In accord with the requirements of the Dodd-Frank Act, the Securities and Exchange (SEC) Commission opened an Office of the Whistleblower in August 2011 to act as a central location to collect tips about those violating securities laws. The Office also has a web page that outlines how people can submit tips to the office about potentialsecurities fraud and the eligibility for collecting a reward for information a person submits to the SEC.
The Dodd-Frank Act provides the SEC authority to give those who report any securities law violations a monetary reward if the tip leads to a successful SEC enforcement action with sanctions of at least $1 million. A person's reward can be anywhere between 10 and 30 percent of the total sanctions the S.E.C. issues. Before the Dodd-Frank Act went into effect, the SEC could only reward those who offered information on insider trading.
The SEC press release about the new whistleblower program cited several positive benefits that will stem from the program:
- Better tips
- More timely information
- Maximization of outside resources
- Stronger protections against retaliation for those who report violations
- Stronger internal compliance for those companies in the securities industry
Securities fraud is any misrepresentation or withholding of information in an attempt to manipulate financial markets. Both individuals and companies can commit securities fraud. Some common types of securities fraud include:
- Insider trading
- Accounting fraud
- Misrepresentation of a company or individual's financial condition
Penalties for Securities Fraud
Securities fraud can carry severe criminal and civil penalties. The Sarbanes-Oxley Act of 2002, passed in response to major corporate securities fraud schemes, subjects a person to up to 25 years in federal prison if convicted of certain types of securities fraud, along with criminal fines. Other securities fraud violations carry a federal prison sentence of five years. The SEC also has the authority to levy civil fines for securities laws violations. If you are facing charges of securities fraud do not hesitate to contact an experienced criminal defense attorney who can fight for your best interests.