In 2016, the Securities and Exchange Commission (SEC) announced that it awarded over $100 million to financial fraud whistleblowers, with the largest reward being more than $30 million. In recent years, SEC enforcement actions from whistleblower tips have resulted in more than $953 million in financial remedies against perpetrators of fraud in the finance industry.
The financial whistleblower program was established by Congress to award whistleblowers with specific information about federal securities law violations. Much of the recovered money has been returned to investors, and many whistleblowers have been awarded.
Joe Lyon is a highly-rated financial fraud lawyer representing plaintiffs nationwide in a wide variety of workplace fraud claims and whistleblower settlements.
1. Whistleblowers and attorneys submit information and evidence of fraud to government
2. Government and the SEC investigate the allegations
3. Cases are filed, and penalties are ordered
4. Whistleblowers and attorneys file claims
5. Awards are determined for plaintiffs
Whistleblowers may be eligible for an award when they provide the SEC with useful information that leads to a successful enforcement action. Whistleblower settlement can range from 10 to 30 percent of the money collected when sanctions exceed $1 million.
Since the whistleblower program began in 2012, the government has received more than 14,000 whistleblower tips from individuals in all 50 states. Ohio residents have added over 200 original tips to authorities.
Of these financial industry tipsters, more than $107 million has been awarded to 33 plaintiffs. Under the law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might reveal their identity.
• In April, 2017, the Securities and Exchange Commission announced an award of nearly $4 million to a person who tipped the agency with detailed information about serious misconduct and provided additional assistance during the ensuing investigation, including industry-specific knowledge and expertise.
• In January, 2017, the SEC awarded more than $7 million to three whistleblowers who assisted the SEC prosecute an illegal investment scheme.
• In February, 2017, the U.S. Securities and Exchange Commission awarded a plaintiff 20 percent of any sanctions paid in connection with a claim brought as a result of the plaintiff’s tip.
Private placements can be attractive because they offer individual investors higher returns than stocks and bonds, but may carry serious risk. Stock brokers have been known to downplay the risks and overemphasize the benefits of adding private placements to a portfolio. There’s typically less information available and less transparency about the companies, increasing investment risk.
Sales of private placements are lucrative to brokers and brokerage firms, however, and have been a favorite instrument in stock broker and financial advisor fraud claims. Since 2013, firms selling private placements are 1.4 times more likely to have been expelled from the financial industry since than those that didn’t.
Regulators and Financial negligence attorneys are concerned this trend is growing and will lead to more individual investors and senior investors victimized by their brokers. Private placements are usually restricted to sophisticated investors, and are sometimes sold to individual investors are unique opportunities even if they do not fit with an original investment plan.
The commissions alone create a fraudulent stock broker’s motivation to sell the securities, without much thought for the financial well-being of an investor. Financial advisor fraud may include the following:
Stock brokers and securities firms feeling pressure to churn a profit are selling tens of billions of dollars a year of private stakes (private placements) in companies, including risky investments that often target seniors.
Individual investors trusting financial experts are victimized by Financial Advisor Fraud, and may pay incredible sums in fees and lose value due to irrational investment risk taken by brokers.
In a Wall Street Journal review of more than a million regulatory records, research identified over a hundred firms where 10 to 60 percent of in-house brokers had three or more investor complaints, regulatory actions, or even criminal charges.
The brokers in question sell very risky private placements or other investment vehicles that may result in the loss of huge parts of a client’s portfolio. Sales of private placements are surging, and the majority of investors are not warned of the risks or told what the investments entail.
Financial Fraud Whistleblowers are encouraged to hire an attorney to best protect them from retaliation, and to maximize the award they may be entitled to. When faced with fraud claims, employers may lash out and terminate any employee who identifies fraud. This is illegal, and whistleblower protection is critical in the process.
Whistleblowers have filed complaints and reached whistleblower settlements regarding the following:
• Shareholder Class Action
• Private Placement Fraud
• Financial Statement Fraud
• Fraud Against Seniors
• Insurance Fraud
• Identity Theft
• Investment Fraud
• Letter of Credit Fraud
• Market Manipulation (“Pump and Dump”) Fraud
• Non-Delivery of Merchandise
• Ponzi Schemes
• Prime Bank Note Fraud
• Pyramid and Ponzi Schemes
• Bond Fraud
• Reverse Mortgage Scams
The SEC Whistleblower Program was created by Congress under the Dodd-Frank Act. The financial fraud Whistleblower Program offers financial incentives for individuals who report securities violations to the SEC.
In instances where a plaintiff provides information leading to an enforcement action resulting in over $1 million, the person may receive an award in the amount of 10 to 30 percent of the sanction amount. Some factors that may increase the amount include the following:
• The significance of the evidence provided
• The assistance provided by the whistleblower
• The whistleblower’s participation in internal compliance systems
Ponzi schemes and other financial fraud vehicles often target the elderly. Regulators and financial negligence attorneys are taking measures to curb this problem.
Financial whistleblowers can receive huge rewards, and victims may be able to recover lost funds. The SEC says financial advisor fraud is unavoidable, so the goal is identify issues before too many seniors and individual investors are victimized.
The study conducted by the Wall Street Journal identified brokerage firms selling private placements and could be likely targets in in financial advisor fraud lawsuits. The SEC has also expressed concern over the elderly and retirees being taken advantage of to pad the pockets of brokers.
Investors can try to protect themselves and ask the following of their broker: How are they paid, by fees and commission or on salary? What are the incentives of selling certain financial instruments?
If you have become aware of a case of financial fraud at the workplace, it may behoove you to come forward and file a confidential complaint with the help of a financial fraud lawyer. While it may seem terrifying to blow the whistle and implicate an employer or colleague in an illegal act, it can be lucrative and the ethical decision.
Plaintiffs with information about fraud should consult an experienced attorney when considering the best way to move forward in a case to maximize their potential award. The size of potential reward is one consideration, though an equally important legal consideration is the risk of possible retaliation. An attorney can assist financial fraud whistleblowers in these important matters.
ABOUT THE LYON FIRM
Joseph Lyon has 17 years of experience representing individuals in complex litigation matters. He has represented individuals in every state against many of the largest companies in the world.
The Firm focuses on single-event civil cases and class actions involving corporate neglect & fraud, toxic exposure, product defects & recalls, medical malpractice, and invasion of privacy.
NO COST UNLESS WE WIN
The Firm offers contingency fees, advancing all costs of the litigation, and accepting the full financial risk, allowing our clients full access to the legal system while reducing the financial stress while they focus on their healthcare and financial needs.
It is wise to consult with an attorney before you file a complaint against a defendant in a Qui Tam lawsuit. A whistleblower lawyer can assist plaintiffs in filing the relevant materials in a timely manner, work to obtain the most possible compensation, and protect plaintiffs against employer retaliation.
Whistleblowers able to provide information to the government that ends in recovering lost funds can expect to be rewarded from between 15 and 30 percent of the recovered amount. The reward will depend on the type of information provided, and other legal factors.
After filing a complaint against an employer or individual, highlighting fraudulent activity, the next step is to fight for rightful compensation, and protect yourself against employer retaliation. A whistleblower attorney can help make sure this does not happen.
A qui tam action is a lawsuit confidentially filed under seal in federal district court in accordance with Ohio and Federal Civil Procedure. A copy of the whistleblower complaint, with a written disclosure statement of all material evidence and information must be filed, in camera and under seal. The complaint and its contents is kept confidential until the seal is lifted. The complaint is not served on the defendant.
The False Claims Act allows persons and employees with evidence of fraud against federal programs or contracts to sue the wrongdoer or employer on behalf of the United States government.
In whistleblower lawsuits, the government may intervene and join the legal action. If the government declines, the private plaintiff may proceed with an attorney.