The Securities and Exchange Commission released its 2015 Annual Report on its Whistleblower Program this week and announced another rise in the number of whistleblower tips that it received. The SEC reported receiving 3,923 tips during its 2015 Fiscal Year, which is up from 3,620 in 2014 (as we previously reported), and up over 30% from 2012, which was the first full year that these numbers were reported. Additionally, in its FY 2015, the SEC paid out $37 million to whistleblowers, which included a whopping reward of over $30 million to just one whistleblower. The SEC’s Office of the Whistleblower (OWB) rewards whistleblowers for “their provision of original information that led to a successful Commission enforcement action with monetary sanctions totaling over $1 million” and can net tipsters between 10% and 30%, which is the statutory maximum allowed under the Dodd-Frank Act.
The OWB determines the reward percentage for whistleblowers based on the particular facts and circumstances of each case, rather than any hard-set mathematical formula. Some of the positive factors that may increase an award percentage include “the significance of the information provided by the whistleblower, the level of assistance provided by the whistleblower, the law enforcement interests at stake, and whether the whistleblower reported the violation internally through his or her firm’s internal reporting channels or mechanisms.” Negative factors that may decrease an award percentage include “whether the whistleblower was culpable or involved in the underlying misconduct, interfered with internal compliance systems, or unreasonably delayed in reporting the violation to the Commission.”
A positive takeaway for companies from the OWB’s report is that 80% of the 2015 whistleblower award recipients initially raised their concerns internally to their supervisors or compliance personnel before reporting their information to the SEC. The Dodd-Frank Act allows whistleblowers to do so, as it is designed to protect individuals who report internally to their companies, as well as those who report directly to the SEC. Thus, for the most part, companies are still able to get an early notice of any wrongdoing prior to the SEC’s involvement, so that it can promptly respond, such as engaging counsel as early as possible to investigate and advise on the proper path forward.