Review of SEC’s Report to Congress on the Impact of Dodd-Frank’s Whistleblower Reform, Pt 3

Over the past several days, we have reviewed a recent report submitted to Congress by the Securities and Exchange Commission detailing its unveiling of the Office of Whistleblower Protection (OWB). The OWB was set up in response to the 2010 Dodd-Frank Act, which effectuated Wall Street reform and is designed to prevent the type of securities fraud that contributed to the 2008 financial crisis. On Monday, we reviewed the OWB’s inception and its goals, while yesterday’s post focused more on the daily duties and responsibilities of the OWB and its staff of attorneys.

In today’s article, we take a look at some of the data found in the report as it pertains to whistleblower tips received during FY 2013, as well as the various ways whistleblower information is processed. While the OWB has been in place since FY 2011, FY 2013 represents the first year the Commission has reviewed year-over-year data concerning the volume and types of complaints.

Whistleblower Tips Received During FYI 2013

Tips are received a number of ways, including online portal, mail or fax. Tips must be detailed on the OWB’s Form TCR and will be returned if deficient. Every tip received is acknowledged by the OWB either through an acknowledgement or deficiency letter.  The online portal is designed to provide tipsters with an efficient and organized submission of their original information.

By the close of FYI 2013, the OWB received 3,238 complaints, which is an increase over the 3,001 complaints received in FY 2012. The most common complaints received pertained to Corporate Disclosures and Financials (17.2%) and Offering Fraud (17.1%). These numbers are nearly identical to those received in FY 2012, however 2012 also included a large number of complaints pertaining to Manipulation (15.2%). Other types of complaints received in 2013 included the following:

• Insider Trading (19.6%);
• Trading and Pricing (16.8%);
• Foreign Corrupt Practices Act (14.9%);
• Unregistered Offerings (10.5%);
• Market Event (8.9%);
• Municipal Securities and Public Pension (4.8%);
• Other (7.64%).

Origin of Whistleblower Complaints

During FY 2013, the OWB received the highest number of complaints from California, Florida, New York and Texas. However, the OWB reports receiving complaints of securities fraud from all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. Other states with a high number of reports include Illinois, New Jersey, Nevada, Ohio and Washington.

Due to the global nature of securities trading, the OWB also received reports of securities fraud from 55 foreign countries, with the highest numbers occurring in Canada, China and the United Kingdom. Other countries reporting a substantial number of fraudulent acts also included Ireland, India and Australia.

How Are Tips Processed?

Within the SEC’s Enforcement Office is the Office of Market Intelligence (OMI), which is responsible for evaluating all tips and reports. If the OMI believes a particular complaint warrants additional investigation, it is assigned to one of 11 regional offices for further review. From there, the information may be used one of several ways. First, the OMI may request the whistleblower gather additional information which may then, in turn, lead to an open investigation. The whistleblower’s information may also be used to trigger an audit or review of securities filings. Some reports of fraud are referred to regulatory agencies better-suited to handle the problem. During investigations, the OWB serves as a liaison between the whistleblower, his counsel and the SEC investigative staff.

U.S. Government is Genuinely Committed to Eradicating Fraud

The SEC remains committed to its duties as delineated in the Dodd-Frank Act and offers citizens an open portal to voice complaints of fraud in the securities trade. If you have suspicions about your broker or other individuals involved in the securities market, strongly consider speaking with a whistleblower attorney as soon as possible. With the right information, a large whistleblower reward may be in your future, and you will never know until you report.