The SEC continues to provide millions of dollars to whistleblowers who bring original information to the SEC’s attention involving violations of the Exchange Act. Because violations of federal securities laws are often committed in secret, it is not uncommon for a person who has such original information to have potentially played a role in the violations himself, either intentionally or unintentionally, and so a common concern among potential whistleblowers is whether they themselves will run into legal problems with regulators by bringing this information forward. The SEC has indicated that it will make significant financial whistleblower rewards even to those individuals who were themselves culpable in the conduct – including one recent action in which it awarded $1.7 million to a whistleblower despite “limited culpability” – but potential whistleblowers often have the question of whether they can receive amnesty from the SEC by bringing original information to the agency.
Amnesty is Not a Guarantee, But Cooperation Credit Is Available
Pursuant to the SEC’s whistleblower regulations, the SEC does not offer a guarantee of amnesty to individuals and does reserve the right to bring an enforcement action against an individual regardless of whether original information was provided to the agency. That said, the SEC regulations do indicate that, should the SEC determine it is appropriate to bring an action against a person who provided original information, it will take that person’s cooperation into consideration in determining how to proceed and what results should be pursued.
This credit for cooperation can include taking “no enforcement action” or reduced charges or penalties. The nature and amount of cooperation credit provided by the SEC are based on a number of factors, including:
- Whether the individual provided “substantial assistance”
- Whether the individual initiated the cooperation with the SEC (e.g. through bringing original information)
- The timeliness of the individual’s cooperation, which includes “whether the individual was first to report the misconduct to the Commission or to offer his or her cooperation in the Investigation”
- The governmental resources conserved as a result of the individual’s cooperation
Why Pursuing a SEC Whistleblower Award May Be in Your Best Interest
Initiating an SEC whistleblower action is, of course, always an important decision that must be fully thought through and strategized in confidential consultation with an experienced whistleblower attorney, but, even where there is potential culpability on the part of the whistleblower, there are potentially many reasons why it is in the best interest of that individual to proceed in pursuing a whistleblower award.
Not providing original information to the SEC certainly does not prevent the SEC from bringing an enforcement action against that individual, even years down the line. The SEC may learn of the misconduct through its own efforts, or even through the efforts of another whistleblower in the same organization who provides the same information to the SEC.
In such cases, a person who failed to take steps to pursue a whistleblower award may miss the cooperation credit benefits that could have accrued to him or her by coming forward earlier. And, of course, that individual would not be eligible for the significant whistleblower awards that would have potentially been available had they taken the steps to bring original information to the SEC before the enforcement action proceeded.
Without a doubt, the decision to come forward as a SEC whistleblower is not an easy one, but by working with a SEC whistleblower attorney who represents your interests and your interests alone, you can work towards the best possible outcome in your situation.
Recovering Your Own SEC Whistleblower Award
If you are aware of misconduct in your organization that violates SEC regulations, you too may be able to recover a significant financial reward by presenting information related to the misconduct to the SEC Whistleblower Office. By working with an experienced whistleblower attorney, you can not only improve your chances of recovering an award (typically 10% to 30% of the total recovery made by the SEC as result of the information provided) but also take steps to protect yourself from retaliation in the process.
At Kreindler & Associates, we are committed to helping whistleblowers win maximum compensation by bringing wrongdoing to light, while taking all necessary precautions to protect their interests. To learn more about how Kreindler & Associates can help in your SEC whistleblower matter, see here.
