A whistleblower is a person who is aware of misconduct and/or illegal activity and reports it to the correct sources, such as regulatory bodies.
Whistleblowers are an essential part of enforcement in the securities industry, such as SEC actions. Many times, whistleblowers, employees, and/or investors are the only way that regulatory agencies such as the SEC, FINRA, the DOJ, and OIG find out that any misconduct is occurring.
In considering whether to submit a tip to the SEC or FINRA, informants must consider how important anonymity is and if they need to hire a lawyer. The SEC Office of the Whistleblower is a great resource for those who do not have counsel to identify whether they have a claim and get help finding representation.
FINRA’s website also allows anonymous tips but cannot guarantee anonymity. Whereas the SEC has strict guidelines regarding anonymity but does not allow an informant to submit anonymously without counsel. In comparing the submission process, the FINRA website provides a simple medium for individuals without counsel to fill out but may require some follow-up, whereas the SEC website asks for most of the information upfront. In either case, it is always best to have a lawyer assist you, especially if you are considering a private action. You would not want to prejudice your civil case for damages.
As an investor, it is important to be active and strategic about which investment firms/companies you allow to manage your money. To be proactive in preventing the necessity of whistleblowing in the first place, one should think about the size, region, and sector of companies they interact with. Investors should look out for red flags throughout the relationship with their broker and also consider company policy, mission statement, and commitment to integrity when choosing a company to invest with. Investors should also consult knowledgeable securities law attorneys if “something doesn’t feel right” and get a free consultation from Malecki Law.