In May 2011, the California Securities Fraud Lawyer Blog reported on the Securities and Exchange Commission’s (SEC) new whistleblower program that went into effect August 12, 2011. On that effective date, the Commission posted 170 actions taken since July 21, 2010 covered by the whistleblower program. Covered actions are those that result in sanctions exceeding $1 million. Charles Schwab & Co., Inc., Citigroup Inc., Dell Inc., General Electric Co., J.P. Morgan Securities LLC, and UBS Financial Services Inc. were among those against whom covered action had been taken. The actions included findings of insider trading, misstatements related to sub-prime mortgage backed securities, misstatements in financial statements to the public, bribes to foreign national for consideration, and misleading statements regarding collateralized debt obligations.
In a number of releases, the Commission reiterates that the status of any particular action as covered is not determinative of whether it resulted from a whistleblower tip nor that any award will be paid to a whistleblower in connections with the action.
While the program has now been in place nearly a year, it has yet to award any payouts; there is speculation that may soon change. The timing of the payout process is the likely reason why no payouts have been made. The process allows whistleblowers to apply for an “incentive award” within 90 days of an action being posted on the Commission’s site. While the processing time for an initial application is not available, once a determination is made, if it is adverse to the applicant, that individual (individually or through counsel) has an additional 60 days to appeal the decision. Thus, it is conceivable that an appealed claim for an incentive award may take up to six months or longer before a final determination is made.
According to its fiscal year 2011 report, the Office of the Whistleblower received 334 tips. If the trend continues, fiscal year 2012, which ends September 31, should see significantly more tips because the program was only operational for the final 7 weeks of FY 2011.
To be eligible for an award, individuals must provide original information to the SEC that leads to the successful enforcement of an action that is subsequently listed on the Commission’s Office of the Whistleblowers site.