The SEC Dodd-Frank Whistleblower Program

Speaking of whistleblowers, the Securities and Exchange Commission just published its annual report to Congress on its own program that it launched in 2011.

And overall, it seems to be on the upswing.

The SEC’s program authorizes monetary awards for volunteering original information that results in a successful enforcement action, including sanctions that exceed $1 million. It doesn’t matter whether you help open a successful investigation or close an existing one more efficiently or favorably.

If you fit the bill, you get ten to thirty percent of whatever the agency collects, and the percentage will vary with the facts and circumstances of the case. Factors that can raise your percentage include the value of your information, the overall assistance you provide, the public interests at stake, and whether you tried to report the matter internally (and suffered retaliation for it) before going to the government. Factors that can lower your percentage include your own unclean hands, if any, whether you delayed unreasonably in reporting the matter, and whether you interfered with your company’s internal compliance program (if any).

According to the report, since 2011, the Commission has paid over $54 million to 22 whistleblowers, and in the last fiscal year alone, it paid over $37 million to eight of them. One received over $30 million and another received over $3 million.

Who are they? According to the agency, about half are current or former employees of the companies they blow the whistle on. Others include ticked-off investors, industry peers, or personal contacts of the person or company in question. They hail from all fifty states as well as other countries, but most come from California, New York, New Jersey, Florida, and Texas. Many submit their information anonymously through counsel.

What do they report on? It runs the gamut, but often, they report on misstated corporate disclosures and financials; fraud in connection with securities offerings; price manipulation; insider trading; unregistered offerings; or violations of the Foreign Corrupt Practices Act.

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