What Is the SEC Whistleblower Program?

There are many other whistleblower programs that you might consider before deciding what the best forum is for your whistleblower action. One of the most prominent and effective among those is the Securities and Exchange Commission (“SEC”) whistleblower program. The Healthcare Fraud Law Group’s lawyers were among the first to file complaints for whistleblowers under the SEC whistleblower program.

The SEC whistleblower program generally considers claims that relate to a possible violation of federal securities laws, rules or regulations. Those claims generally arise from the failure of a publicly traded company to disclose material risks to investors, or when public companies make material false statements to the public about earnings or expenses or in debt offerings. The SEC whistleblower program was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, in the wake of the financial meltdown. Like the False Claims Act this program also provides for an award to the whistleblower that can range from 10% to 30% of the amount the SEC recovers in fines, penalties, interest or the disgorgement of profits the company made because of fraud. One of the advantages of filing under the SEC whistleblower program is that the whistleblower can remain completely anonymous (except for a disclosure of identity to the SEC when claiming an award) if he or she is represented by counsel.

While the SEC generally considers straightforward cases of financial reporting fraud committed by publicly traded companies or false statements made in public debt offerings, it is possible to include allegations of material health care fraud in an SEC complaint. As one court noted a “health care provider’s alleged violation of Medicare and Medicaid laws was sufficiently ‘in connection’ with the sale of securities to be a predicate offense for a securities violations, where Medicare and Medicaid reimbursements constituted 40% of the provider’s revenues.” At the Healthcare Fraud Law Group we always evaluate healthcare fraud cases for possible SEC violations if the defendant is a publicly traded company.

Like the FCA, the Dodd-Frank Act has very strong whistleblower retaliation protections, with a generous statute of limitations for violations of six years. The SEC has taken an active role in enforcing anti-retaliation provision. For example, the SEC recently assessed a $340,000 penalty against a company that attempted to condition severance payments to employees on an agreement by the employee that he or she would not report fraud. To read more about this SEC Order, and the SEC whistleblower program, follow this link https://www.sec.gov/news/pressrelease/2016-164.html.

The statute of limitations for SEC violations is also six years, but can be expanded to ten years depending upon the facts and circumstances of the case.

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