At an SEC enforcement conference held last Thursday, October 18, 2012, several SEC speakers remarked that the agency had received an average of eight whistleblower tips per day, for a total of nearly 3000 tips from 45 countries, in the first year of operation of the SEC’s Dodd-Frank whistleblower rules. The SEC’s revised whistleblower rules, which took effect in August 2011, permit each whistleblower to receive a bounty of 10-30% of all monetary sanctions collected by the SEC on cases associated with the whistleblower’s tip. To be eligible for a bounty, a whistleblower must voluntarily provide the SEC with original information that leads to a successful SEC enforcement action in which the SEC obtains monetary sanctions greater than $1 million. This announcement follows the first award (and first denial of an award) of bounty payments to SEC whistleblowers in August 2012.
These milestones serve as a good reminder to review internal compliance and whistleblower policies to make sure they are state of the art and, from an SEC perspective, do not run afoul of the anti-retaliation provisions of the Sarbanes-Oxley and Dodd-Frank Acts. Several of the studies relied upon by the SEC in adopting these whistleblower rules suggested that many employees prefer to resolve allegations of wrongdoing internally within their employers’ own compliance mechanisms. These studies also suggested that such employees only take the step of reporting to external authorities as a last resort when they view their own employers’ policies as not credible or not sufficiently responsive.