Categories: Financial Services

By Jason Kaufman

The Dodd-Frank Act created a comprehensive whistleblowing program by amending the Securities Exchange Act of 1934 to include Section 21F, entitled “Securities Whistleblower Incentives and Protection,” and establishing the “Office of the Whistleblower” to enforce its provisions.  Individuals who voluntarily provide the SEC with original information that leads to a successful SEC enforcement action resulting in monetary sanctions greater than $1 million are entitled to an award of between 10 and 30 percent of the total sanctions collected.  According to the SEC’s 2013 Annual Report to Congress on the Dodd-Frank Whistleblower Program, the incentives are working.

The SEC reports that since this whistleblowing program went into effect in August 2011, the number of complaints has increased each year.  During Fiscal Year 2013, the SEC received 3,238 complaints from across the county and around the world, reflecting an increase over the prior fiscal year of almost every type of allegation (e.g., offering fraud, insider trading, etc.).  Four whistleblowers received awards during Fiscal Year 2013, one of whom received a more than $14 million award representing the largest granted to date.  In total, the SEC paid approximately $14.8 million in awards to whistleblowers in Fiscal Year 2013, and, with more than $439 million remaining in the Investor Protection Fund from which the awards are paid, further awards seem likely.

Given the easy public access to information concerning the whistleblower program and the ability to submit tips and apply for awards on-line, the broad confidentiality and anti-retaliation protections afforded to whistleblowers, and huge potential payout, it is no surprise that the program is gaining traction and whistleblower complaints are on the rise.

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