Rules for Whistleblowers by Stephen M. Kohn

Author:Stephen M. Kohn
Language: eng
Format: epub
Publisher: Lyons Press
Published: 2023-03-11T00:00:00+00:00

Translated into English, this simply means that if a whistleblower’s original information resulted in a successful enforcement action by the SEC, the whistleblower can also qualify for rewards based on enforcement actions brought by other agencies. Related action payments are available if other federal regulatory or law enforcement agencies issue a sanction based on the information provided to the SEC or CFTC. Depending on the law, related action payments can also be obtained if sanctions are ordered by non-federal authorities, such as state prosecutors or Wall Street self-regulatory organizations, such as FINRA.

Under Dodd-Frank a successful enforcement action requires the SEC or CFTC to obtain over $1 million in sanctions from the fraudster. But once that threshold is reached, a whistleblower can collect rewards based on fines, penalties, and other sanctions obtained by these other agencies, even if those violations have nothing to do with the violation of securities laws. It is the $1 million-plus sanction under the securities laws that triggers the related action rule. Dodd-Frank clearly spells out the conditions that must be met in order for a whistleblower to qualify for a related action payment:

In any [enforcement action brought by the Commission that results in a sanctions of $1 million or more] . . . the Commission . . . shall pay an award or awards to 1 or more whistleblowers who voluntarily provided original information to the Commission that led to the successful enforcement of [a] related action, in an aggregate amount equal to—(A) not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the [SEC enforcement] action or related actions; and (B) not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the [SEC enforcement] action or related actions.

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