Arrange Your Free Consultation Today | 253-753-2500

Doug Cloud Law | Attorney at Law
Doug Cloud Law | Attorney at Law

Protecting Client Interests For Over 40 Years

Washington’s New Whistleblower Award and Protection Act (RCW 21.40): Empowering Insiders to Expose Securities Fraud: A Landmark New Law Strengthening Investor Protection

In 2023, Washington State enacted a groundbreaking law, the Whistleblower Award and Protection Act (RCW 21.40) to reward and protect individuals who expose violations of state or federal securities laws.

The new statute, modeled after the U.S. Securities and Exchange Commission’s (SEC) federal whistleblower program under the Dodd-Frank Act, authorizes financial awards between 10% and 30% of sanctions collected when credible information leads to successful enforcement actions by the Washington State Department of Financial Institutions (DFI) Securities Division.

Under this law, insiders, employees, and market participants who uncover securities fraud can safely report wrongdoing to the state while preserving their anonymity through an attorney.

Washington’s program also includes robust anti-retaliation protections, allowing whistleblowers who face termination, demotion, or harassment to recover double back pay, reinstatement, and legal fees.

Any individual with credible, original information about such activities (whether from within a company, a financial institution, or a public agency) may qualify for legal protection and potential monetary recovery under this law.

Comprehensive Protections for Whistleblowers

The Whistleblower Award and Protection Act ensures that truth-tellers are legally protected and financially rewarded for exposing misconduct.

Key features include:

  • Award to whistleblowers of 10–30% of any monetary sanctions collected when information leads to enforcement action.
  • Anonymous reporting through legal counsel until the case is concluded and an award is issued.
  • Protection from retaliation under RCW 21.40.090, including the right to sue for reinstatement, double back pay, attorney’s fees, and damages.
  • Prohibition on confidentiality gag orders that prevent lawful reporting to regulators.
  • Non-waivable rights, meaning whistleblower protections cannot be signed away in employment agreements or arbitration clauses.

What Types of Securities Fraud Are Covered?

RCW 21.40 applies broadly to violations of both state and federal securities laws, including those under the Securities Act of Washington (RCW 21.20), the Securities Exchange Act of 1934, and related SEC rules. Whistleblowers may report nearly any form of misconduct that deceives investors or distorts market integrity, including:

  • Broker-dealer or investment adviser misconduct: Unsuitable recommendations, undisclosed conflicts of interest, churning, or misrepresentation of investment risks.
  • Corporate or accounting fraud: Manipulation of financial statements, revenue recognition, or false SEC filings.
  • Crypto-asset and digital token fraud: Unregistered or misleading sales of cryptocurrencies and blockchain-based securities.
  • Fraudulent investments involving real estate: Any REIT, rental or storage property company, or other real estate transaction scheme that solicits funds from investors.
  • Insider trading and market manipulation: Using non-public information for personal gain or influencing prices through deceptive trades.
  • Municipal or public-finance fraud: Misleading disclosures in bond offerings or misuse of government investment funds.
  • Ponzi and pyramid schemes: Misuse of investor funds or deceptive high-yield investment programs.
  • Private placement abuses: False statements or omissions in Reg D and private offering materials.
  • Unregistered securities offerings: Selling or promoting investments without required registration or exemptions.

Why This Law Matters: Empowering and Incentivizing Whistleblowers

This Whistleblower Award and Protection Act ensures that fraudulent actors cannot evade accountability by exploiting jurisdictional gaps between state and federal regulators.

For decades, state regulators have recovered billions for investors harmed by fraudulent schemes.

This law amplifies those efforts by enlisting insiders as essential partners in exposing misconduct.

By stepping forward, whistleblowers not only protect investors and markets, but they may also earn significant financial awards while safeguarding their professional and personal integrity, as well as their employment and income.

Speak Confidentially with a Whistleblower Attorney

If you have information about potential securities fraud, insider trading, or investment misconduct, you may be eligible for protection and a financial award under RCW 21.40.

Attorney Douglas R. Cloud represents whistleblowers in state and federal cases, including those under the Washington Whistleblower Award and Protection Act, the federal False Claims Act, and the SEC Whistleblower Program.

With decades of experience in financial and government-related investigations, Mr. Cloud helps clients safely disclose violations, preserve anonymity, and protect their rights.

Contact our law office right away for a free private consultation.

https://www.dougcloudlaw.com/contact/

Phone: 253-753-2500