SEC Investigating Over 700 Cases from Whistleblower Tips

Kelsey Condon

Published On: March 9th, 2018

Although whistleblower tips continue to increase seven years into the U.S. Securities and Exchange Commission’s (“SEC”) successful whistleblower program, there are reports that there has been a decline in enforcement actions and financial sanctions pursued by the SEC in FY 2017. However, during the American Bar Association’s annual White Collar Crime Conference, co-directors Stephanie Avakian and Steven Peikin of the SEC Enforcement Division denied that enforcement has slowed since the Trump Administration took office. Avakian also pointed out the surge in whistleblower tips received by the SEC.

According to the SEC’s 2017 Annual Report to Congress on the Whistleblower Program, the SEC Office of the Whistleblower (“OWB”) received over 4,400 whistleblower tips in FY 2017 alone, more than 13 times the number of tips received in the program’s inaugural year. Of these tips, nearly 1,000 related to corporate disclosures and financials.

The Report also notes that OWB is currently tracking over 700 enforcement matters in which a whistleblower’s tip caused the SEC to open an investigation or which were forwarded to enforcement staff for review in connection with an ongoing investigation. This means that the approximately 15% of the whistleblower tips received by OWB lead to some form of investigation by the SEC.

By comparison, the Department of Justice has an intervention rate (including settlements) of less than 25% in qui tam False Claims Act cases that are filed by a whistleblower, according to the DOJ.

The SEC understands the importance of whistleblowers to the detection of fraud and successful enforcement actions. “[T]he value of the whistleblower program is exhibited most directly and importantly by the hundreds of millions of dollars returned to investors as a result of actionable information that whistleblowers brought to the agency,” said Jane Norberg, Chief of the OWB. Since the whistleblower program’s inception, the SEC has collected over $975 million in monetary sanctions in enforcement actions involving whistleblower information, including more than $671 million in ill-gotten gains and interest. In FY 2017, twelve whistleblowers received a total of nearly $50 million in awards.