New Figures Confirm That Dodd-Frank
Whistleblower Tips Are Pouring Into The SEC
June 6, 2012
A senior official of the Securities and Exchange Commission (“SEC”) has confirmed what manyobservers expected to occur in the wake of the Dodd-Frank Act: the potentially enormous
financial rewards offered to whistleblowers in return for information about suspected
wrongdoing are generating a deluge of tips to the SEC. According to a recent report, the chiefof the SEC’s Office of Market Intelligence revealed in an interview with Law360 that the SEC has
been receiving an average of seven whistleblower tips per day -- with roughly two to threeworthy of investigation -- since the Dodd-Frank whistleblower program began.
The Dodd-Frank whistleblower program authorizes the SEC and Commodity Futures Trading
Commission (“CFTC”) to pay cash rewards for original information that leads to a judicial oradministrative action resulting in a recovery exceeding $1 million. Under Dodd-Frank, thewhistleblower reward can range from ten to 30 percent of the penalty recovered in a judicial oradministrative action resulting in penalties exceeding $1 million. A key condition is that the tip
is “derived from the independent knowledge or analysis of the whistleblower” and was notpreviously known to the government. The SEC and CFTC have discretion to decide the exact
amount of the award based on a number of factors including the “significance” of theinformation and the level of assistance provided by the whistleblower. Because the“significance” of the information in part drives the amount of a reward, the act incentivizes
individuals to disclose the most serious conduct about which they have information. DoddFrank enables whistleblowers to report misconduct under the cloak of anonymity by reporting
tips through legal counsel and not disclosing their identities unless and until it has been
confirmed that they will receive an award.
While not surprising given the financial incentive and protections from retaliation offered towhistleblowers under the Dodd-Frank Act, these latest Dodd-Frank whistleblower figures areanother sign that a new era of heightened corporate whistleblowing has arrived. While it is too
soon to know, this wave of tips could lead to an increase in resources at the SEC assigned toevaluate and investigate this incoming information. These figures are also a reminder that
corporate legal and compliance departments should consider measures to further encourage
employees to report suspected misconduct through internal compliance channels as well as
promptly investigate all tips reported internally. That way, companies can maximize theopportunity to remediate and consider self-reporting any potential wrongdoing before a DoddFrank whistleblower contacts the government.

Memorandum – June 6, 2012

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Page 2Memorandum – June 6, 2012

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