Recently, Sean McKessy, chief of the United States Securities and Exchange Commission (“SEC”) Office of the Whistleblower, reported on the increase in whistleblower tips that have come rolling into his newly created department. The SEC began monitoring these tips eight months ago when the final provisions of the Dodd-Frank Act enacted the whistleblower provisions in Section 21F of the Securities Exchange Act. Section 21F of the Exchange Act directs the SEC to make monetary awards to whistleblowers that voluntarily provide original information that leads to successful enforcement action resulting in the imposition of monetary sanctions exceeding $1,000,000. Qualifying whistleblowers can reap between 10 percent and 30 percent of the monetary sanctions.
Prior figures released in the SEC’s 2011 Annual Report on the Whistleblower Program in November 2011 only captured seven weeks of data. In that brief period, the SEC received 334 tips: the most common complaint categories were market manipulation (16.2%), offering fraud (15.6%), and corporate disclosures and financial statements (15.3%). Ten percent of these tips originated from foreign countries. According to McKessy, new figures show that the SEC has received over 2,000 tips which is more than a 50% increase in the number of tips per month that had previously been reported. In fact, McKessy reported several hundreds of those tips have been high-quality. Although no monetary award has been publicly announced yet, the SEC is starting to turn whistleblower tips into cases.
The SEC has also recently awarded cooperation credit to an individual under its Cooperation Initiative. The SEC’s Enforcement Cooperation Initiative establishes incentives for individuals and companies to fully and truthfully cooperate and assist with SEC investigations and enforcement actions. These two programs work together to provide significant incentives designed to elicit information from individuals that might lead to enforcement actions.