SEC Announces Record Setting Year in Report on Dodd-Frank Whistleblower Program.

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The Securities and Exchange Commission released its annual report to Congress on the Dodd-Frank whistleblower program today. We’re adding information as our SEC whistleblower lawyers digest it.

Highlights from the Fiscal Year 2014 report include:

  • Tips to the SEC were up 10% over last year.
  • 9 of 14 rewards issued by the SEC program happened in Fiscal Year 2014.
  • The SEC paid out its largest award to date, $30 million to a foreign whistleblower.
  • The Commission brought and settled its first anti-retaliation case against Paradigm for termination of a whistleblower.
  • The award to the first recipient has increased from $50,000 to over $385,000.
  • The number of individuals located outside the United States submitting tips increased by 10%.

The complete report can be accessed at: http://www.sec.gov/about/offices/owb/annual-report-2014.pdf

International Tips

Individuals living in the United Kingdom and Canada continued to send a significant number of tips to the United States. The United Kingdom was the leading location for foreign whistleblowers to the SEC in both FY2013 and FY2014. Canada sent 62 tips in FY2013 and 58 in FY2014.

Whistleblowers from India and Australia surged over the past year. Tips from India increased from 18 in FY2013 to 69 in FY2014, moving it from a tie for 5th place to 2nd place overall. India was only 1 tip behind the United Kingdom. Australia nearly doubled from 15 tips to 29, making it the country providing the 5th most tips to the SEC.

Tips from China fell approximately 40% as reports decreased from 52 in FY2013 to 32 this year. Russia also fell by 50%, decreasing from 20 to 10 reports. Russia was 4th last year and fell to 10th.

Who tips?

Only 40% of individuals reporting to the SEC whistleblower program are employees or ex-employees of the company they are reporting.  Another 20% had some affiliation with the company.  They were either contractors, consultants or discussed working for the company in some fashion.

The other 40% were customers competitors, industry leaders or had a personal connection with an insider at the corporation.

Loyalty

Corporations have frequently warned about the potential for incentives to thwart their own internal compliance efforts.  The data released reveals that is not happening.  Employees and former employees reported the securities violation initially to their employer 80% of the time.

Legal Representation

Although there is a limited sample set, the SEC did reveal some information about the recipients of rewards that was not previously available.  Interestingly, less than 50% of the successful tips were submitted with the aid of an attorney.  However, between the initial submission and the reward, some of them hired lawyers.  More than 50% had the assistance of legal counsel when they submitted their information to the Commission for the award determination.