In its Annual Report to Congress on the Dodd-Frank Whistleblower Program, the U. S. Securities and Exchange Commission (SEC) reports that both the number of whistleblower claims and the magnitude of the financial awards stemming from those claims “were record-breaking” in FY 2014. Under the Dodd-Frank whistleblower incentive program, individuals who report original information that leads the SEC to recover monetary sanctions of $1 million or more are eligible to receive awards of 10 to 30% of that financial recovery. Notable findings of the report include:
- The SEC’s Office of the Whistleblower (OWB) received 3,620 whistleblower tips, a more than 20% increase in the number of whistleblower tips in two years.
- The most common complaint categories reported by whistleblowers included Corporate Disclosures and Financials (16.9%), Offering Fraud (16%), and Manipulation (15.5%).
- On September 22, 2014, the SEC authorized an award of more than $30 million to a whistleblower “who provided key original information that led to a successful enforcement action.” This is the SEC’s largest whistleblower award to date.
- The SEC initiated its first anti-retaliation action under the statute in FY 2014.
In FY 2014, the SEC received complaints from individuals in all 50 states, as well as from the District of Columbia and Puerto Rico, and in 60 foreign countries.
The greatest number of complaints were filed in California (556), Florida (264), New York (204), and Texas (208).
Since the inception of the U.S. Securities and Exchange Commission’s whistleblower program in August 2011, the Commission has authorized awards to 14 whistleblowers, with awards being made to 9 whistleblowers during Fiscal Year 2014
The full SEC Report includes a discussion of the OWB’s activities and achievements for FY 2014, profiles of whistleblower award recipients, details about the types of whistleblower tips received, and information about the SEC investor protection fund.
What Employers Should Do:
Employers should take a proactive stance, to include the following:
- Eliminate improper conduct/activities that could give rise to and trigger a whistleblower complaint
- If a complaint is filed, ensure whistleblower is not retaliated against. If you suspect the whistleblower is retaliated against by a Manager/Supervisor, immediately counsel Manager/Supervisor and/or assign Whistleblower to a different Manager/Supervisor in the same or very similar position.
- Establish/develop an Ethics Policy
- Establish a complaint reporting procedure
- Conduct training of employees regarding the policies and processes
- Conduct periodic training of Manager/Supervisors regarding applicable laws, recognizing whistleblower activity, and responding to whistleblower complaints
- Establish a procedure to respond to whistleblower complaints
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