November 21, 2013

A Sunny Report from the SEC Whistleblower Office

By Marlene Koury

The 2013 numbers are in for the Dodd-Frank whistleblower program and they are encouraging.  The SEC released its 2013 Annual Report on the program earlier this week which revealed that tips – and rewards – have increased since 2012.   The young whistleblower program is gaining steam and if it stays on course, it will no doubt be hugely successful in the coming years, perhaps even rivaling the success of the 150-year-old False Claim Act program.

The Report shows that tipsters are flooding in with reports of potentially fraudulent conduct.  Tips went up approximately 8% in 2013, increasing from 3,001 for 2012 to 3,238 for 2013.  That amounts to roughly 9 tips a day.  The tips poured in from all fifty states, with the bulk coming from California, New York, Texas, and Florida.  Tips also originated from the outer territories of Puerto Rico, Guam, and the US Virgin Islands.  And tips from abroad were up by 25% from 2012, coming in from 55 countries, with the most originating in the UK, Canada, China, Russia and India.  As in 2012, the three most common tips involved Corporate Disclosures and Financials (17.2%), Offering Fraud (17.1%), and Manipulation (16.2%).

With the increase in tips, comes an increase in rewards.  Prior to this year, the SEC had paid out only two whistleblower rewards since the program’s inception in 2011.  That changed in 2013 with the SEC making four whistleblower awards from its investor protection fund, a war chest still bulging with nearly $440 million.  One of these awards was an eye-popping $14 million that went to a single whistleblower.  This shows that the SEC clearly recognizes the game-changing incentive fostered by large rewards.  In fact, in the SEC’s press release regarding its $14 million whistleblower payout, SEC director Mary Jo White made very clear the agency’s desire that it serve as an incentive for other whistleblowers to follow suit: “We hope an award like this encourages more individuals with information to come forward.”

With one eye towards bringing in new tipsters, the SEC is keeping another eye on protecting the ones it already has.  The Report stressed that “[t]he protection of whistleblowers from retaliation by their employers is important to the success of the Whistleblower program.” Such an outlook evidences that the SEC is serious about ensuring that whistleblowers will be protected from retaliation, particularly if they do end up with a fistful of dollars.   In that vein, the SEC has vowed to keep confidential the identity of the whistleblowers to whom it has made financial rewards.

The outlook for 2014 is good, and officials at the SEC seem confident that the nascent whistleblower program will continue to blossom.  Sean McKessy, Chief of the Whistleblower Office, recently said that office is conducting investigations that could end in “very big numbers,” and predicted “more frequent and continuous payments on a more rolling basis.”  Here’s hoping that 2014 is an even better year for the SEC whistleblower office and the whistleblowers with whom it is working to combat financial fraud.

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2 Responses to “A Sunny Report from the SEC Whistleblower Office

  1. I am a U.S. Customs whistle-blower and there was NOTHING done about the allegations I made regarding internal corruption which are still outstanding today.
    National Security interests are involved when you are talking about the U.S. Borders at Canada and Mexico.
    There has Never been an investigation and still has NOT resolved today.
    I was forced out of my career in U.S. Customs and I have received Death Threats as a result of my work.Please feel free to contact me regarding my case which has a continuing pattern of retaliation and I require a “Competent” Whistle-blower attorney or organization.