Analysis of the SEC's 2013 Annual Report to Congress on the Dodd-Frank Whistleblower Program

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The attorneys of Young Law Group, P.C. offer this analysis of the SEC's 2013 Annual Report on Whistleblowers under Dodd-Frank, highlighting key developments and program milestones.

On November 15, 2013, the United States Securities and Exchange Commission’s (“SEC”) Office of the Whistleblower (“OWB”) released its annual congressional report on the status of its whistleblower program. To ensure adequate oversight of the program, Section 924(d) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) requires OWB to compile data and issue an annual report to Congress. This article discusses pertinent developments and highlights key provisions of the program. A link to the full text of the OWB Report can be found on the SEC’s website.

Program Overview

In 2010 Congress passed Dodd-Frank to combat risky behavior on Wall Street which contributed a great deal to the nation’s economic collapse in the late 2000s. In an effort to facilitate the goals of the legislation the SEC established the OWB to oversee a whistleblower program, modeled after the False Claims Act. The Dodd-Frank whistleblower provisions provide substantial incentives and protections designed to encourage individuals, with knowledge of securities violations, to bring tips to the SEC. Whistleblowers, whose original information leads to sanctions over $1,000,000.00 are eligible for an award of 10 to 30 percent of the SEC’s entire recovery. As long as they are represented by counsel, whistleblowers can remain anonymous and the SEC maintains strict confidentiality.

Dodd-Frank contains anti-retaliation provisions, which protect employees attempting to report securities violations perpetrated by their employers. This of course is intended to encourage individuals to come forward without fear of retribution. As the Chief of the OWB, Sean X. McKessy noted in the annual report, “[t]he protection of whistleblowers from retaliation by their employers is important to the success of the whistleblower program.” Thus, Dodd-Frank grants a private right of action for employees who have experienced retaliatory action, including but not limited to termination, as a result of their attempts to report violations internally or to the SEC. Successful litigants are entitled to double back-pay, reinstatement, and attorney fees and costs.

Processing Whistleblower Information    

Since its official launch in August of 2011, the OWB whistleblower program has processed thousands of tips, submitted via Form TCRs (Tip, Complaint, and Referral). Once in receipt of a TCR, the OWB can process the information in a number of ways, depending on its contents. The OWB may open an entirely new investigation or use the information to assist in an ongoing one. The information may prompt review of a regulated entity or closer scrutiny of a securities filing, which could in turn lead to an enforcement action. Finally, the OWB may forward the information to another, better suited, regulatory body or law enforcement agency.

If a whistleblower’s information leads to monetary sanctions exceeding $1,000,000.00, the OWB issues a Notice of Covered Action (“NoCA”) to alert the responsible individual. OWB posts NoCAs on its website and announces new publications via Twitter. Additionally, whistleblowers or their counsel can opt to receive email notifications of newly published NoCAs. To claim a potential award, a whistleblower or their counsel must file a Form WB-APP (application for award) with the OWB within 90 days of the NoCA’s publication. The OWB has posted 431 NoCA’s since August 2011, 118 of which came in fiscal year 2013. Whistleblower awards are paid from a congressionally mandated fund called the Investor Protection Fund (“IPP”).

Highlights from Fiscal Year 2013

In 2013 the OWB paid $14,831,965.64 in whistleblower awards. Demonstrating its nationwide scope, OWB received whistleblower tips from all 50 states, the District of Columbia, and the U.S. territories of Guam, Puerto Rico, and the U.S. Virgin Islands. In keeping with last year’s report, California, New York, and Florida were the originating states of the greatest number of whistleblower tips, over 100 each. Additionally, the OWB received tips from whistleblowers in 55 foreign nations. The most common tips in 2013 complained of securities violations related to Corporate Disclosures and Financials (17.2%), Offering Fraud (17.1%), and Manipulation (16.2%).

The SEC whistleblower program is still very much in its infancy. However, notable developments in fiscal year 2013 signal that the program is indeed on the right track. This will of course benefit whistleblowers, American investors, and the public at large. A few notable highlights include:

  • In 2013, the OWB received 3,238 whistleblower tips. By contrast 3,001 Form TCRs were submitted in 2012 and 334 in 2011.
  • Since August of 2011 the OWB has issued 6 awards, 4 were awarded in 2013. Additionally, although too late for inclusion in this year’s report, OWB announced an additional payment on October 30, 2013.
  • In 2013, the OWB issued its largest award to date at $14,000,000.00. Moreover, OWB processed the whistleblower’s Form TCR and issued the award within only six months.

Final Thoughts

While the frequency and amounts of awards under the Dodd-Frank whistleblower program pale in comparison to the billions of dollars awarded under the False Claims Act, the information revealed in the 2013 OWB report is cause for optimism. As the data shows OWB is receiving more Form TCRs than ever. In 2013 the OWB issued 4 of the 6 awards paid in the history of the program. This suggests that OWB is processing claims with greater speed and efficacy. Furthermore, this year’s payment of a $14,000,000.00 award signals that the Dodd-Frank program can prove incredibly lucrative for would-be whistleblowers. Finally, with $439,196,609.36 in the IPP as of the date of the report’s publication it is clear that the OWB has the resources to pay knowledgeable whistleblowers handsomely for their information.

Young Law Group has a proven track record of success in the representation of whistleblowers in some of the nation’s largest whistleblower recoveries. YLG specializes in the representation of whistleblowers in cases under the False Claims Act, the SEC Whistleblower Program, and the IRS Whistleblower Program. Anyone with knowledge of selective or early releases of market moving financial data is encouraged to call (215) 367-5151 for a confidential consultation or visit

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Eric L. Young

James J. McEldrew, III
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