December 2, 2013 SEC Fraud

Review of SEC Report to Congress on the Impact of Dodd Frank’s Whistleblower Reform, Pt 1

As we reported last week, the Dodd-Frank Wall Street Reform and Consumer Protection Act has been highly integral in protecting investors and taxpayers as well as holding fraudulent investors and corporate managers responsible for their misdeeds. Earlier this month, the Securities Exchange Commission, an entity responsible for overseeing the securities exchange market, submitted its annual report to Congress on the impact, successes and failures of the whistleblower program. The Dodd-Frank whistleblower protections were modeled closely after those found in the False Claims Act as the FCA statute has proven highly successful in incentivizing integrity and encouraging people to come forward with information who may otherwise be too apprehensive or fearful of retaliation.

In this article, we will explore the SEC’s assertions as to its purpose and goals, as well as its history. Part Two will discuss the Office of the Whistleblower and its various duties as detailed by the SEC in its report. Part Three contains an analysis of tips received during the fiscal year 2013 as well as general information relating to the processing of these tips and the SEC’s evaluation procedures. Lastly, Part Four will examine the whistleblower awards made during fiscal year 2013 as well as discuss the Inspector General’s evaluation of the whistleblower program.

Message From the Chief of the Office of the Whistleblower

The report begins with an introduction from Chief Sean McKessy, who is tasked with overseeing and administering the provisions of Dodd Frank’s whistleblower protections. The message details the record-breaking $14 million total whistleblower awards, as well as the sharp increase in reports from 2012 and years past. FY 2013 also saw the largest whistleblower award to date, topping $14 million, and leading authorities to fraud perpetuated against substantial investor funds.

Pursuant to the tenets of Dodd Frank, the Office of Inspector General was required to audit and release a report as to the efficiency and effectiveness of the SEC’s whistleblower unit. The report, published in January of this year, concluded the program was user-friendly and operated properly.

Lastly, the Chief reiterated that potential whistleblowers can maintain anonymity if reporting through an attorney, as well as enjoy protection from retaliation through the Commission’s civil enforcement actions in federal court.

History and Purpose of the Whistleblower Program

Contained within the FY 2013 report is an analysis of the whistleblower program’s history and purpose, which will be helpful in understanding the scope and background of this important protective legislation. The Dodd Frank Act amended the original Securities and Exchange Act of 1934 and directs the Commission to offer awards to eligible individuals choosing to come forward with original information about securities fraud amounting to at least $1 million. In light of Dodd Frank’s whistleblower laws, the Commission established a separate Office of Whistleblower to fulfill its mission of administering protections with vigor, identifying and halting frauds early, and minimizing investor losses.

The OWB was designed not to replace but to compliment current corporate compliance programs and encourage companies to work internally to resolve problems. However, it also offers complete protection against retaliation by employers in the event that an employee decides to come forward with information.

Proper Anti-Fraud Protections Encourage the Economy as a Whole

One of the incalculable benefits of programs like the SEC’s OWB is the build-up of investor trust and confidence, thereby increasing economic flow and enhancing the market. If you are aware of investor fraud or believe you may be the victim of investment misconduct, contact a whistleblower attorney as soon as possible. In addition, stay tuned for tomorrow’s assessment of the duties of the OWB, followed by an analysis of whistleblower tips received in FY 2013.

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