On Tuesday, March 8, 2016, in conjunction with announcing a recent $2 million whistleblower award, Sean McKessey, Chief of the Office of the Whistleblower, stated that the SEC continues to see “a significant uptick” in the number of tips submitted under the agency’s Dodd-Frank Whistleblower Program. “[W]e believe that’s attributable to increased public awareness of our program and the tens of millions of dollars we’ve paid to whistleblowers for information that helped us bring successful enforcement actions,” McKessey said. The increase in whistleblower tips continues an ongoing trend that has seen the SEC’s Whistleblower Program receive more tips each year than the year before since the program was established. According to its most recent Annual Report to Congress, between FY 2012 and FY 2015, the number of tips whistleblowers submitted to the Commission grew by more than 30%, with nearly 4,000 tips filed in FY 2015. Since its inception in 2011, the SEC’s Whistleblower Program has paid more than $57 million to whistleblowers, more than $37 million of which was awarded in FY 2015.
The SEC’s Whistleblower Program was created under the Dodd-Frank Act. Under the Program, eligible whistleblowers may receive awards ranging from 10 to 30 percent of the amount the SEC collects in a successful enforcement action, providing those collections exceed $1 million. While the SEC works to protect the identities of whistleblowers, in this instance, the SEC revealed that the three whistleblower will receive almost $2 million in return for providing valuable information in an investigation. The agency did not identify the percentage of sanctions collected that this award represents. One whistleblower who provided the information that led to the SEC’s investigation and continued to provide valuable information throughout that investigation will receive $1.8 million. Two other individuals who provided information after the SEC began its investigation will each receive approximately $65,000. The order determining the awards stated that the first whistleblower brought information to the SEC approximately 18 months before the other whistleblowers began their cooperation. That order also revealed that a fourth individual submitted a related whistleblower claim but the SEC denied that claim because that individual “knowingly and willfully made false, fictitious, or fraudulent statements and representations to the Commission over a course of several years.”
While whistleblowers continue to submit reports to the SEC Whistleblower Program at an ever-increasing rate, it remains vital for companies to ensure that they have vigorous compliance programs in place to prevent and detect potential securities violations and to respond immediately in order to mitigate penalties that may result from inadvertent violations. For further information, see our previous alerts: SEC $700K External Whistleblower Award Highlights Need for Watchful Compliance Programs and SEC Awards Maximum 30 Percent Award to Whistleblower In Its First Whistleblower Anti-Retaliation Case.
