What is Financial and Securities Fraud?

Federal agencies such as the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) oversee whistleblower programs designed to encourage individuals to report financial misconduct. These programs allow for confidential reporting and offer substantial monetary rewards to eligible whistleblowers when enforcement actions result in significant financial penalties.

In addition to these federal programs, a handful of states—including Indiana, Montana, Utah, and Washington—have implemented laws aimed at strengthening securities enforcement, though not all state programs provide financial incentives comparable to those at the federal level.

Whistleblowers who uncover tax fraud or underpayment of federal taxes may also report this misconduct to the IRS Whistleblower Program, which has returned billions of dollars to the U.S. Treasury through successful enforcement actions.

False Claims Act (FCA)

The False Claims Act applies to fraud involving government funds or contracts. Awards range from 15%–30% of government recoveries. The law also allows confidential filings and provides anti-retaliation protections.

SEC Whistleblower Program

Awards range from 10%–30% of monetary sanctions exceeding $1 million. Anonymity is permitted through attorney representation, and the program includes anti-retaliation safeguards under the Dodd-Frank Act.

CFTC Whistleblower Program

This program is similar to the SEC program but focuses on commodities, derivatives, and futures markets.

Sarbanes-Oxley Act (SOX)

The Sarbanes-Oxley Act protects employees of publicly traded companies who report corporate fraud. Remedies include reinstatement, back pay, and compensatory damages.

Individuals who report fraud or unethical behavior, and as a result of their tips, there is a successful enforcement action, become eligible for sizable financial rewards. Depending on the specific program and the type of violation, whistleblowers are eligible to collect between 10% and 30% of the total monetary sanctions imposed by the government as a result of their tips.

The SEC Whistleblower Program, for example, has awarded over $1.9 billion to more than 300 whistleblowers since its creation in 2011. The CFTC offers similar incentives for reporting fraud in the commodities and derivatives markets.

Other federal programs, including those under the False Claims Act and the IRS Whistleblower Program, provide rewards for exposing fraud involving federal funds or taxes. These programs are designed not only to compensate whistleblowers for the personal and professional risks they face but also to uncover complex fraud schemes that often remain hidden from authorities.