Following a week featuring extreme price volatility of certain stocks’ trading prices, the U.S. Securities and Exchange Commission (SEC) announced on January 29 that it is “closely monitoring” the situation. Meanwhile, individuals on social media are encouraging insiders to come forward with information, particularly after popular online brokerages, such as Robinhood, restricted the trading of stocks championed on Reddit. In light of the current demand for financial whistleblowers, whistleblower advocates are reminding individuals of the importance of correctly filing protected disclosures through the SEC Whistleblower Program, which offers both anti-retaliation protections and monetary rewards, and warning of the dangers of blowing the whistle to the media.
On January 29, Acting SEC Chair Allison Lee and SEC Commissioners Hester Peirce, Elad Roisman, and Caroline Crenshaw released a statement regarding the recent market volatility. “The Commission is closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days,” the statement read. “The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
The end of the SEC’s statement says that “[m]embers of the public can submit tips or complaints through the Commission’s website using this online form” and includes a link to the TCR submission page – the required form for whistleblower disclosures.
Whistleblower attorney Siri Nelson of Kohn, Kohn & Colapinto offered her guidance to individuals considering making a disclosure to the SEC. “Whistleblowers can only submit anonymous tips while represented by counsel, and it is highly advised that whistleblowers do so, or retain counsel regardless of their desire for anonymity,” said Nelson. “The whistleblower program and award application process can be difficult to navigate and attorneys are the only ones who can help whistleblowers navigate this system.”
Nelson also responded to the calls on social media for whistleblowers to come forward to the media. Nelson stated that “[t]his is an extremely concerning call, because contacting the media does not provide whistleblowers with any legal protections – nor does it necessarily make them eligible for an award. These whistleblowers need to be encouraged to contact competent whistleblower attorneys before they contact the media.”
“Potential whistleblowers need to be informed about their rights and the awards they might be eligible for,” Nelson added. “Only experienced whistleblower attorneys have the most up to date information and can give accurate personalized advice on eligibility and protections.”
Acting Chair Lee and the rest of the SEC Commissioners have been vocal on the importance of whistleblowers to SEC enforcement efforts. In September 2020, Acting Chair Lee stated that “[s]ince its inception, the Commission’s whistleblower program has enabled us to identify and pursue fraudulent conduct, ongoing regulatory violations, and other wrongdoing that would otherwise have gone undetected.” That same month, Commissioner Crenshaw said that whistleblowers “are a critical part of our enforcement program and allow us to cover more ground in our efforts to protect investors.”
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recouped by the government. In addition to whistleblower awards, the SEC Whistleblower Program provides anti-retaliation protections to whistleblowers, including confidentiality. However, to fully qualify for rewards and protections, whistleblowers need to know how to successfully navigate the disclosure and reward application processes.
The SEC Whistleblower Program is in the midst of a record fiscal year. Since the 2021 fiscal year began on October 1, 2020, the SEC has awarded over $176 million to 28 individuals – the largest total dollar amount awarded to whistleblowers in a fiscal year. The SEC has demonstrated it will reward whistleblowers who successfully follow protocols and submit tips through its whistleblower program.
Statement of Acting Chair Lee and Commissioners Peirce, Roisman, and Crenshaw Regarding Recent Market Volatility