The SEC issued the 2015 Annual Report on its Whistleblower Program, announcing that whistleblower tips to the Commission grew significantly again this last year. According to the report, the SEC received 3,923 tips during the 2015 fiscal year, which is more than an 8 percent increase over the prior year. The SEC also experienced a surge in the number of whistleblower claims seeking payout after successful enforcement actions, so-called “bounty claims.”
Under the Dodd-Frank Act of 2010, the SEC is required to pay whistleblowers who provide information to the SEC that results in a successful enforcement action of more than $1 million in sanctions. The SEC has discretion to pay between 10 and 30 percent of the sanctions it collects, depending on the facts of the case. Factors that increase the size of the award include the significance of the information provided and the level of whistleblower assistance, while factors decreasing the award include the whistleblower’s involvement in the underlying conduct or delay in providing the tip. The SEC attributes the continued rise in whistleblower awards to increased public awareness of the whistleblower program and the significant funds it has paid out under the program, which now total more than $52 million.
One notable trend from the 2015 SEC report is that 80 percent of the whistleblower award recipients first raised their concerns internally before going to the SEC. This emphasizes that it is important for companies to have appropriate procedures for handling whistleblower tips (meritorious or not) when they arise, including by engaging counsel as early as possible to investigate and advise on the proper path forward.