March 28, 2023

Volume XIII, Number 87


March 27, 2023

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Whistleblowers are Essential to Monitoring COVID-19 Compliance

The Securities Exchange Commission (“SEC”), Commodity Futures Trading Commission (“CFTC”), and Internal Revenue Service (“IRS”) have issued statements making it clear that they will continue to investigate fraud related to COVID-19 compliance. The agencies’ enforcement efforts will also continue despite the changing public health conditions.

The SEC warned of risks related to insider trading and reporting violations stating that the agency wished “to emphasize the importance of maintaining market integrity and following corporate controls and procedures. For example, in these dynamic circumstances, corporate insiders are regularly learning new material nonpublic information that may hold an even greater value than under normal circumstances.” Persons with financial information that may impact the value of financial products may not use this information to gain an advantage over the average shareholder. Insider trading is a violation of securities law, and whistleblowers are well poised to report this wrongdoing.

The CFTC has warned that financial criminals may exploit the  COVID-19 crisis seeking to prey on fears and instability.  The agency encouraged individual investors to be vigilant in light of the COVID-19 crisis by researching persons selling financial products before making any purchases, and reporting any potential frauds. The CFTC’s whistleblower program requires filing complaints using a TCR form and requires the assistance of a licensed attorney to file anonymous complaints.

Similarly, the IRS warned of COVID-19 phishing scams related to relief checks issues as part of COVID-19 relief CARES Act. The agency encourages anyone targeted by scams seeking personal information or impersonating the IRS to report these frauds.

Jay Clayton, Chairman of the SEC, emphasized the importance of maintaining market stability in this time of crisis. Whistleblowers have traditionally played an essential role in maintaining markets by the nature of their unique positioning to report otherwise difficult to uncover misconduct. Whistleblowers like Dr. Li Wenliang and Capt. Brett Crozier.  A whistleblower task force for COVID-19 whistleblower matters is essential to protecting market stability and public health. There are several avenues by which whistleblowers may report COVID-19 related fraud. These avenues include the qui tam provisions of the False Claims Act to directly reporting to the SEC, CFTC, or IRS as described by the agencies and above. Whistleblowers have been and will continue to be the key to uncovering frauds at the highest level. The value of whistleblower insights is at a premium in light of the public crisis created by the international pandemic COVID-19 and the issuance of anti-fraud statements by multiple financial regulatory bodies.

Copyright Kohn, Kohn & Colapinto, LLP 2023. All Rights Reserved.National Law Review, Volume X, Number 98

About this Author

Siri Nelson Associate Attorney Kohn Kohn Colapinto Law Firm
Associate Attorney

Siri Nelson is an associate attorney and policy counsel at Kohn, Kohn Colapinto, where she specializes in SEC/CFTC whistleblower law and False Claims Act/Qui Tam rewards.

Nelson is also a professor at Northeastern University School of Law.  Nelson was the recipient of the highly prestigious and competitive Estelle S. Kohn Memorial Fellowship awarded by Northeastern University School of Law.  She graduated from Northeastern University School of Law in May 2019. Ms. Nelson graduated summa cum laude from the College of New Rochelle, School of New Resources, with a B.A. in...