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SEC and CFTC have reasons to celebrate as whistleblower programs turn nine

Photo: Sunset on the Capitol by Michelle Friswell, (CC BY-NC-ND 2.0)

Almost a decade has passed since the Dodd-Frank Act was signed into law, creating whistleblower programs at the Securities and Exchange Commission and the Commodity Futures Trading Commission, and by most measures, those programs have been successful despite some challenges.

The law was enacted on July 21, 2010, but the whistleblower provisions got little attention at the time. Since then, the SEC and CFTC as well as Wall Street have come to recognize the power of whistleblowers that the Dodd-Frank Act unleashed. Whistleblowers have become one of the most important weapons to fight securities and commodity law violations.

Recent years have seen dramatic increases in the number of whistleblower reports, the size of whistleblower rewards and the number of whistleblowers receiving awards at the SEC. The CFTC has lagged behind in comparison, but in the past year, it has begun to pick up steam.

However, the SEC suffers from a huge backlog of thousands of whistleblower cases due to limited resources as well as lengthy delays in decisions about whistleblower awards. The numbers are much smaller at the CFTC, where whistleblower reporters number in the hundreds, compared to the SEC, which had 5,282 reports from whistleblowers in 2018 alone.

Since issuing its first award in 2012, the SEC has awarded more than $384 million to 64 whistleblowers. The SEC has ordered over $1.7 billion in monetary sanctions in cases that relied on whistleblower information and assistance.

The SEC issued the largest whistleblower awards to date in March 2018: a $50 million award to two whistleblowers who reported jointly and a $33 million award to another whistleblower. Up until then, the largest whistleblower award was a $32 million award granted to an international whistleblower represented by Phillips & Cohen.

The record number of whistleblower reports submitted to the SEC constituted an 18 percent increase in whistleblower reports from the 4,484 received the prior year.

Recent years also have seen an increase in whistleblower reports from outside of the United States. Since 2015, the number of international whistleblower filing reports with the SEC has steadily grown, with 651 reports filed internationally in 2018. Most international whistleblowers are from English-speaking countries, with the bulk of reports coming from Canada, the United Kingdom and Australia.

The CFTC announced five awards in 2018, totaling over $75 million for the whistleblowers. The awards included the CFTC’s largest-ever whistleblower award of approximately $30 million. Last year also saw a surge in whistleblower reports: The CFTC fielded 760 whistleblower submissions, a 63 percent increase from the year prior.

The CFTC also issued its first award to an international whistleblower, awarding a whistleblower outside the US over $70,000 in July 2018.

Under Dodd-Frank, SEC and CFTC whistleblowers are entitled to an award equal to 10 percent to 30 percent of the amount the SEC collects based on the whistleblower’s information, if the overall recovery exceeds $1 million.

The SEC and CFTC whistleblower programs also provide for confidentiality; anonymity (with certain exceptions) if the whistleblowers file a claim through a lawyer; and job protection, prohibiting retaliation against whistleblowers. Learn more about the protections offered to whistleblowers in our overview.

If you are aware of any securities or commodity law violations and would like to discuss your options with an experienced whistleblower attorney, please contact Phillips & Cohen for a free and confidential consultation.

 

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