Not be known to the SEC
  • Not be exclusively developed from an allegation in a hearing
  • Reported to the SEC’s Office of the Whistleblower after its effective date of July 2010

The law explains that “independent knowledge and analysis” means information that is not derived from public sources alone.

The amount of the award

The amount of the award given to a tipster whose disclosure leads to enforcement in court is 10 percent to 30 percent of what the SEC collects from the defendant. While the SEC has sole authority to decide the amount of an award, it evaluates the following factors:

  • The value of the information given by the tipster
  • How helpful the informant was throughout the process
  • The effect the award is likely to have on deterring future misconduct
  • Whether the whistleblower was culpable
  • The promptness of the tipster report

Even if you possess valuable information of fraud, corruption and misconduct, to merit receiving an award, it is crucial to comply with every detail of the whistleblower law. An experienced Texas whistleblower attorney can provide valuable guidance.

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