How to Report High-Quality Tips to the SEC

The SEC’s whistleblower program incentivizes people to come forward with evidence of securities law violations. In exchange for taking that risk—and it is a risk, because so many whistleblowers are insiders at the places where fraud happens—the program offers 10% to 30% of any financial penalty the SEC recovers.

But whistleblowers only get that money if the SEC believes their information is “high-quality” and then takes action on it. Even then, the award must be more than $1 million, and the percentage of the amount varies according to things like how helpful the information was. Fortunately, there are a few things you can do to make sure your tips are information the SEC wants—and eventually lead to a substantial award.

The SEC whistleblower program is looking for original information, meaning that it can’t be public knowledge or something that a source other than you already reported. The SEC seems particularly interested in information that it couldn’t have gotten on its own. For example, this could include information that’s internal to your employer, or that the SEC wouldn’t notice under normal circumstances.

The information should further the SEC’s mission of protecting investors and maintaining fair markets. At a minimum, your information needs to reveal a possible violation of securities law. If it’s something dangerous to investors, like a Ponzi scheme, the SEC is likely to be very interested.

The information you bring the SEC should be as helpful as possible to regulators. For example, a case might turn on whether the accused people intended to defraud investors or were merely unlucky. If you can provide a document that clearly shows that the accused always expected the investment to fail, your tip will likely succeed with the SEC.

You should report information as soon as possible, for two reasons. One is that you don’t want to look as if you participated in or ignored clear wrongdoing. In addition to any penalties that might expose you to, it also reduces your eligibility for an award. The other reason is that information must be original to make you eligible for an award. If you wait, another person could report it first.

To be useful to regulators (and, perhaps eventually, prosecutors), your information should be documented as thoroughly as possible. Physical documentation gives the SEC important details—and the ability to prove its allegations. It might also shorten the investigation.

To maximize your award, there are other things to know. For example, cooperating with the SEC during an investigation counts in your favor when the Commission is determining the amount of the award. Participating in any internal investigation with your employer could also help. And you must follow the process to its completion because you only become eligible for an award at the end of the matter.

An experienced SEC whistleblower attorney can help you sort out all these rules and make sure you don’t miss any crucial opportunities to earn an award. A lawyer can also help guard your anonymity when necessary. At the Law Firm of David R. Chase and Silver Law, we guide whistleblowers through the process and make sure they’re in the best possible position to earn an award. As career securities law attorneys, we understand what information gets the SEC’s attention and how to navigate the complex whistleblower process. To set up a meeting, call us at 800.975.4345 or send us a message online.