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Posts Tagged ‘reporting fraud’

SEC Cautions Attorneys Against Hush Language in Whistleblower Contracts

Sean McKessy, Chief of the U.S. Securities and Exchange Commission’s (SEC’s) Office of the Whistleblower, cautioned lawyers attending a Georgetown University Law Center Corporate Counsel Institute event against incentivizing company whistleblowers to withhold evidence of company wrongdoing from the SEC.

“[W]e are actively looking for examples of confidentiality agreements, separates agreements, employee agreements that … in substance say ‘as a prerequisite to get this benefit you agree you’re not going to come to the commission or you’re not going to report anything to a regulator.’”

McKessy, joined by Government Accountability Project’s legal director, Tom Devine, and Commodity Futures Trading Commission (CFTC) whistleblower chief Christopher Ehrman,  added that attorneys found to have drafted contracts that offer whistleblowers incentives in exchange for silence may be disciplined.

“[I]f we find that kind of language, not only are we going to go to the companies, we are going to go after the lawyers who drafted it,” McKessy said. “We have powers to eliminate the ability of lawyers to practice before the commission. That’s not an authority we invoke lightly, but we are actively looking for examples of that. “

McKessy indicated that the SEC receives an average of approximately 10 tips each day while Ehrman stated that tips received by the CFTC increased up to 60% compared to last year.
Whistleblowers who provide “original” information to the SEC about possible securities violations can earn from 10% to 30% of fines over $1 million obtained by the commission.

SEC Awards Whistleblower $14 Million

Whistleblower Today

The Securities and Exchange Commission (SEC) announced its largest whistleblower reward, $14 million, pursuant to the Dodd-Frank whistleblower program. 

Whistleblowers can receive up to 30 percent of the funds collected by the SEC in exchange for high-quality original information if the related SEC enforcement action results in sanctions greater than $1 million. 

 “Our whistleblower program already has had a big impact on our investigations by providing us with high quality, meaningful tips,” said SEC Chair Mary Jo White.  “We hope an award like this encourages more individuals with information to come forward.”

The witness, who did not wish to be identified, provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible.  Less than six months after receiving the whistleblower’s tip, the SEC was able to bring an enforcement action against the perpetrators and secure investor funds.

“While it is certainly gratifying to make this significant award payout, the even better news for investors is that whistleblowers are coming forward to assist us in stopping potential fraud in its tracks so that no future investors are harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower.  “That ultimately is what the whistleblower program is all about.”

If the whistleblower wishes to remain anonymous, the SEC must protect the confidentiality of whistleblowers and is prohibited from disclosing information that may reveal a whistleblower’s identity. 

 


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