SEC Chair Mary Jo White gave a speech at the Northwestern University School of Law on April 30, 2015 on the SEC’s new Whistleblower Program.  She called it a “game changer.”  She said that despite criticism, whistleblowers provide “an invaluable public service” the SEC increasingly sees itself as the “whistleblower’s advocate.”

Whistleblower Statistics

After just four years the SEC’s program has seen significant successes:

• The number of tips they have received is high and has increased by more than 20 percent.
• In 2014, the SEC received over 3,600 tips (about ten a day), which is up from about 3,200 tips in 2013.
• In the first quarter of this year, they have seen the numbers increase by more than 20 percent over the same quarter last year.
• Tips have come from whistleblowers from all fifty states and sixty foreign countries.
• The tips span the full spectrum of federal securities law violations.

The program is still fairly new, but so far a total of seventeen whistleblowers have received awards.  Payouts have totaled nearly $50 million and the SEC has made individual awards in excess of $1 million three times.  The highest award to date is over $30 million.  In the last fiscal year, the Commission issued more awards to more people for more money than in any previous year – and that trend is expected to accelerate.

Retaliation

Chairman White also stated that the SEC is “very focused” on cracking down on retaliation against whistleblowers and wants whistleblowers and their employers to know that employees are free to come forward without fear of reprisals.  The statute provides that employers cannot “discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower” to provide information or assistance to the SEC.

If they suffer retaliation whistleblowers can sue the company directly, and the SEC may also bring an action for retaliation against an employer.  The SEC believes that strong enforcement of the anti-retaliation protections is critical to the success of the SEC’s whistleblower program and bringing retaliation cases will continue to be a high priority.

The Bottom Line

The SEC’s Whistleblower program is intended to create powerful financial incentives for individuals to provide real evidence of fraud or any wrongdoing that harms investors to the SEC.  She stated that the ultimate goal of the whistleblower program is to deter further wrongdoing.  She admitted that it is “too early to draw conclusions about whether the program has altered corporate behavior and reduced wrongdoing.  But we certainly hope it has and will continue to do so.”

Copyright 2015 by Mark W. Pugsley.  All rights reserved.