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Typically, U.S. whistleblower statutes cover international wrongdoing including wrongdoing in India or in the know of an Indian resident as long as the errant company:
is traded on the U.S. stock exchange or through over the counter [OTC] securities in the U.S. – includes an American company with operations in India, a foreign company listed on the U.S. stock exchange with operations outside the US, or an Indian company listed on the U.S. stock exchanges; or
does business in the U.S.; or
has government contracts with the U.S. Government.
The SEC is the apex market regulator in the U.S. (SEBI is the Indian equivalent) and can enforce monetary penalties and other civil remedies through administrative proceedings or filings in court. SEC is one of the regulatory agencies to which financial malfeasance can be reported by a whistleblower under the Dodd Frank Act.
A whistleblower typically gets between 10% and 30 % reward out of the penalties recovered by the SEC in a civil action. The degree of the whistleblower’s assistance and the significance of the whistleblower’s information plays a role in determining the range of awards.
An SEC whistleblower filing is an administrative filing and not a complaint in Court. A potential whistleblower can access the tips, complaints, referral [TCR] form if they have any information about the violation of federal securities laws for example, misleading shareholders and investors about the truth or accuracy of public filings. Other kinds of misconduct that the SEC whistleblower program is looking for includes accounting fraud, insider trading, bribery of foreign government officials, other market manipulation and/or a generic failure to comply with any regulations of the SEC.
The SEC Whistleblower program is open to:
Whistleblowers can complain of wrongful conduct that has an impact on the U.S. Market even if the illegal conduct hasn’t taken place in the U.S.
The only way to file an anonymous TCR form is if the whistleblower is represented by a qualified attorney. In the absence of an attorney, the whistleblower will have to disclose their identity and cannot file an anonymous TCR form.
The SEC decides whether to act on a TCR. The SEC whistleblower program is unlike the FCA scheme because the whistleblower does not have an independent right to pursue an action against a defendant company if the SEC chooses not to act on a TCR. The SEC can get in touch with whistleblowers if it pursues a TCR. The SEC does try and maintain confidentiality of a whistleblower when publishing settlements and awards.
There is no residency or citizenship requirement under the SEC Whistleblower program. The SEC whistleblower program is focused on U.S. investors and shareholders – a nexus that cuts across entities with a variety of operations globally. A company could have zero operations in the U.S. and be traded on a U.S. stock exchange [e.g. NYSE or NASDAQ] or through over the counter [OTC] securities in the U.S. and have accounting manipulations occurring in a European country that could be in the know of an Indian manager at the Indian branch of the company and the SEC may be interested in investigating the information the Indian manager provides under the SEC Whistleblower program. Large companies that may not be listed on any U.S. stock exchange but traded through any licensed broker over the counter could still come under the SEC Whistleblower program.
While the U.S. may have created the fertile conditions for corporates and capital to flourish, it’s also as a necessary corollary been responsible for being able to track down transnational corporate corruption. The SEC has made it clear that “it makes no difference whether, for example, the claimant was a foreign national, the claimant resides overseas, the information was submitted from overseas, or the misconduct comprising the US securities law violation occurred entirely overseas.” In 2023 India was one of the top five countries that provided tips, complaints and referrals under the SEC Whistleblower programs.
No. A whistleblower can be any person, including employees from a competing business, clients of the company, third-parties, recipients of service or goods of the fraud committing company, and former or present employees of the company.
Fraud in initial public offerings
Misleading investors about value and growth, especially post-IPO tech companies.
Manipulations, misrepresentations and failure to make necessary disclosures.
Stock Price Manipulation
Insider trading
Failure to make such cybersecurity disclosures. Public companies are supposed to disclose all material cybersecurity risks and data breaches.
Private Equity Fraud and Investment Advisor Fraud
Violation of privacy and data retention policies as an intentional matter of course and failing to inform investors
Misrepresentation of any material details to the SEC or in public filings, including failing to make mandatory disclosures.
Manipulations and misrepresentations in financial statements and accounting fraud
Market manipulation: through inaccurate information in public filings or otherwise.
Improper Revenue Recognition
Fraud in Cryptocurrency market: A more detailed write-up on whistleblowers in the cryptocurrency context is available here.
Any Indian subsidiary, agent, contractor, affiliate of an SEC covered entity that manipulates its books of accounts may fall foul of the Securities regulations.
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