A Securities Lawyer’s Advice to Would be Whistleblowers

Whistleblower Tips are on the Rise

Increased public awareness of the SEC’s Whistleblower Program has lead to a tremendous growth in whistleblower tips and complaints.  In Fiscal Year 2016, the SEC received a record number of tips totaling more than 4,200.  That same year, the SEC paid over $57 million in awards to whistleblowers.  Eligible whistleblowers are entitled to an award equal to 10% to 30% of the monetary sanctions collected by the SEC.  The largest amount paid to a whistleblower in 2016 was $22 million.  The payment of significant awards to whistleblowers has undoubtedly led to a flood of tips and complaints.

Only “High-Quality” Information Will be Rewarded

When a whistleblower submits a tip or complaint under the SEC’s Whistleblower Program, the SEC’s Office of Market Intelligence (“OMI”) will perform a preliminary evaluation to determine whether a new whistleblower tip or complaint warrants further inquiry.  With such a large volume of tips flowing into the OMI’s office, only those complaints that contain “high-quality” information will be acted upon.

Advice for Would be Tipsters

The SEC is less likely to pursue tips that simply contain blanket assertions.  Be specific.  Whistleblower tips need to be credible and include detailed information describing the individuals involved and the specific instances of fraudulent conduct.  Instead of providing general inferences, include a discussion of the federal securities law violations that are involved.  To the extent possible, include non-public documents with your submission that support your complaint.  Lastly, don’t delay.  Subject to certain exceptions, the applicable statute of limitations for the SEC to pursue an enforcement action is five years.

Click here for more information on the SEC’s Whistleblower Program.