Consumer Fraud

SEC whistleblower program gained momentum in its third year

whistleblower SEC whistleblower program gained momentum in its third yearThe U.S. Securities and Exchange Commission (SEC) said that the number of whistleblower tips it received in fiscal year 2014 climbed again to its highest level since Congress created the agency’s Dodd-Frank Whistleblower Program three years ago.

In its annual report, the agency said the SEC whistleblower program had received more than 3,620 tips from whistleblowers in fiscal year 2014 (Oct. 1, 2013 – Sept. 30, 2014), up nearly 10 percent from the 3,328 tips that it received in fiscal year 2013. The SEC compiles the report to monitor the health of the program and keep track of how much it pays out to whistleblowers whose tips lead to settlements or civil fines.

“Not only did the number of whistleblower awards rise significantly, but the magnitude of the award payments was record-breaking” the SEC report says, pointing to an award of more than $30 million the agency paid out on Sept. 22, 2014, to one whistleblower who provided information that was instrumental in a successful enforcement action that would have been difficult for regulators to detect.

The SEC paid a total of nine awards to whistleblowers in fiscal year 2014. Although the agency doesn’t release specific details about the cases it pursues in order to protect the whistleblower’s identity, it said that tips were received from every U.S. state and several foreign nations.

States where the most tips originated were California, Florida, New York and Texas. The majority of tips outside the United States came from Australia, Canada, China, Great Britain and India.

The SEC added that some whistleblowers who received awards in past years have received “significant additional payments” when their contributions led to more enforcement actions and penalty money. The first whistleblower to receive an award under the SEC whistleblower program received an initial payout of nearly $50,000, but that award multiplied more than seven times to $385,000.

The SEC’s Office of the Whistleblower was established under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act to combat financial fraud such as the Ponzi scheme constructed by Bernie Madoff. Whistleblowers knew that Madoff was defrauding his investors and for years reported his scheme to the SEC with supporting evidence, yet the agency failed to act on those tips.


Securities and Exchange Commission