Articles Tagged with SEC

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A mandated Securities Exchange Commission (SEC) whistleblower program, instituted as part of the Dodd-Frank Wall Street Reform Bill, reached its one year anniversary this week with a reported fund of $452 million set aside to pay out the first year’s rewards.

Whistleblowers may receive between 10% and 30% of the SEC’s recovery as an incentive for providing information in connection with potential securities fraud to the SEC. The program has already led to a veritable flood of tips from prospective relators on a daily basis, two to three of which on any given day are deemed worthy of further investigation.

The SEC program is similar in design to the federal False Claims Act (FCA), a whistleblower statute that has been on the books since 1863. Under the FCA, relators have standing to bring suit against individuals and corporations which have allegedly submitted false claims for payment to the government. It is also a violation of the FCA to submit a false claim in order to avoid payment of a liability owed to the government. Since 1986, the False Claims Act has undergone myriad amendments that, taken together, have worked to expand the protections available to whistleblowers and increase the number of valid claims under the statute. For example, the passage of the Fraud Enforcement and Recovery Act (FERA) in 2009, the Dodd-Frank Wall Street Reform Bill in 2010, and the Patient Protection and Affordable Care Act (PPACA) in 2010 all increased the scope of liability under the law. The 2009 changes to the law also included a broadening of the  anti-retaliation provisions, expanding coverage to include not only employees, but also contractors and agents who make “lawful efforts to stop” violations of the FCA.

Whistleblowers who prevail under the FCA may recover between 15% and 30% of any settlement or final judgment. Although the government may elect to intervene in a qui tam action filed under the FCA, it does not always do so. Relators have standing to sue under the statute regardless of whether or not the government intervenes, and many relators have won FCA cases in the absence of government intervention. Relators who wish to proceed without the government benefit from selecting legal representation with a proven track-record of bringing formidable resources to bear in order to successfully litigate suits under the FCA.

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Third party litigation has recently been a hot topic in the U.S., spurring speculation as to whether hedge funds will similarly begin funding whistleblower cases. A recent article on Pharmalot suggests that this leap may be likely and points out that whistleblower cases may be prime targets for investors, because they often suffer financing problems during long periods of litigation but may also result in nine figure settlements. Continue reading

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When the SEC released proposed whistleblower regulations required under Dodd-Frank, they requested comments from the public.  In response, Arent Fox, a law firm that represents Wal-Mart and drugmakers Elan and Genzyme, recently sent a letter to the SEC. In it, the firm advocated that the SEC first require employees to explore internal corporate compliance procedures before turning to the SEC. Additionally, the letter also requested a “no-bite” strategy in which the SEC refuses to accept tips from those with a fiduciary responsibility to the company, including top officers and directors. Continue reading

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According to Dodd-Frank legislation, the SEC is required to adopt regulations regarding its whistleblower program no later than April 21 2011 (nine months from enactment). According to a recent report released by the SEC, the agency has set aside about $450 million for future payments to whistleblowers whose information results in successful cases and penalties.

The SEC is currently soliciting comments on how the proposed whistleblower program may best co-exist with current corporate compliance programs. Comments may be submitted via the SEC’s online form here. Continue reading

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A securities fraud class-action lawsuit has been filed against Green Mountain Coffee Roasters Inc. in U.S. District Court in Vermont. The suit was originally brought by a whistleblower alleging accounting irregularities. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC may award between 10 percent and 30 percent of more than $1 million to any whistleblower providing “original information” leading to a successful SEC enforcement. Continue reading

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New whistleblower provisions in the recently passed Dodd-Frank Act enable whistleblowers to receive rewards for reporting violations of the Foreign Corrupt Practices Act (FCPA). The FCPA prohibits bribery of foreign government officials in international business transactions and false entries in books and records of those companies within the statute. Whistleblowers assisting in a recovery receive a monetary award between 10-30%. Continue reading

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With the passage of the Dodd-Frank Act (AKA the Financial Reform Bill), the SEC now has more power to reward whistleblowers who report securities law violations with substantial payments.  The first of these rewards came on July 23rd when Karen and Glen Kaiser of Connecticut received $1 million for their assistance in proving insider trading allegations against Pequot Capital Management, one of its employees, and a former Microsoft employee. Continue reading