SEC Has Recovered Over $1 Billion Due to Whistleblower Tips


Over the past week, the U.S. Securities and Exchange Commission has issued total rewards of over $20 million to three SEC whistleblowers. As a result, SEC enforcement actions involving whistleblowers have now recovered more than $1 billion in financial remedies against whistleblowers.

The SEC whistleblower program has been accepting tips for more than five years now and has been repeatedly acknowledged as an important tool in the government’s arsenal to detect and stop violations of federal securities laws.

In the first announcement (last week), the SEC split more than $16 million between two whistleblowers. According to the press release, the first whistleblower alerted the agency to the misconduct that became the focus of the investigation and the cornerstone of the enforcement action. The second SEC whistleblower on this matter provided significant additional information and provided ongoing cooperation that saved significant time and agency resources.

One interesting aspect of this announcement was that the second whistleblower received a similar award to the first. Although the SEC whistleblower program favors the first person to provide information to the U.S. Government, it makes clear that there is still substantial value to the Government in receiving information after the investigation has already started.

In the second announcement (two days ago), the SEC paid a former company insider more than $4.1 million for reporting a widespread, multi-year violation of the securities laws. According to the press release, the whistleblower was a foreign national working outside of the United States. The individual alerted the SEC to the fraud and provided assistance throughout the investigation.

No money has been taken or withheld from harmed investors to pay whistleblower awards. When Congress set up the whistleblower programs in the Dodd-Frank Act, it committed a certain amount of money in the budget to the payment of whistleblower awards. As a result, rewards are not paid out of the amount of funds recovered even though the amount of funds paid are expressed as a percentage of the money collected from the enforcement action.

More awards are expected. In the financial reports released about the program last month, the SEC recognized contingent liabilities of $221 million. This suggests that there are at least $200 million more in awards announcements coming.

SEC Issues Annual Whistleblower Report for 2017


The annual SEC whistleblower report to Congress for Fiscal Year 2017 has been released. It provides information and data about the activities of the SEC Whistleblower Office (referred to in the report as OWB) from October 1, 2016 to September 30, 2017. Over the year period, the SEC received over 4,400 whistleblower tips during Fiscal Year 2017 and paid out awards totaling nearly $50 million. The SEC also brought a number of enforcement actions to address companies that unlawful retaliated against or impeded whistleblowers.

The SEC has now paid our approximately $160 million to 46 whistleblowers since the Dodd-Frank Act created the SEC whistleblower program. Three of the top four awards were announced in 2016 and two of the top 10 awards were announced in 2017. All three awards from FY2017 that were on the top 10 list involved the protection of investor funds.

As has been the case in several other reports, the annual report provided select anonymized data about the successful whistleblowers. Here is some of the data that we found interesting:

  • Two-thirds of them provided the impetus for the SEC to open the investigation. One-third of the paid whistleblowers assisted with an already-existing investigation.
  • About 62 percent of award recipients were current or former insiders of the entity they reported. Other types of insiders such as consultants or close affiliates, industry professionals, harmed or prospective investors, and other outsiders made up the rest.
  • Of the current or former employees, almost 83 percent raised their concerns internally to their supervisors, compliance personnel, through internal reporting mechanisms, or understood that one or more of these individuals were already aware of the information before they reported to the SEC.
  • The majority of individuals were represented by legal counsel at the time they initially submitted their tips to the SEC.
  • In cases resulting in awards, individuals represented 47% of the defendants, unregistered entities and companies 25%, and registered entities such as broker-dealers, investment advisors and other registered market participants were 28% of defendants
  • Nine recipients were foreign nationals or residents of foreign countries when they submitted tips.

The SEC also provided a chart of the percentage of primary securities violations in covered actions assisted by whistleblowers. Here is a summary of the chart:

Misrepresentations/omission violations: 28%
Corporate/issuer disclosure (i.e., FCPA, accounting and offering document issues): 22%
Offering fraud (including Ponzi and pyramid schemes): 22%
Trading violations (including insider trading): 11%
Sales and advisory practices violations: 8%
Other (including operational, registration and fees/markups/commissions violations): 9%

Breakdown of Whistleblower Tips Submitted in FY2017

We can also take a look at the division of tips going into the SEC according to the whistleblower’s own characterization of the violation type:

Corporate Disclosures and Financials: 954
Offering Fraud: 758
Manipulation: 468
Trading and Pricing: 271
Insider Trading: 231
FCPA: 210
Unregistered Offerings: 144
Market Event: 125
Municipal Securities and Public Pension: 67

Breakdown of International Tips

The SEC received tips in FY 2017 from individuals in 72 foreign countries. The top five countries outside of the United States for tips were:

United Kingdom: 84
Canada: 73
Australia: 48
China: 39
Mexico and Russia: 26 (tied)

Tips by State

The leading states for tips within America were:

California: 500
New York: 438
Texas: 250
Florida: 229
New Jersey: 175

The Chief’s Annual Message

The message from Jane Norberg, chief of the Office of the Whistleblower, at the beginning of the report specifically mentioned the “critical role of whistleblowers” in protecting investors. Since its inception, whistleblower tips have helped recover $671 million in disgorgement, the majority of which has or is scheduled to be returned to harmed investors. The focus on this role continues the message sent by the Enforcement Division last week in its report that protecting retail investors was a top priority of the securities regulator.

The other key aspect of Norberg’s message was Rule 21F-17 and the SEC’s enforcement of the whistleblower protections. We have written about these SEC regulation here before. Rule 21F-17 prohibits impeding communications between the SEC and whistleblowers. During the last fiscal year, the SEC brought a number of enforcement actions against corporations for efforts to uncover the identity of whistleblowers or restrictive language in severance and separation agreements. The SEC also independently brought an enforcement action for terminating an employee in violation of the Dodd-Frank whistleblower anti-retaliation provisions. Norberg said that reviewing allegations of violations of these laws would “continue to be a focus … in the upcoming fiscal year to ensure that whistleblowers can free report information … without fear of reprisal.”

The other area that was mentioned was the office’s hotline. Since the whistleblower hotline was established at the SEC, the OWB has returned over 18,600 calls from the public. In the last fiscal year, it returned nearly 3,200 calls, an increase over FY2016. We have found this to be a very helpful service that the SEC provides for whistleblowers and their attorneys.

The report also discusses the efforts of the Whistleblower Office on behalf of whistleblowers in federal court cases involving anti-retaliation provisions. It specifically mentions the U.S. amicus curiae brief filed in the Supreme Court in Digital Realty Trust, Inc. v. Somers, which is to be heard by the Court at the end of this month. Somers provides the Court the opportunity to hold that a whistleblower is protected by the Dodd-Frank anti-retaliation provisions even if they only reported internally to a manager or supervisor rather than file a Form TCR with the SEC.

The 2017 annual report is the second issued by Jane Norberg after she succeeded Sean McKessy. It marked the first full year of her leadership at the OWB. McKessy announced that he was leaving the SEC Office of the Whistleblower in July 2016.


The SEC also released its financial report recognizing a contingent liability of $221 million for the year ending on Sept. 30, 2017.  This means that the SEC expects that additional whistleblower awards are probable in that amount.  The awards have not been announced yet and there is no indication at what stage the SEC will recognize a future payout as a contingent liability.

Our Offer

As always, our attorneys are available for a free, confidential initial consultation with potential SEC whistleblowers.  Please call 1-800-590-4116 to speak to an SEC whistleblower attorney at McEldrew Young.

Australia Joint Committee Recommends More Whistleblower Protections


Australia appears to have moved one step closer to adopting whistleblower rewards and additional retaliation protections with a report last month by the Parliamentary Joint Committee on Corporations and Financial Services. The report’s main recommendation is for Australia to establish a Whistleblower Protection Authority to support whistleblowers, prioritize the handling of whistleblower tips and investigate instances of retaliation.

The report also recommends that the whistleblower protection body, or law enforcement agencies have the absolute discretion to issue a reward within a legislated range. The Joint Committee aimed to address some of the criticism leveled against such a bounty system by supporting a cap on the ultimate size of the reward that can be paid.

On the issue of anti-retaliation protections, the Joint Committee considered there to be a strong case for extending the protections in the Fair Work (Registered Organisations) Act 2009 (“FWRO Act”) to other public and private whistleblowers. There was noted significant inconsistencies in the level of protections offered, and substantial weakness. The witnesses interviewed

The Joint Committee also examined the benefits and drawbacks of anonymous whistleblowing. The Committee concluded that the weight of evidence strongly favors allowing and protecting anonymous disclosures from the private sector. It recommended that features (sections 20 and 21) of the Public Interest Disclosure Act 2013 be unified across public and private sector whistleblowing, including making it an offense to disclose identifying information of the discloser or failing to protect the discloser’s identity in court.

Australia has been looking at reforming its whistleblower laws for some time now. Over the summer, Financial Services Minister Kelly O’Dwyer said that the Australia Government plans to introduce a bill this year to improve whistleblower protections and is considering a US-style reward system.

The Joint Committee report which was issued in September 2017 can be downloaded online via the link here.

WSJ Reports Ontario Securities Whistleblower Tips Against Major Private Equity Firm


Since the Ontario Securities Commission opened its whistleblower program to tips, at least four individuals have filed complaints against one of Canada’s largest private equity firms according to the Wall Street Journal. Officials at the Ontario Securities Commission and a unit of the Toronto Police Service have inquired about the matter with the multi-billion dollar investment firm at issue.

Last fall, only a few months after launching the program in July, the head of the Ontario Securities Commission said that there had been more than 30 tips detailing securities law violations and that some of them involved serious offenses or potential offenses in areas that the agency would never otherwise be able to find. One express target of the program is misstatements in accounting and disclosure violations. The potential reward for reporting securities law violations that result in total monetary sanctions of over $1 million

The OSC has been accepting whistleblower tips for just over a year now. Based on the history of the SEC program, it is still far too early to expect them to have announced a payout. If they follow the lead of the SEC, they may put out a report of the number of tips acquired through the program in its first year.

This would be an interesting statistic to see and contrast against British whistleblowers, which have been reporting to the Financial Services Authority in the United Kingdom in declining numbers. The FSA has twice declined to offer banking whistleblowers monetary rewards, opting instead for regulations that aim to protect against retaliation, such as the requirement of an internal whistleblower champion within companies.

The WSJ article details a bit about the methodology of the program in Canada. Ontario regulators send tips warranting review to the program’s inquiries team to conduct interviews research before deciding whether to formally open an investigation. Many of the complaints are dismissed without any further inquiry.

The investment firm denied any wrongdoing in a statement released after the WSJ article was published.

Without Whistleblower Rewards, British Tips Decline


A report earlier this month by the Financial Conduct Authority detailed the declining number of whistleblower tips reported to the British authorities. From 2014-15 to 2016-17, the number of reports has declined each year, resulting in just 900 cases in the last year. In 2014-15, the FCA had 1,340 whistleblower reports.

A spokesman for the FCA indicated that they believe that whistleblowers are more aware of internal reporting mechanisms and are taking advantage of them. However, this system has received negative press this year due to the efforts of Barclays chief executive Jes Staley to learn the identity of an anonymous whistleblower.

The British regulators adopted measures in 2014 to require each firm to appoint a “whistleblower champion” and prohibited retaliation against employees that skip the internal reporting mechanisms in favor of reporting directly to the FCA. However, it rejected financial incentives for whistleblowers after studying the SEC program.

In May, the UK confirmed that overseas lenders that have a British Branch must inform their UK-based staff that they can whistleblow in confidence to the FCA or the Bank of England’s Prudential Regulation Authority. It extended the program to non-executive directors at lenders and insurers, while planning to roll out the regime to the entire financial-services industry.  The FCA again failed to institute rewards despites suggestions to do so during the comment period.

The FCA has made various efforts to better respond to whistleblowing over the past few years. It held an internal whistleblowing event in May 2016, has networked with other bodies to benchmark their own performance, and increased training for staff on how to handle whistleblowing.

The declining numbers stand in stark contrast to the success of the SEC and CFTC whistleblower programs, which have seen increasing numbers of tips about misconduct. The SEC and CFTC Directors recently touted the success of those programs. The SEC program, for example, has helped recover more than $1 billion since the passage of the Dodd-Frank Act by Congress.

International Whistleblower Rewards See Boost

nigeria country on map

We are seeing more movement on the payment of whistleblower rewards internationally. Nigeria and Korea have been paying rewards recently and Australia continues to consider stronger retaliation protections and monetary incentives. This is in addition to the Ontario Securities Commission’s implementation of a program to reward tips about securities fraud last year.

Here is a brief overview of the news coming to us from these countries:


Nigeria began offering monetary incentives of up to 5 percent for whistleblowers who report fraud in the public or private sector. According to recent news reports, the program has recovered $177 million in state funds in the first two months.

The government measure is an interim provision while it passes formal legislation on the matter. The goal was to assist the government in rooting out corruption. The Minister of Information and Culture in Nigeria told the press that this was just the tip of the iceberg.


South Korea law has authorized rewards to antitrust whistleblowers for over a decade. The KFTC reported in January that the government paid out approximately $735,000 (USD) to whistleblowers. For the past two years, Korea has paid out the entire amount it budgeted to whistleblowers.

Nevertheless, Korea continues to struggle with the protection of whistleblowers. A survey by the Horuragi Foundation of 42 whistleblowers found that 60 percent were fired after whistleblowing, according to the New York Times.


Australia has been considering monetary incentives and retaliation protections for some time. The media recently reported about submissions by several organizations to the government in favor of changes to the government’s handling of whistleblowers. While Australia may ultimately take a conservative approach similar to Britain, the extensive debate in the country over possible rewards suggests that the Australian government is giving it serious consideration.

FCPA Enforcement in 2017

Businessman with briefcase

The end of the Obama Administration was one of the busiest in the resolution of government investigations ever. The SEC and DOJ wrapped up nine Foreign Corrupt Practice Act investigations in the course of two months. The enforcement actions involved:

  • Odebrecht and Braskem: $3.5 billion (US, Brazil and Switzerland)
  • Rolls Royce: $800 million (US, UK and Brazil)
  • Teva: $519 million
  • General Cable: $82 million
  • Biomet: $30 million
  • SQM: $15 million
  • Mondelez: $13 million
  • Orthofix: $7.4 million
  • Las Vegas Sands: $6.96 million

It was a big part of a busy time in government enforcement. Overall, companies agreed to pay around $20 billion to resolve possible enforcement actions involving a broad range of violations from mortgage fraud to automobile manufacturing issues.

There has been a great deal of speculation whether the Obama Adminstration’s enforcement record would continue into the Trump Administration, particularly regarding FCPA enforcement under President Trump. In 2012, Trump declared the FCPA an outrageous law that criminalized activity beyond our borders. President Trump has nominated Jay Clayton to head the Securities and Exchange Commission. A few years ago, Clayton led a paper that criticized the DOJ and SEC for overaggressive enforcement of the law.

Nevertheless, there are reasons to believe that the government will continue to investigate and prosecute FCPA cases. First, Attorney General Nominee Jeff Sessions was asked directly whether in light of President Trump’s comments he would enforce the FCPA, and he indicated he would (with a few caveats).

Second, authorship of a paper while in private practice is not necessarily reflective of the positions that an attorney will set forth while in government office. For example, Andrew Weissmann, the Chief of the DOJ’s Fraud Section, co-authored a white paper for the U.S. Chamber of Commerce protesting overzealous FCPA enforcement in 2010 before entering government service. Yet, no one can look back on his period of government service and question the strength of FCPA enforcement.

President Trump and the Republican Party have a long list of priorities while in office, including replacing Obamacare and repealing portions of Dodd-Frank. While weakening the FCPA would follow through on the promise to get government out of the way of business, it is also in philosophical opposition to his mantra of cleaning up the swamp in Washington D.C. Will he truly be able to reconcile the

We are holding off judgment until we have more information, but it is definitely a subject of relevance to potential FCPA whistleblowers. If you are an individual with evidence of bribery by a business, we strongly urge you to consult with an attorney before internal or external reporting. To speak to one of our whistleblower attorneys, call 1-800-590-4116.

Bribery News: Embraer Moves Toward Settlement; Rolls Royce Investigation Expands


Summer may be a slow time on the stock market but we’re getting a steady stream of bribery news with just two months left in the government’s fiscal year. On the FCPA front: Embraer announced that it has reserved $200 million for a settlement under the U.S. Foreign Corrupt Practices Act. Internationally: Germany and the U.K. have expanded their investigations into bribery allegations involving Rolls Royce.

Embraer and Brazil

Embraer, a Brazilian aircraft manufacturer, has been under investigation by the SEC and DOJ over payments to a Dominican Republic official for around 5 years now. Brazil charged eight employees of the company criminally in 2014 – one of the first efforts of the country to prosecute its citizens for bribery abroad. The announcement it reserved $200 million came in its financial disclosures to investors required by the SEC as part of its registration to trade on the New York Stock Exchange.

Brazil has been mired in corruption scandals for the past few years, with a federal court in Brazil accepting obstruction of justice charges against the country’s former President Luiz Inacio Lula da Silva with regard to the investigation into Petrobras.

Rolls Royce

In news outside of the US and Brazil: Germany and the United Kingdom have both extended their investigations into bribery at Rolls-Royce. Rolls Royce has been under investigation for alleged bribery in China and Indonesia.

In May, U.K. broadened the investigation by the Serious Fraud Office to include the company’s former operations in Nigeria, according to media reports. Now, Germany is investigating the company’s actions in seven Asian countries. Rolls Royce previously paid a fine to South Korea over bribery by MTU Friedrichshafen to sell defense products.

Rolls Royce was the second-largest manufacturer of airplane engines in 2013. it also manufacturers automobiles; engines for ships, rail and defense vehicles; and drive systems for the oil and gas industry.

To speak to one of our SEC whistleblower attorneys about reporting a violation of the FCPA, please call 1-800-590-4116.

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International Support for Whistleblowers Growing


Governments across the world continue to recognize the importance of whistleblowers with agencies in Germany and Canada opening up whistleblower programs to collect information about violations of their laws. Australia has extended its consideration of whistleblower rewards to include international tax avoidance, which it is studying. And Ontario Canada’s program to reward whistleblowers for information concerning securities violations will soon launch.

BaFin, the German financial regulator, will open an office for corporate whistleblowers on Monday. The office will offer anonymous reporting as well as follow special protocols to ensure the confidentiality of identities provided is maintained. There was no mention of rewards in the Reuters article.

Montreal’s securities regulator, known as AMF, also launched its whistleblower program two weeks ago. AMF regulates conduct on the Montreal Exchange, which offers trading in derivatives such as futures and equity options. Although AMF will offer immunity from civil suits related to the reporting of wrongdoing, the securities regulator declined to authorize whistleblower rewards. In a statement, the agency said that their analysis indicated the key component to encourage whistleblowers were the protections offered rather than the monetary awards.

We’re also less than two weeks away from the launch of the Ontario Securities Commission whistleblower program. This Canadian whistleblower program for providing insider information about accounting fraud, market manipulation and insider trading will pay up to a maximum of $5 million.

The maximum reward for information is $1.5 million unless the regulator collects at least $10 million in sanctions. If this threshold is met, the individual is eligible for between 5 and 15 percent of the sanctions collected up to the maximum ($5 million)

Unlike the United States, securities regulation is generally regulated regionally in Canada. The OSC oversees trading on the Toronto Stock Exchange, which is the eight largest exchange in the world by market capitalization.

Canada has been one of the largest sources of whistleblower tips to the U.S. Securities and Exchange Commission’s whistleblower program from outside the 50 states. The SEC program was created by the Dodd-Frank Act and offers rewards of between 10 and 30 percent to eligible individuals providing information that results in monetary sanctions of more than $1 million.

Other countries have also been considering adding rewards. In February, the Australian Financial Review published an article indicating that Australia was considering rewards for tax whistleblowers similar to the IRS whistleblower program. The Australia program is expected to be aimed at international tax avoidance.

We’re approaching Independence Day here in the United States so our office will be closed shortly for the holiday weekend. We wish everyone a Happy and Safe July Fourth!

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International Whistleblower Protections Growing But Still Fall Short


Whistleblower protection is gaining traction in many nations but “much remains to be done” according to an OECD report published last month titled “Committing to Effective Whistleblower Protection”. For individuals reporting corporate misconduct such as bribery, this is especially true as whistleblower protection in the private sector is still “almost a legal vacuum”.

The report is largely provided in the context of the reporting of foreign bribery (through mechanisms such as the Foreign Corrupt Practices Act) because of the OCED’s work on the Anti-Bribery Convention and its implementation by the OECD Working Group on Bribery.

As much as we may find particular areas of protections here in the United States lacking, we are still proud that our country is considered a leader in anti-retaliation protection measures.

Public Sector Whistleblowing

Our emphasis here at McEldrew Young is rarely on “public sector” whistleblowers (by this we mean individuals working for the government), but it was heartening to note from the report that most OECD countries responding to a 2014 OECD survey offered some protection for public sector whistleblowers. There is also an “emerging consensus on the need for protection” according to the report with numerous multilateral anti-corruption treaties calling for protection of individuals reporting in good faith suspected acts of corruption.

Yet, even in an area where there has been improvement, it continues to occur on an “ad hoc basis”. We need to look no farther than here in the United States, one of the established leaders in this field, to see that there is still more to do over the next few years both in refining the scope of protections and changing attitudes so that the protections are less necessary.

For those interested in the public sector, it is a particular emphasis of this report. It provides case studies of how the whistleblower protections work for public sector employees in Belgium, Canada, Chile, Ireland, Switzerland and the United States of America.

Private Sector Whistleblowing

Private sector protections for bribery whistleblowers have fallen short in many countries, according to the OECD Report. Of the 41 Parties to the Anti-Bribery Convention, only 14 have adopted satisfactorily the 2009 Anti-Bribery Recommendations for whistleblower protections.

Issues with protecting whistleblowers may explain the low internal and external reporting of corruption problems.  Only 2% of foreign bribery cases are brought to the attention of law enforcement by whistleblowers. A higher percentage of self-reporting companies first learn about the foreign bribery through whistleblowers, with 17% receiving an internal report, but that still falls short in comparison to the amount discovered through an internal audit or M&A due diligence.

Although we would expect employees on the ground to be an important line of defense against corruption, those numbers seem shockingly low.  We will have to wait to see if these numbers are ultimately impacted by the authorization of rewards for FCPA whistleblowers through the Dodd-Frank Act and SEC whistleblower program.

The OECD report also noted the need for protection of both internal and external reporting by individuals of an organization.
The 2015 OECD Survey on Business Integrity and Corporate Governance exposed a big problem for internal compliance programs relying on internal reporting: 86% of corporations have a mechanism to report corporate misconduct but over one-third of these businesses lack a policy protecting whistleblowers or the surveyed employee was unaware that a policy existed.

We have seen the importance of internal whistleblower protections play out here in the courts through the Dodd-Frank Act, with the Securities and Exchange Commission steadfastly arguing in favor of anti-retaliation protections for internal reporters as a necessary keystone to encourage external reporting. Hopefully, as retaliation protections and awareness increase internationally, the percentage of both insider and external reports will grow.

The United States has been at the forefront of both authorizing financial rewards for whistleblowers as well as anti-retaliation protections over the past decade.  We are hopeful that other countries will adopt additional protections over the next few years, as they begin to recognize the important role external tips can play in law enforcement actions and unmasking corporate wrongdoing.  It is still too early to say how that movement will play out, but it is encouraging to see reports such as this one that details international players thinking about the importance of these issues.

For the report, click here.

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