SEC Issues 2016 Whistleblower Report, Has Issued $111 Million in Whistleblower Awards to Date

Written December 2, 2016 by Matthew Melamed

On November 15, 2016, the U.S. Securities and Exchange Commission (“SEC”) issued its 2016 Annual Report to Congress on the Dodd-Frank Whistleblower Program.  According to Jane Norberg, Chief of the SEC Office of the Whistleblower, “Fiscal Year (FY) 2016 was historic for the SEC’s whistleblower program,” including surpassing the $100 million mark in awards issued since the program started.  Norberg continued: “Because of the key features of the whistleblower program – protecting the confidentiality of individuals who report through the program, taking action against employers who retaliate against or interfere with their employees’ ability to report wrongdoing to the agency, and awarding whistleblowers whose information leads to successful enforcement actions – we expect that the Commission will continue to receive high-quality tips that can be leveraged to detect and halt fraud earlier and more effectively.”

4,200 Tips, $57 Million Awarded in 2016During FY 2016 alone, the SEC received more than 4,200 tips and awarded more than $57 million to 13 whistleblowers, including 6 of the 10 highest awards ever issued under the program.  Each of the whistleblower awards resulted from information the SEC did not previously know, and which led to the opening of an investigation or significantly contributed to a successful enforcement action.

Enforcement Actions to Protect Whistleblowers.  The SEC also reported “significant and ground-breaking enforcement activity on the whistleblower protection front,” including the first stand-alone case brought against a company that fired a whistleblower after he reported questionable financial statements to senior management and the SEC.  The enforcement action resulted in a $500,000 penalty against the company.  The SEC also brought numerous enforcement actions against companies for entering into separation or severance agreements that sought to impede former employees from communicating voluntarily with the SEC.  These actions demonstrate the SEC’s commitment to protecting whistleblowers.  As Chief Norberg explained: “Assessing confidentiality, severance, and other kinds of agreements that may stifle a would-be whistleblower from reporting his or her information to the agency and that strip away the very incentives Congress intended for the program will continue to be a top priority for the SEC’s Office of the Whistleblower . . . .”

Claims Leading to Awards.  Though the SEC is prohibited from disclosing any information that reasonably could be expected to reveal the identity of a whistleblower, the Report discloses that 65% of award recipients were current or former insiders at the company on which they reported information of wrongdoing.  The remaining award recipients were either investors who had been victimized by the fraud, professionals working in the same or a related industry, or individuals who had a personal relationship with the wrongdoer.  The Report also provides that awards have resulted from complaints about financial services firms (including broker-dealers and investment advisers), Ponzi-schemes, false or misleading offering memoranda or marketing materials, accounting irregularities, and internal controls violations, among others.

Worldwide Whistleblowing.  Whistleblower tips were filed by citizens of every U.S. state and more than 60 foreign countries (including citizens of every continent but Antarctica) during 2016.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

SEC Issues $4 Million Whistleblower Award

Written September 23, 2016 by Janine Arno

On September 20, 2016, the Securities and Exchange Commission (SEC) announced an award of more than $4 million to a whistleblower whose original information alerted the agency to a fraud.   The SEC’s Whistleblower Program has awarded more than $111 million to 34 whistleblowers since its inception in 2011.   SEC enforcement actions from whistleblower tips have resulted in more than $500 million in financial remedies.

“Our program continues to incentivize whistleblowers to come forward with solid information that helps us bring violators to justice before more wrongdoing can occur,” said Jane Norberg, Acting Chief of the SEC’s Office of the Whistleblower.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  The SEC also provide provisions to safeguard whistleblowers from retaliation.

Whistleblowers who voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action may be eligible for an award.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

SEC Awards Whistleblower More Than $700,000 for Detailed Analysis

Written January 19, 2016 by Janine Arno

The Securities and Exchange Commission (SEC) has awarded a whistleblower more than $700,000 to a company outsider who conducted a detailed analysis that led to a successful SEC enforcement action.

“The voluntary submission of high-quality analysis by industry experts can be every bit as valuable as first-hand knowledge of wrongdoing by company insiders,” said Andrew Ceresney, Director of the SEC’s Enforcement Division.  “We will continue to leverage all forms of information and analysis we receive from whistleblowers to help better detect and prosecute federal securities law violations.”

Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award demonstrates the Commission’s commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency.  We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.”

The SEC’s whistleblower program has paid more than $55 million to 23 whistleblowers since the program’s inception in 2011.  Whistleblowers who voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action may be eligible for an award.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  The law also includes provisions to protect the anonymity of the whistleblower if represented by counsel, and provisions to safeguard whistleblowers from retaliation.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

SEC Awards Former Corporate Officer $500,000 Whistleblower Claim

Written March 4, 2015 by Robert Lu

The U.S. Securities and Exchange Commission, on Monday, March 2, 2015, awarded a former company officer approximately half a million dollars for reporting securities-law violations in a rare public case of a high-level staffer getting an outside bounty after raising concerns internally.

The unnamed tipster will get between $475,000 and $575,000 for giving the SEC information on an unspecified securities fraud that led to an enforcement action by the SEC.   (The SEC is required by law to protect the confidentiality of whistleblowers. The agency does not disclose information that might reveal a whistleblower’s identity.)

The SEC said that the former officer discovered the fraud either through the company’s internal “processes for identifying, reporting, and addressing possible violations of law” or because another employee told him or her about it.  Normally, this would disqualify a person from the SEC whistleblower program.  In this instance, however, the officer fell into an exception provided by the agency’s whistleblower rules because he or she reported the potential wrongdoing internally at least 120 days before reporting it to the SEC.

The SEC has now made 15 whistleblowers awards since the program started three years ago.  Payouts have totaled nearly $50 million. The money comes from an investor protection fund financed through financial sanctions collected by the SEC.  Whistleblower awards can range from 10% to 30% of the money collected in a case.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

 

Why 2015 Could Be Huge For Whistleblowers: Predictions and Perspectives

Written January 26, 2015 by Robert Lu

Unquestionably, 2014 was a banner year for whistleblowers on many fronts. The U.S. Securities and Exchange Commission (“SEC”), under the penumbra of the relatively new Dodd-Frank Act, started to sharpen its focus on corporate whistleblowing, as evidenced by the record payout in September 2014 of more than $30 million to a whistleblower who had helped alert the SEC to what it described as an ongoing fraud. And not to be outdone, the U.S. Justice Department recovered nearly $6 billion from False Claims Act cases in fiscal year 2014. According to the Justice Department, this was the first time the government’s annual recovery exceeded $5 billion, and for the second consecutive year there were over 700 whistleblower lawsuits filed.  These trends will likely continue going forward as both the SEC and the Justice Department have increased resources for fighting and ferreting fraud. Continue reading

SEC Issues Annual Report on Dodd-Frank Whistleblower Program for Fiscal Year 2013

Written November 20, 2013 by Janine Arno

The second Annual Report on the Dodd-Frank Whistleblower Program shows that the SEC received 3,328 tips, complaints and referrals across the country and abroad in fiscal year 2013 (up 8% from 2012 where 3,001 in tips, complaints and referrals were received).  The most common complaint categories reported by whistleblowers in 2013 were Corporate Disclosures and Financials (17.2 percent), Offering Fraud (17.1 percent), and Market Manipulation (16.2 percent).   The whistleblower submissions were received from 55 foreign countries, with the United Kingdom leading in submissions for the most tips outside of the United States.

During fiscal year 2013, the SEC made nearly $15 million in award payments to whistleblowers under the SEC’s whistleblower program.    Since the inception of the SEC’s whistleblower program in August 2011, the SEC has granted awards to six whistleblowers and assures more awards are coming and at a faster pace.

The SEC Whistleblower Program provides for mandatory rewards to individuals who offer original information to the SEC that leads to an SEC enforcement action resulting in sanctions of more than $1 million.  The award size to whistleblowers ranges from 10 to 30 percent of the amount collected by the SEC (and in related actions). The law also includes provisions to protect the anonymity of the whistleblower if represented by counsel, and provisions to safeguard whistleblowers from retaliation.

Supreme Court Considers Whistleblower Protections Under Sarbanes-Oxley Act

Written November 12, 2013 by Robert Lu

On Tuesday, November 12, 2013, the U.S. Supreme Court revisited the Enron Corp. collapse as the nine justices debated the scope of whistleblower protections in a key provision of the Sarbanes-Oxley Act, which was passed in 2002 in response to the Enron accounting scandal fraud that led to the company’s failure a year earlier.

The provision at issue at the Supreme Court protects people who expose the kind of corporate misdeeds that arose at Enron. But there is a dispute over whether that protection under the Sarbanes-Oxley Act covers only employees of publicly traded companies or also applies to contractors hired by the companies. The dispute pits business groups against President Barack Obama’s administration, which is seeking a broad interpretation of the whistleblower provision.

At oral argument on Tuesday, Justice Department lawyer, Nicole Saharsky, arguing on behalf of the administration, said that “[t]he statute protects an employee of a contractor from retaliation. That’s what the text says. That’s what Congress intended to cover, these accountants, lawyers and outside auditors who were so central to the fall of Enron.”

A decision by the Supreme Court is expected by spring 2014.

The case is Lawson v FMR, 12-3.  A copy of the transcript can be accessed here.

SEC Rewards Whistleblower With $150,000 Payout

Written October 31, 2013 by Robert Lu

The Securities and Exchange Commission on October 30, 2013, announced an award of more than $150,000 to a whistleblower whose tips helped the agency stop a scheme that was defrauding investors.

The whistleblower, who did not wish to be identified, provided significant information that allowed the SEC to quickly open an investigation and obtain emergency relief before additional investors were harmed. By law under the Dodd-Frank Act, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal an identity.  The SEC said the award amount represented 30 percent of the money collected by the SEC in the successful enforcement action, the maximum permitted under the law.

This is the sixth whistleblower to be awarded through the SEC’s whistleblower program since it began two years ago.

The largest award was announced earlier this month when a whistleblower was awarded more than $14 million.