SEC Whistleblower Rules To Know

The Securities and Exchange Commission is responsible for maintaining a sound securities market (source: [dcl=6683]). The organization has far reaching powers to investigate and prosecute anyone accused of misconduct. This can be employees of publicly listed companies,stock traders,fund managers or the staff of an exchange among others. The US securities market is usually sensitive and reacts to any market information almost immediately. Since the management and staff of a listed company may have information that can push stock prices up or down,there is usually the temptation for insiders to either buy or short stocks in advance to ensure they profit from a stock price increase or decrease. They can also sell the information they have to third parties,such as fund managers or friends and relatives.

Blowing the Whistle

Anyone who benefits from insider information can be charged with insider trading by the SEC. Anyone with information about insider trading or any other type of impropriety or misconduct can approach the SEC and provide the information as a whistleblower. There is usually monetary reward for helping the SEC prosecute individuals accused of misconduct or insider trading among other types of securities fraud.

SEC Whistleblower Rules

Whistleblowers are entitled to get between 10 to 30% of the monetary sanctions recovered as a result of their whistleblowing. The money is usually paid from the Investor Protection Fund.

The first rule that potential whistleblowers need to know is that the SEC can only take action if the monetary sanctions exceed $1 million dollars. If the monetary sanctions in a case do not exceed a million dollars,the whistleblower may not get a monetary reward.
To qualify for any reward,the whistleblower must provide original information of the impropriety to the SEC. The information they provide must be crucial in the successful prosecution of the suspects. As mentioned earlier,the monetary sanctions must exceed $1 million.

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