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SEC Anticipates Increase in Whistleblower Tips

The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") is one of many laws that protect consumers from fraudulent acts committed by corporations. In order to increase transparency and expose organizations that engage in illicit activity, Dodd-Frank includes a "whistleblower program" that incentivizes individuals to come forward with information regarding possible securities law violations. If the information is original and leads to a Securities and Exchange Committee ("SEC") enforcement action in which more than $1,000,000 in sanctions is ordered, the SEC is authorized to provide monetary awards between 10 to 30 percent of what it collects to the individual.

Since 2011, when Dodd-Frank was first instituted, the SEC has paid more than $54 million to 22 whistleblowers. In 2014, the SEC announced it was going to pay an individual between $30 to $35 million for reporting an ongoing fraud scheme.

Due to the whistleblower program, the SEC has been able to identify more instances of fraud and other violations than might otherwise have been possible. In a report for the fiscal year of 2014, the SEC received a record of 3,620 whistleblower tips. This year, the SEC expects its latest report to show an even greater number of tips. Although whistleblowers can be employees, suppliers, contractors, clients, or any individual who becomes aware of illegal activities, many of the whistleblowers have been senior accounting officials, and about 17 percent of the tips were made up from financial reporting and disclosure issues.

The legal team at SFMS has substantial experience representing SEC whistleblowers. If you have any questions regarding this subject or this posting, please contact Chiharu Sekino (csekino@sfmslaw.com) or Alec Berin (aberin@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd, Finkelman, Miller & Shah, LLP, is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains affiliate offices in London, England, and Milan, Italy, and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides our firm with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

SOURCES

Beeson, Ed. "SEC Whistleblower Tips Expected to Surge Higher." Law360. Last modified November 4, 2015.

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