SEC: Whistleblowers More Common, Active

By Michael Patrick McSweeney (@mpmcsweeney)

An increasing number of whistleblowers have contacted the U.S. Securities Exchange Commission’s (SEC’s) Office of the Whistleblower (OWB) in fiscal year 2013 compared to fiscal year 2012, according to a new report released by the government agency. The SEC findings show that whistleblower filings and cash awards are up year-over-year.

More than $14 million has been paid out so far this year to individuals who provided information that led to an SEC enforcement action. The Office of the Whistleblower, created as part of the Dodd-Frank financial reform law, is empowered to gather intelligence and disburse confidential payouts between 10 percent and 30 percent of the value of the enforcement action’s final penalty.

Overall, the report found that the OWB’s policies and practices have made it more attractive for whistleblowers of financial crimes to come forward to federal officials: The publication shows that individuals are participating at the highest rate in the three years since the OWB was founded.

Further, the OWB release explored the effectiveness of the program in terms of its performance and included data on the types of crimes reported and the areas from which whistleblower reports are filed.

Complains On The Rise

According to the SEC data, 334 complaints were registered with the OWB in fiscal year 2011, the office’s first year of operation. By 2012, that number had swelled to 3,001 whistleblower filings. More than 3,200 complaints have been submitted to the OWB since the start of fiscal year 2013.

Corporate Disclosures and Financials relating to the mishandling of information between public companies and general investors was the most common category by complain volume, accounting for 17.2 percent of all whistleblower filings in 2013. Offering Fraud and Manipulation accounted for 17.1 percent and 16.2 percent, respectively.

Last year, Corporate Disclosures and Financials made up 18.2 percent of all complaint volume, which Offering Fraud and Manipulation represented 15.5 percent and 15.2 percent, respectively, of whistleblower filings.

Award Frequency On The Rise

Since 2011, the OWB has disbursed awards to six whistleblowers. Of this group four were paid during fiscal year 2013. According to the report, each of these payouts followed an enforcement action that resulted in a criminal conviction.

The report highlighted specific instances when a payout was conducted. In June 2013, three whistleblowers received awards while two more were given awards in October. For fiscal year 2013, the OWB disbursed nearly $14,831,965.64 in whistleblower awards.

OWB Expands International Reach

The OWB received a number of whistleblower complaints from individual sources around the world, the SEC report showed. More than 400 international whistleblowers submitted complaints, accounting for 11.77 percent of the OWB’s overall traffic.

Outside of the U.S., 66 filings came from the U.K. Canada and China followed with 62 and 52 complaints, respectively. Twenty came from Russia while Indian and Irish sources submitted 18 such filings.

To read the full OWB report, follow the link here.