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New Law Provides Financial Incentives and Increased Protection for Securities Fraud Whistleblowers

On July 21, 2010, President Obama signed the Dodd-Frank Financial Reform Act into law. Within the Act is a new whistleblower provision providing that persons who voluntarily supply “original information” in Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC) enforcement actions resulting in sanctions greater than $1,000,000 are entitled to recover 10 to 30 percent of the amount recovered by the SEC or CFTC.

The new law also provides added protection for the whistleblower. A lawyer can serve as an intermediary for the whistleblower with the government. By retaining a lawyer to assist with the matter, the identity of the whistleblower can remain anonymous from the company or individuals complained of, and even from the SEC or CTFC. Further, the law creates liability when an employer discharges, demotes, suspends, threatens, harasses, directly or directly, or in any other manner, discriminates against a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower relating to the SEC or CFTC action.

In addition to the benefit of anonymity, there are many other significant benefits to having an experienced attorney represent the whistleblower. An attorney experienced in dealing with the SEC, CFTC and securities law issues can be helpful to the whistleblower in helping present the case to the regulators at the inception and helping the regulators build their case. Further, the SEC and CFTC have the sole discretion in determining the percentage of the recovery the whistleblower is entitled to receive between 10% to 30% (as long as the recovery exceeds $1,000,000). An attorney experienced in SEC or CFTC matters can help negotiate the best deal possible for the whistleblower.

Examples of reportable fraud under Dodd-Frank include:

• Manipulation of a security’s price or volume
• Fraudulent or unregistered sale of a security
• Ponzi schemes
• Insider trading
• False or misleading statements about a company or its finances
• Abusive naked short selling
• Theft or misappropriation
• Fraud involving municipal securities or public pension plans

Blum Law Group is a nationally recognized law firm dedicated to the practice of securities litigation, and has extensive experience with the laws and regulations of the SEC and CFTC. If you have information regarding securities laws violation by your current or former employer, contact Blum Law Group for a no-cost consultation.

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