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Five Things You Did Not Know about the SEC Whistleblower Program (from the FCPAméricas Blog)
June 15 2012
Matt Ellis, Matteson Ellis Law, PLLC (Guest Blogger)
Or at least I did not know… until I attended Compliance Week’s 2012 Annual Conference last week. At the conference, the Deputy Chief of the SEC’s Whistleblower Office, Jane Norberg, gave an informative presentation. She qualified her statements by saying they were her own – she was not speaking on behalf of the SEC.
1. Office Doubling in Size. The SEC’s Whistleblower Office is now in the process of hiring five additional staff attorneys to handle its significant caseload. The attorneys will join the four staff attorneys and one Deputy attorney who already work in the office. This can safely be taken as an indication that whistleblower tips are on the rise and that the office predicts the trend will continue.
2. Whistleblower’s Place in Line Matters. The whistleblower’s place in line before the SEC matters because the first whistleblower to disclose certain information is the one who receives all of the credit for it. If the whistleblower informs the SEC that he or she has already disclosed or plans to disclose the issue to the company first allowing the company’s compliance program to address the matter, the SEC will hold the whistleblower’s place in line in the case that the company does not act within the allotted 120 days. Note that a recent study suggests that whistleblowers prefer to report issues internally before taking them to the government.
3. Various Factors Determine Level of Bounty. Pursuant to the SEC’s rules, whistleblowers who voluntarily provide the SEC with original information that leads to a successful enforcement action in which the SEC is awarded monetary sanctions of over $ 1 million may be eligible to receive an award of 10%-30% of the monetary sanctions collected. What factors determine where the award falls on this spectrum? If the whistleblower attempts to cooperate with the company’s compliance program by reporting the issue internally, and if the company does not act within 120 days, the recovery will be closer to 30%. Also, if the information provided is significant to the success of an enforcement action, if the assistance of the whistleblower and its counsel is significant, or if the SEC has a high interest in the deterrent effect of the whistleblower award, the recovery will be higher. In contrast, if the whistleblower interferes in the company’s compliance program, unreasonably delays reporting, or is culpable in the act, the bounty will be closer to 10%.
4. Guilty Whistleblowers Recover. The SEC Whistleblower’s Office recognizes the complicated considerations surrounding whether or not to award a whistleblower who was also involved in the wrongdoing. The office has decided to allow such awards in certain situations, recognizing that sometimes “dirty hands are necessary to point us in the right direction.”
5. Protections for Foreign Whistleblowers. The Whistleblower’s Office has made it clear that it is already receiving tips from all over the world. Many have asked if the statute’s anti-retaliatory protections extend to foreign whistleblowers. The rules are not clear on this point. When asked, Ms. Norberg said that the statute’s protections apply to everyone. She also noted that the issue ultimately is one for the courts, since judges will oversee a whistleblower’s action against a company. She suggested that the answer would be easier if the company in question is a U.S. company, because jurisdictional considerations would be clearer. If the company is foreign, the results might depend on how the case is brought before a U.S. court. But she stressed that, in the eyes of regulators, the statute applies across the board, even extraterritorially, whether or not the action in question was directed toward the United States or not.
Also, talk in the halls of the conference suggests that the SEC’s Whistleblower Office has already begun to establish strong relationships with certain trial lawyers known for bringing credible cases before it. Some say that the cases of these lawyers, in practice, are given priority because the office knows it can trust the information. Take these rumors for what they are worth.
The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. @2012 Matteson Ellis Law, PLLC. Used by permission.
Matt Ellis is an FCPA attorney with the law firm Matteson Ellis Law, PLLC and drives content for the FCPAméricas blog.
BLOG: Silence of the Whistleblowers. June 13 2012
BLOG: Employees Want to Talk… Make Sure They Do. May 17 2012
ARTICLE: Whistleblowers Set To Receive First SEC Payouts. Investopedia. June 11 2012
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