Investment “Securities” Fraud

Fraud in the areas of stock, bond, commodity and derivative transactions can be complex. They encompass a wide variety of frauds, with the essential element of investors losing all or some of their money. It can involve fraud in the transactions, the financial reporting, or accounting flim-flams (e.g. Enron). Insider trading, manipulation of stock prices, falsity of financial reports, Ponzi schemes, and SEC filings are just some of the varieties of fraud. 

Securities Fraud Whistleblower Rewards 

The process for reporting fraud and the rewards for whistleblowers is different under the Dodd-Frank Wall Street Reform and Consumer Protection Act than that found under the False Claims Act. Under Dodd-Frank, whistleblowers are eligible to receive 10 to 30% of the money recouped in excess of $1 Million. 

Whistleblower Protections 

Like the False Claims Act, Dodd-Frank also provides whistleblower protections from corporate retaliation (firing, demotion, harassment, suspension), with the whistleblower being eligible for up to two times their actual lost pay and benefits, plus the right to reinstatement and payment of any legal fees and costs. 


If the whistleblower has retained a lawyer to represent him or her, they may report the fraud anonymously. It is possible that their identity may remain confidential even to the SEC or the CFTC (Commodities Futures Trading Commission), up to the time for payment of the reward. This confidentiality provision is even stronger than that under the False Claims Act or the IRS whistleblower law. 

Report Internally First? 

While the SEC rules issued on May 25, 2011 encourage internal company reporting of the fraud, they fortunately do not mandate it. Mandatory prior internal reporting was fervently sought by the large corporations, but fortunately was not written into law. Usually, a whistleblower who first reports fraud inside the company has made a mistake; all too often it leads to retaliation on the whistleblower, isolation of him or her from the evidence, and cover up or evidence destruction. It is true that under the final SEC rules a whistleblower’s percentage of the reward can be enhanced if he or she reported internally first. However, the timing of that first internal report can be crucial, and is best done after all legally available evidence has been gathered confidentially. 

Foreign Corrupt Practices Act Violations 

Bribery by corporations in foreign countries is not only too common, it is illegal. Citizen whistleblowers who provide our government with information about violations of the Foreign Corrupt Practices Act (FCPA) could be entitled to rewards from 10% to 30% of the amount recovered by the government. In recent years, the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), have become more aggressive about pursuing such foreign bribery cases. For more details about the FCPA provisions, see the SEC’s “Lay Person’s Guide” to the FCPA.

The actual FCPA statute can be found at 15 U.S.C. §78-dd1-3. For a confidential assessment and advice about a potential foreign bribery case, just contact our firm.