According to the Securities and Exchange Commission’s 2014 Annual Report to Congress on the Dodd-Frank Whistleblower Program, the regulator issued nine whistleblower awards, including one $30 million award issued to one whistleblower.
The report states that over 40% of those who received awards were either former or present employees of the companies on which they reported. 80% of these whistleblowers tried to bring up the issues to the companies first before going to the regulator. They only approached the regulator after an employer did not act to rectify the misconduct. Whistleblower award recipients also included fraud victims, individuals with personal ties to the fraudsters, consultants, and contractors.
The SEC also noted that it brought its first enforcement action against an employer that retaliated against a whistleblower. The Dodd-Frank Act has an anti-retaliation program that is supposed to protect individuals who bring a whistleblower claim. In that action, Paradigm Capital Management got into trouble for retaliating against a trader who told the SEC that the firm had taken part in allegedly unlawful transactions. Paradigm was ordered by the SEC to pay $2.2 million to resolve the employee’s retaliation claim.
The Office of the Whistleblower said that it has gotten 3,620 tips for the year to date, which is nearly 400 more than in 2013. Complaints appeared to primarily involve offering fraud, corporate disclosures and financials, and manipulation.
The SEC said that successful whistleblower cases typically involved individuals who identified specific people involved in a fraud or could provide documents to substantiate their claims. The alleged wrongdoing that they reported either was still going on or had just recently ended.
Whistleblowers may be entitle to a percentage of what is recovered in a fraud case if the individual is among the first to present original, relevant information that leads to a successful enforcement action by the government, with sanctions going over $1 million. The SEC does not accept all whistleblower claims.
Last year, the Commission rejected over 200 claims. One individual turned in 196 claims. The main reasons the SEC denied claims included lack of original formation related to the case, a claimant failing to turn in the application for an award within 90 days of the Notice of Covered Action, and there was no resulting successful enforcement action despite the information provided by a claimant.
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