Whistleblower provision opens door for increase of securities class actions

FRT Admin
Site administrator
June 23, 2011

On August 12, 2011, the final rules of the whistleblower provisions as detailed in the Dodd-Frank Act will go into effect. These provisions give the Securities and Exchange Commission (SEC) the authority to reward whistleblowers who voluntarily provide the SEC original written information about a federal securities law violation. In order to be eligible, the violation and subsequent whistleblower information must produce a disciplinary action resulting in monetary sanctions exceeding $1 million.

Whistleblower awards will be paid out of the statutorily-created Investor Protection Fund, with funds in excess of $450 million. The projected awards for whistleblowers will range from 10 to 30 percent of the monetary sanctions. This incentive will certainly encourage individuals to report securities violations. In fact, recent reports issued by the SEC indicate that there has been an increase in whistleblower tips since the Dodd-Frank Act was signed into law on July 21, 2010.

The expected result of the new provisions is an increase in the number of federal securities law investigations, ultimately leading to more civil litigation and class action cases. These provisions have also apparently created an incentive for plaintiffs’ securities class action attorneys, who are actively pursuing prospective Dodd-Frank whistleblowers with online advertisements.

More exposure and publicity of the whistleblower act will likely cause an increase in claims notices received by institutional investors. Class actions settlement claim services, like those provided by Financial Recovery Technologies (FRT), can take the pressure off those organizations.  A leading firm in the class action settlement recovery space, FRT helps institutions recover more settlement funds than they typically can recover on their own.

Contact us today to find out how Financial Recovery Technologies can ensure your firm recovers all settlement funds that it is entitled to receive.

Click here for more information about the SEC’s whistleblower program.

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