SEC Enforcement Director Andrew Ceresney asserted that the SEC Whistleblower Program has had a "transformative impact . . . both in terms of the detection of illegal conduct and in moving . . . investigations forward quicker and through the use of fewer resources."

In a speech before the Sixteenth Annual Conference of Taxpayers against Fraud in Washington, Mr. Ceresney emphasized the importance of the Whistleblower Program to enforcement actions. Since inception, the program:

  • handled more than 14,000 tips from whistleblowers in every state in America, and in over 95 foreign countries;
  • received an increasing number of tips from whistleblowers: 3,001 in fiscal year 2012 – the first full fiscal year in which the program became operational – and nearly 4,000 last year, an upsurge of approximately 30%;
  • returned over 2,800 phone calls from members of the public during fiscal year 2015; and
  • issued final orders and preliminary determinations concerning over 390 whistleblower award claims by the end of 2015.

Mr. Ceresney identified SEC cases best served by whistleblower assistance including (i) issuer reporting and disclosure cases, which he called the "most common type of tip," (ii) offering frauds and Ponzi schemes, and (iii) Foreign Corrupt Practices Act violations. He listed individuals who may qualify as whistleblowers under the Dodd-Frank Act including: company insiders, compliance and internal audit personnel, company outsiders - particularly experts who can provide high quality analysis, and participants in the wrongdoing (subject to certain conditions). Further, Mr. Ceresney discussed the impact of the timing of a tip on an award. Unreasonable delays in reporting information is a "significant factor" in determining the size of the award, he said.

Mr. Ceresney urged counsel to (i) ensure that clients segregate tips from information protected by attorney-client privilege and work product doctrine; (ii) make sure that clients provide corroborating information for their tips; and (iii) increase public awareness of the Whistleblower Program.

Mr. Ceresney predicted that the whistleblower program would continue to grow in significance.

I am proud of the program's accomplishments during its brief existence and anticipate that the whistleblower program will continue to be a game changer in future years. In fact, my prediction is that it will take us significantly less time to announce that we have passed the $200 million milestone than it did to pass the $100 million mark.

Commentary / Steven Lofchie

The government maintains that the SEC program granting awards to whistleblowers provides great enforcement benefits. Perhaps legislation mandating the creation of similar programs should be adopted to provide whistleblower awards to those who report misconduct by the government. Balanced whistleblowing seems particularly apposite now that the range of government activity is expanding to encompass tasks that historically were carried out by the private sector.

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