When someone discovers a fraud or securities violation at the place where they work, or being committed by someone they do business with, they have the option of reporting what they know to the Securities and Exchange Commission (SEC) under the SEC whistleblower award program.  Generally speaking, if the SEC brings an action based in whole or in part on that information, in which it collects more than $1 million, and if all other requirements are met, it is required to give the SEC whistleblower(s) an award of 10% – 30% of what it collects from the wrongdoers in that action.  People who are considering whether to report to the SEC often wonder what SEC whistleblower protection NY employees, or employees in other states, have available to them.  If you are one of those people, while you should consult with your own SEC whistleblower attorney, there are some general things that you can keep in mind.

sec whistleblower protection ny

One SEC whistleblower protection NY employees and others should be aware of is that employers are not allowed to prevent their employees from reporting frauds or securities violations to the SEC.  For example, the SEC whistleblower Rules state that an employer may not enforce or threaten to enforce a confidentiality agreement to prevent an individual from reporting a possible securities law violation to the SEC.  (SEC Rule 21F-17(a).)  In a FINRA arbitration proceeding, settlement agreements, discovery stipulations and other confidentiality agreements cannot “prohibit or restrict a customer or any other person from communicating with the Securities and Exchange Commission (SEC) … regarding a possible securities law violation.”  (FINRA Regulatory Notice 14-40.)  Even before the Dodd-Frank Act created the SEC whistleblower program, some courts had already ruled that it is against public policy to enter into agreements not to report frauds or other crimes to the government.  For example, in Chambers v. Capital Cities/ABC, the court said that “it is against public policy for parties to agree not to reveal … facts relating to alleged or potential violations of law.”  (159 F.R.D. 441, 444 (S.D.N.Y. 1995).)

Another SEC whistleblower protection NY employees have is the right not to be retaliated against by their employers for reporting securities law violations to the SEC.  Employers cannot discharge, demote, suspend, threaten, or harass someone “in the terms and conditions of employment” because of any lawful act that person does “in providing information about possible securities law violations to the Commission”.  (15 U.S.C.A. §78u-6(h)(1)(A)(i).)

The Dodd-Frank Act allows an SEC whistleblower who has been retaliated against by his or her employer to bring a lawsuit in federal court.  It also allows the SEC to bring its own enforcement action against the employer for illegally retaliating against one of its SEC whistleblowers.  The SEC brought its first enforcement action against an employer for illegally retaliating against an SEC whistleblower in June 2014. (In the Matter of Paradigm Capital Management and Candace King Weir.)  In a press release about that case, the Chief of the SEC’s Office of the Whistleblower said “We will continue to exercise our anti-retaliation authority in these and other types of situations where a whistleblower is wrongfully targeted for doing the right thing and reporting a possible securities law violation.”  (SEC Press Release 2014-118.)

The requirements and conditions for someone to receive an SEC whistleblower award are complicated.  The rules that apply to SEC whistleblower protection are different depending on what state the SEC whistleblower lives or works in.  If you are thinking about becoming an SEC whistleblower, you may want to consider having an SEC whistleblower attorney explain those laws and rules to you.

Jason Pickholz, the founder of The Pickholz Law Offices, is one of the first lawyers ever to win an SEC whistleblower award for a client.  He is also the first SEC whistleblower attorney to successfully convince the Securities and Exchange Commission to grant his client an SEC whistleblower award over an initial recommendation by its staff to deny any reward.  This was the first time in the history of the SEC whistleblower award program that the Commission overruled an adverse Preliminary Determination by its Claims Review Staff.  (See official SEC Award here.)  Inside Counsel Magazine named this as one of the “Five milestones in the Dodd-Frank whistleblower reward program“.  For related articles, click here (Boston Business Journal) and here (NY Times).  In addition, Mr. Pickholz is a Fellow of the New York Bar Foundation, an elected honor that is limited to 1% of the New York State Bar Association membership. 

To find out more about the SEC whistleblower program, please click on the “SEC Whistleblowers” link on the right side of this page, or click here.  If you would like to speak with an SEC whistleblower attorney, you can call Mr. Pickholz at 347-746-1222.



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