Whistleblowers have a longstanding and vital role to play in detecting securities fraud. Protections for whistleblowers weakened during the Trump administration, as did efforts to incentivize reporting fraud to the U.S. Securities and Exchange Commission (SEC). The Biden administration has brought hope for revitalized protections and incentives for whistleblowers through recently updated guidance from the SEC and proposed legislation pending before Congress.
As corporate insiders, whistleblowers know where and at whom to look to expose well-hidden fraud and harmful business practices. Getting this inside perspective to regulators can kickstart entirely new investigations and drive existing investigations with new leads. For this reason, since July 2010, the SEC has maintained an Office of the Whistleblower, which "strongly encourages the public (including any whistleblowers)" to submit any tips or complaints of securities fraud.
In addition to enforcement actions, whistleblower tips have long provided invaluable behind-the-scenes information that has sparked private securities litigation. Over the past decade, multiple securities lawsuits have stemmed from whistleblower tips and complaints filed with the Whistleblower Office. These private actions provide an important source of recovery for defrauded investors and keep corporate America in check.
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