Recently, the Securities and Exchange Commission (“SEC”) touted its additional award of $150,000 to the first-ever Dodd-Frank Whistleblower. The unidentified recipient received $50,000 in August 2012. The most recent payout came after the SEC collected additional funds from the violators, and represents 30% of the amount collected to date, which is the maximum percentage payout allowed under the law.
According to Sean McKessy, Chief of the SEC’s Whistleblower Office, “[t]his latest payment shows that the SEC’s aggressive collection efforts pay dividends not only for harmed investors but also for whistleblowers.” McKessy added that the SEC plans to increase payouts to whistleblowers as it collects additional funds from securities law violators. This announcement comes barely six months after the SEC issued its largest ever whistleblower award – more than $14 million – to a whistleblower whose information led to an enforcement action that recovered substantial investor funds.
The Whistleblower Program has quickly ramped up its activity and visibility since its inception in 2011. It can provide rewards to both employees and non-employees. The number of whistleblower tips reached 3,238 last fiscal year, with whistleblowers from all 50 states and foreign countries. The protections and monetary incentives afforded by the Whistleblower Program mean it will likely bring more cases to the SEC’s attention, and will lead to increased enforcement against companies and individuals. Therefore, companies should ensure that they have vigorous compliance programs in place to prevent and detect potential securities violations, and to mitigate penalties that may result from inadvertent violations. Companies should also ensure they have appropriate policies prohibiting retaliation against whistleblower employees and providing a complaint procedure for any such employee who believes he or she has suffered from retaliation.