Morgan & Morgan
The SEC Whistleblower laws apply to a broad range of industries and the whistleblower protection laws have specific applications to companies within certain industries. The finer points of the Whistleblower laws can be broken down into specific industries, industry-specific issues, and specific examples of each violation.
Fraudulent acts committed in foreign lands may still amount to securities fraud or corporate fraud
St Augustine is the origin of the now famous saying, “when in Rome, do as the Romans.” The notion behind this adage is that it is OK to adapt to foreign local customs when abroad even if those foreign customs violate your home laws and customs. The SEC Whistleblower Act does not recognize this adage. A public company registered with the SEC that commits corporate fraud or securities fraud on foreign soil is still accountable to the SEC for that fraud. In fact the Foreign Corrupt Business Practices Act specifically addresses corporate conduct committed outside the United States. A securities fraud whistleblower or corporate fraud whistleblower then can report acts that occur outside the United States if the corporation responsible is registered with the SEC.
When reading through the different industries, a potential SEC whistleblower should keep in mind that there are two general types of companies, often termed “reporting companies” and “market participants”. A “reporting company” is subject to the SEC’s jurisdiction because the company has or should issue securities that are regulated by the SEC. A “market participant” is a company or individual that engages in the business of creating a market for a security. Stockbrokers, investment banks and market makers are examples of “market participants”. The SEC has jurisdiction over “market participants” because of the job the market participants performs. The SEC Whistleblower Act covers both market participants and reporting companies.
We use the term “securities fraud” often throughout this site. A reader could conclude then that securities fraud only occurs when there is a drop in the price of the underlying security or stock. While this is often true, it is the wrong conclusion. Securities fraud and corporate fraud can occur- and a whistleblower can and should report this fraud- regardless of the fraud’s effect on the underlying stock price.