A recent Wall Street Journal article (subscription required) quoted Michele Wein Layne, Regional Director of the LA office of the SEC, when she addressed the SEC’s Office of the Whistleblower Bounty Program at the American Bar Association’s annual conference. Ms. Layne responded to why federal securities regulators have made just two whistleblower awards since 2011:
“[Whistleblower awards] take a long time. It could be further out until you see some of those substantial awards.” The Wall Street Journal article highlighted Ms. Layne’s description of the lengthy, multi-step process to a whistleblower award, and the following should be taken into account when pondering why we haven’t seen an avalanche of awards:
- The SEC engages in a time-intensive investigation process to explore the whistleblower’s tip. For example, a tip on alleged market manipulations or investment fraud requires a specialized investigation into complex subject matter.
- The SEC, when warranted at the conclusion of the investigation, takes legal action, which can take a lengthy period of time to get resolved.
- The whistleblower tip must yield over $1,000,000 in sanctions
- The SEC must determine that the detailed prerequisites to receiving a whistleblower bounty are met, such as that the tipster provided “original” information.
- The SEC needs to determine the percentage—between 10% and 30%—of the recovery to which the whistleblower is entitled.
The Wall Street Journal article highlights that the complexity of these investigations has resulted in a long, meandering road to a pay day, and the SEC may pay out bounties a fairly long time after receiving a tip. So it would be unreasonable to conclude that the issuance of only a few whistleblower awards thus far means that there won’t be a significant number of awards issued in the future. Stay tuned …