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SEC Received More Than 3,000 Tips in First Year of Dodd-Frank Whistleblower Program
Todd Ruger
The National Law Journal
11-16-2012
The Securities and Exchange Commission received more than 3,000 whistleblower tips during the first full year of the Dodd-Frank Whistleblower Program, which allows individuals to report anonymously and receive employment protections and monetary awards.
The tips came from all 50 states and 49 other countries, resulting in 143 enforcement judgments and orders issued during fiscal year 2012 that potentially qualify as eligible for a whistleblower award because they involved sanctions exceeding the statutory threshold of more than $1 million, according to a SEC report released November 15 [PDF].
Whistleblowers represented about 20 percent of all enforcement actions and could have earned as much as $180 million, according to calculations by Jordan Thomas, the chair of whistleblower representation at Labaton Sucharow and the former SEC assistant director who helped set up the program.
Those awards are significant to the success of the program, Thomas said. Surveys his firm conducted this year showed that one in four financial professionals said they saw wrongdoing in the workplace, and 94 percent said they would report it under the protections offered by the SEC whistleblower program.
Only 44 percent of them knew about the SEC program, however. And Thomas pointed out there was a large jump in reporting in August, the same month the SEC announced its first whistleblower payout. "Once these people become aware of the program, they're going to be reporting," Thomas said.
Other interesting tidbits: There were far more reports from California (435) than from any other state, including New York (246). The most international reports came from the United Kingdom (74).
The SEC did not have a similar program before the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law requires the SEC to publish these statistics every year.
Under the Dodd-Frank Act, the SEC can pay financial awards to whistleblowers who provide high-quality, original information about a possible securities law violation that leads to a successful SEC enforcement action with more than $1 million in monetary sanctions.
The SEC is authorized to pay the whistleblower between 10 percent and 30 percent of the sanctions collected. Awards are paid from the Investor Protection Fund established by Congress to fund payments. There is currently $453 million in the fund.
