Are We Still At A “Sweet Spot” for SEC Whistleblowers?

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According to an article by Rob Lenihan of Thomson Reuters, published in August 2014, Sean McKessey, head of the SEC’s whistleblower program, was quoted by the Wall Street Journal as saying that the numbers [of whistleblower complaints] will soon grow and “we’re getting close to the sweet spot.” Malecki Law had reported on this Wall Street Journal article and examined the state of Dodd-Frank Whistleblower program, as it existed then, in this blog post. A year into it, let’s examine where we are at with the growing numbers.

During the 2014 fiscal year, the number of whistleblower tips and complaints received by the Commission grew 10.1 % from the year before to 3,620. The Dodd- Frank Whistleblower program, which promises cash rewards for those whose tips lead to a successful investigation by the SEC, has witnessed many milestones in past four years. In a recent development, SEC paid a handsome $3 million to a company insider in July 2015, who helped crack a complex fraud case.

According to Andrew Ceresney, Director of the SEC’s Division of Enforcement. “Insiders may hold the key to helping our investigators unlock intricate fraudulent schemes,” and “by providing significant financial incentives for people to come forward, the SEC’s whistleblower program continues to be profoundly effective in helping us protect investors and hold wrongdoers accountable.” The SEC’s whistleblower program has already paid more than $50 million to 18 whistleblowers, since its inception in 2011, including $30 million in awards in 2014, more than doubling the $14 million rewards it paid in 2013. Let’s hope the trend continues!

In another record-breaking development, SEC announced an award of more than $30 million to a foreign whistleblower in September 2014. In Liu v Siemans AG(4) the Second Circuit court had ruled that Dodd-Frank’s anti-retaliation provisions do not apply to conduct abroad and dismissed a suit brought by a former employee of a Siemens subsidiary in China who claimed to have been fired after reporting potential corruption. Although the whistleblower is a foreign resident and none of the termination actions occurred within the United States, SEC stated that the plaintiff provided “key original information” leading to a successful enforcement action by the SEC concerning U.S. Securities violations. Therefore, in such instances the whistleblower protection provision is deemed to have extraterritorial applications although not implicitly set forth in the whistleblower provisions. In 2014, according to the Commission, tips have been received from individuals in 83 countries outside the United States, including the United Kingdom, India, Canada, China and Australia.

The initial reluctance to come forward seems to be wearing off and with a better effort to protect the rights of national and international whistleblowers, more and more tipsters are inclined to step forward. If you feel you have valuable information, consult Malecki Law about your options.