Nayeem in Fort Worth

Nayeem is a graduate student in the JD/MBA program in Dedman School of Law and Cox School of Business. He was awarded a Maguire and Irby Family Foundation Public Service Internship for summer 2013 from the Cary M. Maguire Center for Ethics and Public Responsibility at SMU. He is working as an enforcement attorney at the U.S. Securities and Exchange Commission in Fort Worth.

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Fight financial fraud: The SEC is here to help

The Dodd-Frank Wall Street Reform and Consumer Protection Act – or as I like to call it, The Game Changer.  Unless you’ve been hiding your money under your mattress for the past few years, you’ve heard of the Dodd-Frank Act.  While the name has a certain lackluster feel to it, the substance of the Act is something else completely.  The Dodd-Frank Act provides incentives, protections, and procedures for people who report information about securities-related fraud to the Securities and Exchange Commission.

That’s right… incentives, protections, and procedures for people who report fraud to the SEC.

If it reads cryptic and leaves you with a sense of “huh,” then you’re not alone.  The Act allows the SEC to actively recruit and protect Whistleblowers.  Whistleblowers are people with knowledge of corporate financial wrongdoing — and the ethical conviction and moral fortitude to bring it to light.  They provide an important public service and may even help prevent the next Enron, Bernie Madoff, or other major economic crisis.  We have learned as a nation how fraudulent financial practices can destroy hard-earned nest eggs, cheat retirees and investors, and even cause economic meltdowns like the one that triggered the Great Recession.

That is why the Act is referred to on a daily basis at the SEC.  You see it in emails, relied upon for authority in pleadings, and being spoken of at the proverbial water cooler.  Federal law recognizes that whistleblowers who expose financial misconduct provide a valuable public service – and it is for this reason that the Act provides whistleblowers with financial incentives and protection from retaliation by culpable employers.

Financial incentives that can add up to a pretty penny!

The SEC’s Investor Protection Fund, from which whistleblower rewards are paid, has been funded with $452 million.  Created in the spirit of the highly successful False Claims Act, Section 922 of Dodd-Frank entitles whistleblowers who provide the SEC with information leading to a successful enforcement action to awards of 10 to 30 percent of sanctions of $1 million or more.  So, doing the honest and ethical thing can actually prove to be quite beneficial for your future.

The Act also prohibits employers from retaliating against employee-whistleblowers and provides whistleblowers with legal recourse if their employers fire them, demote them, or otherwise make their work life difficult. They are protected from retaliation even if the employer hasn’t committed any securities law violations and/or the SEC never files a case against the employer.

Working at the SEC, I have gained a discrete look at how important Whistleblowers are to the US economy.  I’ve encountered Whistleblowers from around the globe who provide credible intel on what could be the next Madoff.  So, I felt the need to use this blog post to raise awareness.

Examples of financial wrongdoing include the following:

  • Insider trading
  • Market manipulation
  • Ponzi schemes
  • Financial reporting that violates the standards established by the Financial Accounting Standards Board
  • Violations of the Foreign Corrupt Practices Act
  • Financial scams targeting investors

Expose financial fraud. Protect the public interest. The Securities and Exchange Commission can help.

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