Securities Whistleblower Complaints Involving Criminal Violations
Our Lawyers Explain What Securities Whistleblowers Need to Know About Reporting Criminal Offenses
Most violations of federal securities laws are civil in nature. As a result, in most cases, whistleblower complaints lead to civil enforcement proceedings that the U.S. Securities and Exchange Commission (SEC) handles directly. However, some possible securities law violations are criminal in nature, and in these cases, the SEC works with the U.S. Department of Justice or state prosecutors to pursue criminal charges.
As SEC whistleblowers, what does this mean for you?
Whistleblower complaints involving civil and criminal securities law violations are fundamentally the same. Individuals who come forward must meet the same basic requirements to qualify as a whistleblower, and starting the process involves filing a formal whistleblower complaint with the appropriate office or agency. But there is one key difference between civil and criminal securities whistleblower cases: In criminal cases, whistleblowers may be entitled to an additional whistleblower reward.
Filing a Whistleblower Complaint for a Criminal Securities Law Violation
If you believe you may have information about a criminal securities law violation, you will want to consult with a securities whistleblower lawyer promptly. When establishing your status as a protected whistleblower—and your right to a whistleblower reward—timing is important. It is also critical to ensure that you file your complaint by all pertinent substantive and procedural requirements and law enforcement interest. You may not receive whistleblower status if you do not qualify as the “first to file,” or if you do not file your whistleblower complaint appropriately.
When are securities law violations criminal in nature? This is a complicated question. The federal securities laws are incredibly complex, and many violations can warrant civil or criminal enforcement. Generally speaking, however, proving a criminal securities law violation requires evidence of willfulness or intent. In many cases, a violation that would warrant civil penalties under normal circumstances can trigger criminal scrutiny if the offender is accused of acting willfully or intentionally. However, there are securities-related offenses that are strictly criminal in nature.
With this in mind, some examples of offenses that can lead to criminal charges in appropriate cases include:
- Corporate accounting fraud
- Investor fraud
- Insider trading
- Market manipulation
- Ponzi schemes and other fraudulent schemes targeting investors
- Submitting fraudulent filings or reports to the SEC
- Using “any manipulative or deceptive device or contrivance in contravention [of SEC Rules]”
When you schedule a confidential consultation at Oberheiden P.C., we will arrange for you to speak with one of our senior securities whistleblower lawyers in strict confidence. Your lawyer will review the information that you have in your possession and determine if you meet the requirements to serve as a whistleblower under the SEC’s whistleblower program. If so, your lawyer will also determine if the information that you have in your possession warrants criminal scrutiny, and if it does, your lawyer can assist with pursuing a “related action” (or other appropriate legal action) that would make you eligible for an additional whistleblower reward from investor protection fund.
The Securities Exchange Act has adopted a rule that entitles whistleblowers to additional rewards when they supply information in a “related action.” A criminal prosecution involving a securities violation is one example of a related action. As the SEC explains:
“Individuals who provide information that leads to successful SEC actions resulting in monetary sanctions over $1 million may also be eligible to receive an award if the same information led to a related action brought by certain other authorities, such as a parallel criminal prosecution. To be clear, eligibility for an award in an SEC [successful enforcement action] is a prerequisite to receiving an award in a related action.”
Just like SEC enforcement actions, for a related action to warrant a whistleblower reward, it must be successful. But this does not necessarily mean that it must result in a criminal conviction. For example, as the SEC also explains, “Deferred Prosecution Agreements and Non-Prosecution Agreements entered into by the U.S. Department of Justice may be considered a related action for award purposes.”
Importantly, however, if the entity that pursues criminal charges has its own whistleblower program, then the case may not qualify as a “related action.” The SEC makes this clear as well, stating:
“If another authority has a whistleblower award program that could pay on the related action, then the SEC will not consider the other authority’s action to be a ‘related action’ unless the SEC finds that the SEC’s own whistleblower program has a more direct or relevant connection to the action. However, if the other authority’s whistleblower award program is not comparable to the SEC’s, or if the related action award would not exceed $5 million, then the SEC will consider the action brought by the other agency a ‘related action.’”
Along with handling SEC whistleblower cases, we have significant experience representing whistleblowers in matters involving the DOJ and other federal agencies as well. As a result, if you need to report a criminal securities law violation to the government, we can assist regardless of whether the information you have in your possession is likely to lead to a “related action” or another type of criminal law enforcement proceeding.
If you become eligible for a whistleblower reward due to a successful related action, you will need to follow specific procedures for claiming this reward—and the SEC will not pay this reward unless you request it. Our lawyers can assist with this part of the process as well if your whistleblower complaint leads to a successful criminal enforcement proceeding.
The SEC published a Fact Sheet when it amended its rules to provide additional clarity around whistleblower rewards in related actions. This Fact Sheet is another good resource if you have questions about the monetary compensation available to securities whistleblowers in criminal cases. With that said, we are more than happy to explain everything you need to know; and, if you are thinking about blowing the whistle on any form of potential securities laws violations, we invite you to contact us for a completely free and confidential consultation.
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Dr. Nick Oberheiden
Founder
Attorney-at-Law
Lynette S. Byrd
Former DOJ Trial Attorney
Partner
Brian J. Kuester
Former U.S. Attorney
Hon. Kevin McCarthy
55th Speaker, U.S. House of Representatives (ret.)
Government Consultant
Mike Pompeo
Of Counsel
Former U.S. Secretary of State
John W. Sellers
Former Senior DOJ Trial Attorney
Linda Julin McNamara
Federal Appeals Attorney
Nicholas B. Johnson
Former Prosecutor
Roger Bach
Former Special Agent (DOJ)
Chris J. Quick
Former Special Agent (FBI & IRS-CI)
Michael S. Koslow
Former Supervisory Special Agent (DOD-OIG)
Ray Yuen
Former Supervisory Special Agent (FBI)
FAQs: Blowing the Whistle on Criminal Securities Fraud
Does the SEC Investigate Criminal Securities Fraud?
Yes, the SEC investigates all types of alleged and apparent federal securities law violations, including violations that are criminal in nature. However, the SEC does not prosecute criminal securities fraud—instead, it works with prosecutors at the U.S. Department of Justice to pursue charges when warranted. The DOJ’s Antitrust Division and Market Integrity and Major Frauds (MIMF) Unit investigate securities-related offenses as well. If you have information about a criminal securities law violation, our lawyers can assist you with filing a whistleblower complaint with the appropriate federal authority.
How Do I Report a Criminal Securities Law Violation?
In most cases, when you report securities violations involves filing a formal whistleblower complaint with the SEC. While the SEC’s whistleblower program provides strong whistleblower protection (and financial rewards) to eligible whistleblowers, there are specific requirements that individuals need to meet in order to qualify. With this in mind, if you are thinking about coming forward, we strongly recommend consulting with an experienced SEC whistleblower attorney as soon as possible.
What if I Have Concerns About Being Implicated in a Criminal Securities Law Violation?
If you have concerns about being implicated in a criminal securities law violation that you are thinking about reporting to the SEC, you will want to consult with an experienced lawyer right away. While individuals who participated in statutory violations can still serve as whistleblowers in some cases, special rules and limitations apply. An SEC whistleblower lawyer at Oberheiden P.C. can explain everything you need to know.
In an SEC whistleblower case, a “related action” is an enforcement proceeding initiated by another state or federal authority based on the same information that the whistleblower provided to the SEC. Whistleblowers who provide information that leads to a successful related action may be entitled to an additional whistleblower reward from the SEC if they do not receive a reward from the other authority involved.
Should I Hire a Lawyer if I Am Thinking About Blowing the Whistle on Criminal Securities Fraud?
If you are thinking about blowing the whistle on criminal securities fraud, there are several important reasons why you will want to speak with a lawyer as soon as possible. You will want to choose a lawyer who has experience representing whistleblowers in this specific scenario. While it is important that whistleblowers come forward, it is also important that whistleblowers protect themselves, and making informed decisions requires experienced legal representation.
