The SEC has released its Annual Report on the Dodd-Frank Whisteblower Program for fiscal year 2012 (which ended in September). The November, 2012 report, which the SEC made in accordance with the reporting obligations of the Dodd-Frank Act, is available here. The SEC disclosed that it received 3,001 whistleblower tips, and that the “most common complaint categories reported by whistleblowers were Corporate Disclosures and Financials (18.2%), Offering Fraud (15.5%) and Manipulation (15.2%).” Tips were received from individuals in all 50 states, the District of Columbia, Puerto Rico, and 49 foreign countries.
The report disclosed that during fiscal year 2012, the SEC made its first incentive award to a whistleblower under the program:
During Fiscal Year 2012, the Commission made its first award under the whistleblower program. On August 21, 2012, a whistleblower who had helped the Commission stop an ongoing multi-million dollar fraud received an award of 30 percent — the maximum percentage payout allowed by law — of the amount collected in the Commission’s enforcement action against the perpetrators of the scheme. The award recipient in this matter submitted a tip concerning the fraud and then provided documents and other significant information that allowed the Commission’s investigation to move at an accelerated pace and ultimately led to the filing of an emergency action in federal court to prevent the defendants from ensnaring additional victims and further dissipating investor funds. The whistleblower’s assistance led to the court ordering more than $1 million in sanctions, of which approximately $150,000 had been collected by the end of the fiscal year. In accordance with the 30 percent award determination, on August 21, 2012, the whistleblower was paid nearly $50,000. Motions for additional judgments are currently pending before the court and any additional collections or increase in the sanctions ordered and collected will increase the amount paid to the whistleblower.
(The SEC’s release for the above case does not name the whistleblower, and Law360 reports that “[m]any attorneys expressed disappointment that the agency withheld crucial information about the tip, including a description of the fraud and how the whistleblower knew about it.”)
The report also disclosed that the SEC has a fund of over $452 million to fund whistleblower awards and finance operations. In a statement, SEC Chairman Mary L. Schapiro stated, “[i]n just its first year, the whistleblower program has proven to be a valuable tool in helping us ferret out financial fraud.”
For further reading on the SEC’s whistleblower program and Dodd-Frank, please see Sarah L. Reid’s article, “The Evolution of the SEC Whistleblower: From Sarbanes-Oxley to Dodd Frank.”