ATTORNEYS AS SEC WHISTLEBLOWERS
The whistleblower programme created under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act, administered by the US Securities and Exchange Commission (SEC), has been in effect for approximately six years. We have seen whistleblowers handsomely compensated for informing on their employers. According to a recent SEC press release, approximately $154m in compensation – sometimes referred to as a ‘bounty’ – has been awarded to 44 whistleblowers. On the flip side, we have seen SEC enforcement actions that give effect to the anti-retaliation provisions under the programme, emphasising that companies cannot interfere with communications between whistleblowers and the government. But what about attorneys? Can attorneys be whistleblowers? Should they? If so, under what circumstances? Perhaps most importantly, what can companies do to prepare themselves for the prospect that their most trusted advisers could – at least in theory – turn them in?
Generally, whistleblowers may be eligible for a monetary award by voluntarily providing the SEC with original information about a violation of the federal securities laws that has occurred, is ongoing, or is about to occur, if the information leads to an SEC enforcement action that results in monetary sanctions totalling more than $1m. The award can range from 10 to 30 percent of the government’s recovery from the wrongdoer. To meet the “original information” test, the information must be: (i) derived from the “independent knowledge” or “independent analysis” of the whistleblower; (ii) not already known to the SEC from any other source (unless the whistleblower is the original source); and (iii) not exclusively derived from an allegation made in a judicial or administrative hearing, in a governmental report, hearing, audit or investigation or from the news media (unless the whistleblower is a source of the information).
Jul-Sep 2017 Issue
Foley & Lardner LLP