On November 17, 2014, the U.S. Securities and Exchange Commission (SEC) Whistleblower Office issued its Fiscal Year 2014 Annual Report. The report highlighted the increasing number of tips received under the whistleblower program — 3,620 tips from whistleblowers in fiscal year 2014 (up 12 percent from fiscal 2013). The report also noted the increasing number (and magnitude) of the awards made to whistleblowers. Of the 14 awards issued since the whistleblower program began, nine awards were made in fiscal year 2014. The report emphasized some of the more significant awards, including the coordinated activity with the SEC Enforcement staff that resulted in an enforcement action against Paradigm Capital Management (see July 2, 2014, newsletter, SEC Brings First Anti-Retaliation Case Under Dodd-Frank Act Whistleblower Provisions), the award to an employee with audit and compliance responsibilities on August 29, 2014 (see October 3, 2014, newsletter, SEC Makes First Whistleblower Award to a Compliance Professional), and the record $30 million award to a whistleblower on September 22, 2014 (see October 3, 2014, newsletter, SEC Announces Record Award of $30 Million to Foreign Whistleblower).
The report contains a breakdown of the reports received:
- The SEC received more than 2,700 phone calls from the public. Tips came from individuals in every state, as well as Washington, D.C. and Puerto Rico. The most tips originated in California, Florida, New York, and Texas.
- The bulk of foreign tips originated from Britain, India, Canada, China, and Australia.
- The most common types of complaints reported included: corporate disclosures and financials (16.9 percent), offering fraud (16 percent), and manipulation (15.5 percent).
Since the program began in mid-2011, a total of 10,193 reports have been made to the SEC. The report provides some details on the individuals who have received awards:
- Forty percent of the individuals receiving awards were current or former company employees.
- Of the award recipients who were current or former employees, more than 80 percent raised their concerns internally to their supervisors or compliance personnel before reporting information to the SEC. In these cases, the individuals reported to the SEC only after concluding that the company was not taking steps to address or remedy the improper conduct.
- An additional 20 percent of the award recipients were contractors, consultants, or were solicited to act as consultants for the company committing the violation.
The report confirms prior public statements that the Whistleblower Office is working to identify confidentiality, severance, and other agreements that may interfere with an employee’s ability to report wrongdoing. The report states that the Whistleblower Office is “actively working with Enforcement staff to identify and investigate practices in the use of confidentiality and other kinds of agreements that may violate” the SEC rule prohibiting “taking any action to impede an individual from communicating directly with the SEC about a possible securities law violation.”