The SEC Enforcement Director Speaks on the SEC Whistleblower Program

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Person Holding a Black Digital Tablet, representing Fake News on Stocks

The SEC Enforcement Director, Andrew Ceresney, spoke yesterday about the SEC whistleblower program at the Taxpayers Against Fraud Conference in Washington, D.C. There’s some great information for whistleblowers.

Before we identify the takeaways for securities whistleblowers, we thought it worth taking a moment to speak about Taxpayers Against Fraud, an organization where our whistleblower attorneys are members. We’re proud to support this organization, which fights tirelessly on behalf of whistleblowers and their attorneys to protect the individuals who come forward and the public fisc.

Ceresney’s speech follows an announcement earlier this month celebrating the award of more than $100 million in rewards under the whistleblower program created by the Dodd-Frank Act. So the program seems to be picking up steam.

Here’s what we learned:

There have been three types of cases where whistleblowers have ben particularly important: issuer reporting and disclosure cases, offering fraud/ponzi schemes, and Foreign Corrupt Practices Act cases. Whistleblower assistance to date has been helpful in all three types of cases.

  • Issuer reporting and disclosure cases are very hard to spot without a roadmap of potential misconduct from whistleblowers.
  • Retail investors are typically the largest class of victims in offering fraud and ponzi schemes, with whistleblower information allowing the SEC to quickly halt these schemes before it is too late.
  • The SEC appreciates international whistleblowers who can provide evidence of FCPA violations because overseas investigations are difficult.

The SEC makes requests of companies for documents and testimony in ways that seek to protect the whistleblower’s identity.

Providing materials that are covered by the attorney-client privilege or work product doctrine are not helpful and can substantially delay the investigation.

Supporting evidence, in the form of documents, expert analysis or names of other individuals who can provide information helps the SEC investigate tips more quickly.

Participants in misconduct should know that, in many circumstances, they are eligible for awards and the SEC would like to hear from them. Although there are safeguards built into the program to ensure that whistleblowers do not profit from their own misconduct, including where they substantially directed, planned or initiated the misconduct of an entity, or conduct for which they are criminally convicted, culpable whistleblowers can still get paid for eligible information they report that falls outside of these limitations.

Both the investigations and the award process takes time. The Investigatory process is long and the government is limited in the amount of information it can disclose about ongoing investigations.

About 20% of whistleblower rewards receive a lower reward percentage because of an unreasonable delay in reporting by the whistleblower.

The complete speech is posted on the SEC website.

To speak to our SEC whistleblower attorneys about this information or for an evaluation of a potential submission to the SEC, please call 1-800-590-4116.