Securities and Commodities Whistleblowers


Securities and commodities fraud harm individual investors and have the potential to undermine the entire financial system. Securities fraud involving mortgage backed securities is widely considered to be one of the principal causes of the 2008 financial collapse, which was felt in the United States and around the world.

Investigations into the causes of the 2008 crisis led to the passage of the Dodd-Frank Wall Street Reform and Protection Act. The purpose of the Dodd-Frank Act is clearly stated in its title: “… to promote the financial stability of the United States by improving accountability and transparency in the financial system…”

The Dodd-Frank Act created two new programs for securities and commodities whistleblowers. The first addressed fraud involving the sale and trading of securities (mainly stocks and bonds), which is regulated by the Securities and Exchange Commission (SEC). The laws governing the SEC whistleblower program can be found on our SEC Law page.

A second whistleblower program addressed fraud related to the commodities futures trading, including agricultural products (e.g., grains, fruits, cotton, coffee, sugar), metals (gold, silver, copper), and energy (oil, coal, etc.). Commodities are regulated by the Commodity Futures Trading Commission (CFTC), which also has authority over the foreign currency exchange market. CFTC whistleblower laws are available on our CFTC Law page.

Awards for Securities and Commodities Whistleblowers

The laws for securities and commodities whistleblowers share some similarities with the False Claims Act. Securities and commodities whistleblowers who provide original information to the SEC or the CFTC that enables the government to collect more than $1 million in an enforcement action are entitled to a reward of at least 10 percent, and potentially up to 30 percent, of the amount recovered.

SEC and CFTC whistleblower rewards are determined by the following:

  • The importance of the whistleblower’s information to the success of the recovery action.
  • The “degree of assistance” provided by the whistleblower and his or her attorneys.
  • The “programmatic interest of the Commission in deterring violations of the securities laws.”

Both the SEC and the CFTC further clarified the meaning of programmatic interest in final rules explaining how their whistleblower programs would be implemented. In deciding programmatic interest, both commissions consider:

  • The degree to which the award enhances the Commission’s ability to enforce securities laws and protects investors.
  • The degree to which the award encourages other whistleblowers to come forward with high quality information.
  • The severity and wide spread nature of the violations exposed and the potential harm they posed to investors.

Other factors the Commissions consider in determining the size of an award are the timeliness of the whistleblower’s report and any “unique hardships” experienced by the whistleblowers as a result of their reporting and assistance.

Original Information

To qualify for an award, securities and commodities whistleblowers must provide the SEC or CFTC with “original information,” which is defined in the law as information that “is derived from the independent knowledge or analysis” of the whistleblower and “is not known to the Commission from any other source, unless the whistleblower is the original source of the information.”

A number of other conditions explained in SEC and CFTC rules determine whether information will be considered original. For example, information obtained by an “officer, director, trustee, or partner of an entity… in connection with the entity’s processes for identifying, reporting, and addressing possible violations of law” would not be considered original.

Anti-Retaliation Protection for Securities and Commodities Whistleblowers

Both the SEC and CFTC laws prohibit retaliation against securities and commodities whistleblowers. They provide that, “No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower.” Employees who suffer retaliation can sue for reinstatement with equal seniority status, two times their back pay plus interest, and compensation for legal costs and attorney fees.

Foreign Corrupt Practices Act

The SEC and the Justice Department jointly enforce the Foreign Corrupt Practices Act (FCPA), which concerns bribing of foreign officials. With the passage of the Dodd-Frank Act, whistleblowers that provide the SEC with original information regarding violations of the FCPA may be eligible for the rewards and protections offered under the SEC whistleblower program.

Filing a Whistleblower Claim

It is important for securities and commodities whistleblowers to understand that they must comply with SEC and CFTC rules in submitting a whistleblower claim or risk being denied an award. Whistleblowers may submit claims anonymously, but only if they are represented by a whistleblower attorney.

Representation by an experienced whistleblower attorney is critical in navigating SEC and CFTC rules and regulations and can help you receive the maximum award possible. If you are aware of fraud involving securities or commodities trading, or violations of the Foreign Corrupt Practices Act, please contact the whistleblower attorneys at Baum, Hedlund, Aristei and Goldman to discuss your case.