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Whistleblower Protection under the SEC Whistleblower Program

Monday, January 10, 2011

whistleblower protectionIn our web site, we established the types of anti-retaliatory protections offered employees under the SEC Whistleblower Program. A question constantly heard is how does an employee optimize or receive the full benefit of these protections?

Here are some of the specific rules proposed by the SEC on qualifying whistleblowers seeking protection and/or a reward.

Potential vs. Proven Securities Fraud

The SEC Whistleblower Program protects employees who report “potential” corporate misconduct. But it's imperative to understand that “potential” does not mean “proven," “actual,” “provable," or even “interesting–to-the-SEC”. Should an employee need to invoke the protections afforded to him or her, he or she will not need to prove that underlying misconduct occurred.  That person only needs to prove that she reported the misconduct using the appropriate forms to the SEC.   

Accrues to employee upon submission to SEC

The anti-retaliatory protections of the SEC Whistleblower Program accrue to an employee when that employee reports information to the SEC. It is not relevant where the SEC is in its investigation or whether the SEC intends to investigate the matter at all. Again, it is the proper reporting of potential corporate misconduct that triggers the whistleblower protections, not the investigation the report may or may not generate.

Qualifying for protection verses qualifying for a reward

Much of the statute creating the SEC Whistleblower Program and much of the energy the SEC is expending creating qualifications for the program deal with who can be entitled to receive a reward, not who is entitled to protection from retaliation. Certain types of compliance officers and senior executives may not qualify for a reward.  So too some attorneys and auditors may not. The information must be provided voluntarily to receive a reward. This type of analysis deals with who qualifies for a reward, not who qualifies for protection from retaliation.  

While the distinction is still unsettled at this time, it seems clear that a larger group of employees and individuals will qualify for whistleblower protection, even though some of those employees may not qualify for a reward.

Learn more about SEC Whistleblower Qualifications to better understand if you're eligible for whistleblower protection and/or a reward.