The SEC whistleblower program covers the full range of securities fraud which is, essentially, when publicly-traded companies deceive the investing public. Some types of fraud that whistleblowers can report that may lead to SEC enforcement actions include:
Financial statement fraud: This is when companies misrepresent financial information that is communicated to the public, including through press releases, reports (such as Forms 8-K, 10-Q, 10-K), and analyst conference calls.
The most common type of financial statement fraud is improper revenue recognition such as fictitious revenue reporting, revenue timing, and improperly deferred earned revenue schemes. When someone suspects or witnesses this behavior, the best course of action is to contact a financial fraud attorney right away.
Insider trading: This is when someone learns of non-public information concerning a particular company (often by a company insider) and then buys and/or sells securities based on that non-public information.
Well-known insider trading cases include those that were brought against Martha Stewart, Enron CEO Jeff Skilling, and Steve Cohen’s SAC Capital.
Market manipulation: This is when companies attempt to evade the strict rules governing securities trading by engaging in trading violations such as pump and dump schemes, front running, and spoofing and layering.
Financial Fraud Ponzi Schemes Lawyer
Ponzi schemes: Named after notorious fraudster Charles Ponzi, those perpetuating “Ponzi schemes” dupe investors into parting with their money with the promise of high returns. What usually happens is that the fraudsters simply use the new investors’ money to pay existing investors to create the illusion of a real investment. Bernie Madoff, for example, ran the largest Ponzi scheme in history, a $65 billion scam that in many ways was the impetus for the SEC Whistleblower Program.
Foreign Corrupt Practices Act Violations: The Foreign Corrupt Practices Act (FCPA) bans bribes to foreign officials to assist in obtaining or retaining business. Even an offer to make a bribe is enough to violate the FCPA.
The FCPA also requires companies who list their securities in the United States to (a) keep books and records that accurately and fairly reflect the company’s transactions and (b) maintain an adequate system of internal accounting controls.