United States: Regulators Offer Insights Into SEC, CFTC, And OSHA Whistleblower Program's Trends And Priorities

On July 16, 2019, three prominent whistleblower law regulators spoke at PLI's Corporate Whistleblowing in 2019, which was co-chaired by Orrick partners Mike Delikat and Renee Phillips. With the standard disclaimer that their comments and opinions were their own and not the official comments of their respective agencies, each spoke about their agencies' whistleblower program's current progress, challenges, and priorities.

CFTC's Whistleblower Office

(https://www.whistleblower.gov/overview)

The Director of the CFTC's Whistleblower Office, Christopher Ehrman, spoke first about some emerging issues for the CFTC in 2019. In the coming years, Ehrman said he hopes to see the CFTC move more into analytics and set up an office of market intelligence. Additionally, while the CFTC is already the primary regulator for the derivatives market in the United States, Ehrman shared that "virtual currency is a big thing and will only get bigger." The CFTC currently has anti-fraud authority in the virtual currency space.

Ehrman also shared some statistics for the CFTC's whistleblower actions. Since 2014, the CFTC has awarded over 90 million in whistleblower awards. The number of "TCRs" or "Tips, Complaints, and Referrals" from whistleblowers is down in 2019 as compared to previous years, a trend Ehrman attributes to the Commission's decreased advertising. However, Ehrman has noticed an improvement in the quality of the TCRs that are coming in to the agency.

Ehrman also reflected on the positive effect of the CFTC's "summary proceeding" process for disposing of facially deficient whistleblower applications. This permits the agency to allocate resources effectively and avoid spending money and time on applications that "couldn't possibly recover." Since 2017, when CFTC instituted the summary proceeding process, it has been able to dispose of over 100 applications with minimal agency resources.

SEC's Office of the Whistleblower

(https://www.sec.gov/whistleblower)

Jane Norberg, the Chief of the SEC's Office of the Whistleblower ("OWB"), spoke about the recent trends and priorities of the SEC's OWB. Norberg reported that the SEC received over 5,200 tips from whistleblowers in fiscal year 2018, approximately 14 tips per calendar day. These tips came from every state in the United States and 72 countries.

Norberg noted that since the inception of the whistleblower program in 2011, the SEC has received over 28,000 whistleblower tips. Norberg emphasized that the whistleblower program brings "real value to the harmed investors," as its work has led to the return of close to $2 billion to harmed investors.

Norberg shared that 2018 was "record breaking for awards and tips." The SEC awarded more money in fiscal year 2018 than every year since the program's inception combined. The highest ever award, $83 million to three whistleblowers, was announced in March 2018. In September 2018, the SEC announced a $54 million award to two people. Finally, in March 2019, the SEC awarded $50 million to two whistleblowers. Norberg believes that these blockbuster awards have increased the number of tips coming into the SEC. As she put it "the more publicity, the more whistleblowers come forward." She also noted an upward spike in the number of tips following the Supreme Court's ruling in Somers v. Digital Realty Trust, Inc. That case held that Dodd-Frank's anti-retaliation provisions apply only to whistleblowers who make reports to the SEC, not to whistleblowers who solely report issues to company management.

Finally, Norberg mentioned the Whistleblower Reform Act of 2018, which recently passed the House by a 410 to 12 vote, but has yet to pass the Senate. In response to the Supreme Court's Digital Realty decision, the Reform Act would amend Dodd-Frank to protect whistleblowers who make internal reports to company management and not just those who report to the SEC. Norberg sees this as "correct[ing] a gap in the scheme of protections" for whistleblowers.

OSHA's Whistleblower Program

(https://www.osha.gov/oshdir/r02.html)

Teri Wigger, Assistant Regional Administrator for OSHA Region 2, which covers New York, New Jersey, Puerto Rico, and the Virgin Islands, spoke about how OSHA now has jurisdiction for whistleblower protections under 23 different statutes, including a recently enacted IRS whistleblower protection law. She reminded the audience that, unlike her colleagues at the CFTC and SEC, OSHA does not take enforcement action based on the conduct underlying a whistleblower tip. Rather, OSHA is responsible only for investigating allegations of retaliation against whistleblowers. That being said, 22 of the 23 statutes under OSHA's purview identify a federal partner agency that automatically receives a copy of every complaint. These agencies can then investigate the underlying conduct.

Wigger shared some recent trends from OSHA. In fiscal year 2018, OSHA acted upon and investigated 3,007 complaints of retaliation. Seventy percent of those complaints fell into the categories of safety and health. Only 6% of the complaints were under Sarbanes-Oxley and only 2% were under the Consumer Financial Protection Act. OSHA has seen a 74% increase in complaints in the past 10 years. However, over the same time period, it has seen a 34% reduction in claims under Sarbanes-Oxley. The New York region has seen the biggest decrease.

In general, Wigger reported that it now takes OSHA less than a year to investigate the average retaliation claim. However, she noted that claims under Sarbanes-Oxley usually are not the "average" claims and generally require more time. The New York region's resolution time is faster than the OSHA average: according to Wigger, usually under a year, or even six months, across all statutes.

The program was recorded and will be available to PLI members on its website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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