SEC Makes Whistleblower Lawsuits More Profitable for Employees

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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New Securities and Exchange Commission (SEC) rules now make it more profitable for employees who file whistleblower lawsuits alleging fraudulent activity. Whistleblowers, also called relators, can now receive up to 30% of the penalty imposed on employers, which in many situations can amount to millions of dollars in compensation.

New SEC Whistleblower Rules

The new SEC whistleblower rules were created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping change to U.S. financial regulation since the Great Depression, which seeks to promote financial stability by improving accountability and transparency in financial systems. The new SEC rules provide that those employees who discover fraudulent activity within their company against the government:

  • Get a bigger piece of the recovery. Whistleblower bounty awards in SEC cases had been capped at 10% prior to the new rules. However, that amount has now tripled and relators have the opportunity to receive up to 30% of the recovery when a successful enforcement of a federal court or administrative action in which the SEC obtains monetary sanctions totaling $1 million or more. Considering that most whistleblower lawsuits allege millions, and even billions, of dollars in fraudulent activity, that can result in a hefty award.
  • Are safe from employment retaliation. Whistleblowers are protected from employment retaliation if they have a reasonable belief that the information provided relates to a possible SEC law violation that has occurred, is occurring or is about to occur. They are also protected from threats by employers to enforce a prior confidentiality agreement.

Employees are not required to first report what they’ve discovered through internal channels before filing a whistleblower lawsuit. While employees can report the fraudulent activity directly to their employer or directly to the SEC, whistleblower lawyers say that having adequate representation may be in your best interests.

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Whistleblower Lawyers Say Confidentiality Is Key

Whistleblower lawyers, also known as Qui Tam lawyers, who represent employees who have discovered fraudulent activity against the government in their company in violation of the False Claims Act, say that treating these matters with the utmost confidentiality is a key component to the process as the first person to file the whistleblower lawsuit is the one who reaps the benefits. Since lawyers are excluded from receiving whistleblower funds, trust issues are irrelevant.

In other words, your lawyer can’t take the information you’ve provided and file their own claim. Any recovery goes to you – and that recovery can be substantial. Whistleblower compensation can often be worth millions of dollars.

You Can Make a Difference

All of these new laws and regulations are in response to corrupt activity in financial institutions that caused the current U.S. economic recession – and government officials say that you can make a difference. In fact, SEC Chairman Mary Schapiro stated, “For an agency with limited resources like the SEC, it is critical to be able to leverage the resources of people who may have first-hand information about violations of the securities laws.”

If you’ve discovered fraudulent activity against the government by your company, contact an experienced whistleblower attorney to discuss your situation so that you can decide what course of action – if any – makes sense for you and your family.

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