SEC and CFTC Whistleblower Laws

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SEC and CFTC Whistleblower Laws Attorneys

The creation of the Commodity Futures Trading Commission (CFTC) and Security and Exchange Commission (SEC) whistleblower offices was a result of the Dodd-Frank Legislation, aimed at combating financial fraud.

Whistleblowers can report commodities and securities fraud to these agencies and potentially receive awards for providing information. Unlike the Federal False Claims Act, neither the CFTC nor the SEC allows for private action by the whistleblower for the underlying fraud.

Under these provisions, whistleblowers can report fraud to the agencies, and if the agencies take action against the defendants, the whistleblowers may be eligible for awards. However, they cannot independently pursue legal action against the defendants for the fraud itself. Seeking the assistance of a skilled whistleblower lawyer is important when dealing with SEC and CFTC whistleblower laws.

SEC Whistleblower Program

The Securities and Exchange Commission (SEC) is a government agency responsible for regulating securities trading in the United States. The SEC whistleblower program, established by the Securities and Exchange Commission Act, focuses on violations that harm investors.

Successfully navigating the SEC whistleblower program requires addressing specific challenges. Whistleblowers may feel frustrated when they believe they are telling the truth but face obstacles in coming forward.

Program Applications

The SEC has demonstrated its commitment to protecting whistleblowers. It allows for anonymous filing of cases with legal representation, and the identity of anonymous whistleblowers is safeguarded, even when they receive awards.

While complete anonymity may not always be feasible under the SEC whistleblower program, initial anonymous filing allows for government action to be taken before the whistleblower’s identity is revealed.

Given the risk of retaliation faced by whistleblowers, anonymity plays a crucial role in SEC and CFTC procedures, as anti-retaliation provisions often offer limited protection. However, the False Claims Act has a unique procedure where cases are initially filed under seal, providing some time before the whistleblower’s identity becomes known.

Government Contracting

Government contracting, especially in defense, is a significant industry. Unlike Medicare, the government usually maintains a direct relationship with defense contractors, making fraud cases more complex when proving that the government was defrauded or unaware of misrepresentations or changes made by the contractor.

Government knowledge alone is no longer a defense against fraud. However, cases involving fraud against the government become challenging when the government is fully aware of the conditions and services provided under a contract with a defense contractor.

Types of Fraud

Various types of fraud can be actionable under the False Claims Act. Surprisingly, even mortgage fraud can involve government funds when the government ensures mortgages, including those related to housing and urban development.

Any form of fraud against the government can serve as the basis for a successful whistleblower case under the False Claims Act.

Case Size

The SEC and CFTC whistleblower offices are relatively new compared to the False Claims Act, resulting in a smaller range of successful cases. Nonetheless, successful cases and awards have been obtained through these whistleblower offices. Whistleblower attorneys anticipate more successful prosecutions as whistleblowers come forward with relevant information to these agencies.

Generally, the SEC whistleblower office has jurisdiction over publicly traded companies. Securities fraud examples include selling worthless securities or failing to disclose known risks to investors, which can lead to appropriate actions under the SEC whistleblower law.

Filing Restrictions

In general, any individual who witnesses wrongdoing can file a whistleblower action, with some exceptions. Attorneys representing clients face challenges due to privileged material disclosure. Additionally, military personnel cannot file Federal False Claims Act cases related to their service.

Each state law has its own restrictions on who can file and receive awards under their False Claims Act. It is important to be aware of such limitations. Whistleblowers should consult with legal counsel before filing any action to maximize their chances of receiving an award under whistleblower laws.