Evaluation of the SEC’s Whistleblower 

Program

 January 18, 2013

Report No. 511
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511

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Evaluation of the SEC’s Whistleblower Program January 18, 2013

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We appreciate the courtesy and cooperation that your staff extended to us during 

this audit.

Attachment

cc: Erica Y. Williams, Deputy Chief of Staff, Office of the Chairman

Luis A. Aguilar, Commissioner

Troy A. Paredes, Commissioner

Daniel M. Gallagher, Commissioner

George S. Canellos, Deputy Director, Division of Enforcement

Sean X. McKessy, Chief, Office of the Whistleblower, Division of 

 Enforcement

Jeff Heslop, Chief Operating Officer, Office of the Chief Operating Officer
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511

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Evaluation of the SEC’s Whistleblower Program

Executive Summary

Background. Section 922 of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank), amended the Securities Exchange Act of 1934 

(Exchange Act) by adding Section 21F, “Securities Whistleblower Incentives and 

Protection.” Section 21F directs the U.S. Securities and Exchange Commission 

(SEC or Commission) to make monetary awards to eligible individuals who 

voluntarily provide original information that leads to successful Commission 

enforcement actions resulting in the imposition of monetary sanctions over 

$1,000,000, and certain related successful actions. The SEC can make awards 

ranging from 10 to 30 percent of the monetary sanctions collected, which are 

paid from the SEC’s Investor Protection Fund (IPF). In addition, Section 924(d) 

of Dodd-Frank directed the SEC to establish a separate office within the 

Commission to administer the whistleblower program. In February 2011, the 

Commission established the Office of the Whistleblower (OWB) to carry out this 

function.

On May 25, 2011, the Commission adopted final Regulation 21F to implement 

the provisions of Section 21F of the Exchange Act. Regulation 21F became 

effective on August 12, 2011. Among other things, Regulation 21F defines terms 

that are essential to the whistleblower’s program operations, establishes 

procedures for submitting tips and applying for awards – including appeals of 

Commission determinations, and whether and to whom to make an award; 

describes the criteria the SEC will consider in making award decisions, and 

implements Dodd-Frank’s prohibition against retaliation for whistleblowing.

OIG met with OWB’s Chief and Deputy Chief to discuss how the office handles 

whistleblower complaints from the initial submission of a complaint, to the eligible 

whistleblower receiving a monetary award. Our audit included a review of

OWB’s procedures, decision points, whistleblower personnel practices, and its 

communications with the whistleblower. 

The whistleblower process includes the following phases which are discussed in 

the report:

(1) Phase 1 - Intake/Triage.

(2) Phase 2 - Tracking. 

(3) Phase 3 - Claim for an Award.
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Congressional Requirement. Section 922 of Dodd-Frank required the Office of 

Inspector General (OIG) to conduct a review of the whistleblower protections that

were established under the amendments made by the section and to submit a 

report of findings not later than 30 months after Dodd-Frank’s enactment to the 

(1) Senate Committee on Banking, Housing, and Urban Affairs, and (2) House 

Committee on Financial Services. Dodd-Frank further required that OIG make 

this report available to the public on our website.

Objectives. Section 922 of the Dodd-Frank Act required OIG to evaluate the 

SEC’s Whistleblower Program and answer the questions as described below. 

OIG will examine whether the:

1. Final rules and regulation issued under the amendments of Section 

922 have made the whistleblower protection program (program) 

clearly defined and user-friendly.

2. Program is promoted on the SEC’s website and has been widely 

publicized.

3. Commission is prompt in:

a) responding to information provided by whistleblowers;

b) responding to applications for awards filed by 

whistleblowers;

c) updating whistleblowers about the status of their 

applications; and

d) otherwise communicating with the interested parties.

4. Minimum and maximum reward levels are adequate to entice 

whistleblowers to come forward with information, and whether the 

reward levels are so high as to encourage illegitimate whistleblower 

claims.

5. Appeals process has been unduly burdensome for the 

Commission.

6. Funding mechanism for the Investor Protection Fund established by 

Section 922 is adequate.

7. In the interest of protecting investors and identifying and preventing 

fraud, it would be useful for Congress to consider empowering 

whistleblowers or other individuals, who have already attempted to 

pursue a case through the Commission, to have a private right of 

action to bring suit based on the facts of the same case, on behalf 

of the government and themselves, against persons who have 

committed securities fraud.

8. The Freedom of Information Act (FOIA) exemption established in 

Section 21 F(h)(2)(A) of the Securities and Exchange Act of 1934, 

as added by the Dodd-Frank Act, 

a) Aids whistleblowers in disclosing information to the 

Commission.

b) What impact the FOIA exemption described above has had 

on the ability of the public to access information about the 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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regulation and enforcement by the Commission of securities; 

and 

c) Any recommendations on whether the exemption described

above should remain in effect.

The Inspector General was also given the discretion to review other matters 

related to the program as appropriate. 

Prior OIG Audit Reports. In March 2010, OIG conducted an audit of SEC’s now 

defunct bounty program and issued Assessment of the SEC’s Bounty Program, 

Report No. 474 on March 29, 2010. The objectives of this audit were to:

(1) Assess whether necessary management controls have been 

established and operate effectively to ensure bounty applications 

are routed to appropriate personnel and are properly processed 

and tracked; and 

(2) Determine whether other government agencies with similar 

programs have best practices that could be incorporated into the 

SEC bounty program. 

Although the SEC had an established bounty program for more than 20 years 

that rewarded whistleblowers for insider trading tips and complaints, OIG’s report 

found there were very few payments made under the program and the 

Commission received very few applications from individuals seeking a bounty. 

The report also found that the program was not widely recognized inside or 

outside the Commission. Finally, the report determined the SEC’s bounty 

program was not fundamentally well-designed to be successful.

Results. The implementation of the final rules made the SEC’s whistleblower 

program clearly defined and user-friendly for users that have basic securities 

laws, rules, and regulations knowledge. The whistleblower program is promoted 

on the SEC’s website and the public can access OWB’s website from the site in 

four or more possible ways to learn about the whistleblower program or to file a 

complaint with the SEC. Additionally, OWB outreach efforts have been strong 

and the SEC’s whistleblower program can be promptly located using internet 

search engines such as Google, Yahoo, and Bing. 

The SEC generally is prompt in responding to information that is provided by 

whistleblowers, applications for whistleblower awards, and in communicating with 

interested parties. However, the whistleblower program’s internal controls need 

to be strengthened by adding performance metrics.

The SEC’s whistleblower program’s award levels are comparable to the award 

levels of other federal government whistleblower programs, and range from 10 to 

a maximum 30 percent. Based on our review of past experience of other 
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whistleblower programs and practical concerns in the administration of the SEC’s 

program, we determined the SEC’s award levels are reasonable and should not 

change at this time. 

Currently no whistleblower appeals have been filed with the Federal Court of 

Appeals. However, one whistleblower has appealed a preliminary determination 

made by the Claims Review Staff. Based on our analysis of the appeals process 

we do not anticipate that it has been unduly burdensome for the Commission.

Further, we determined that the funding mechanism for the Investor Protection 

Fund established by Section 922 is adequate. However, we found at this time it 

is too premature to introduce a private right of action into the SEC’s 

whistleblower program because it has only been in place since August 2011. A 

fundamental change in approach would disrupt the system currently in place. 

Upon collecting additional data and assessing the effectiveness of the program 

after a reasonable amount of time has passed, OIG will be in a better position to 

opine on the usefulness of adding a private right of action to the SEC’s 

whistleblower program.

Finally, we found the FOIA exemption that was added by Dodd-Frank aids 

whistleblowers in disclosing information to the Commission by providing an 

additional safeguard for whistleblower confidentiality. This exemption essentially 

had no impact on the public’s ability to access information regarding the SEC’s 

regulation and enforcement of federal securities laws. Therefore, we determined 

the exemption should be retained.

Summary of Recommendations. This report contains two recommendations 

that were developed to aid the SEC in establishing performance metrics for key 

processes in its whistleblower program and to facilitate the Commission’s 

monitoring of the whistleblower program’s performance.

Management’s Response to the Report’s Recommendations. OIG provided 

Enforcement with the formal draft report on January 11, 2013. Enforcement

concurred with both recommendations in this report. OIG considers the report 

recommendations resolved. However, the recommendations will remain open 

until documentation is provided to OIG that supports each recommendation has 

been fully implemented. 

Enforcement’s response to each recommendation and OIG’s analysis of their

responses are presented after each recommendation in the body of this report.
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TABLE OF CONTENTS

Executive Summary......................................................................................................iii

Table of Contents ........................................................................................................ vii

Background and Objectives .................................................................................. 1 

Background ....................................................................................................... 1 

Objectives .......................................................................................................... 7 

............. 9 

......................................................9 

...................................12

....... 14 

. 21 

. 22 

....................................................................

....................................................................

.................................................................................................... 22 

..................................................................... 24 

............................................................................ 26 

..........................................................28

..........................................................................................30

OIG’s Audit and Response to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act’s Questions and Our Recommendations

Question 1: Determine Whether Final Rules and Regulation Issued Under 

the Amendments of Section 922 Have Made the Whistleblower Protection 

Program Clearly Defined and User-Friendly.

Question 2: Determine Whether the Whistleblower Program is Promoted 

on the SEC’s Website and has been Widely Publicized

Question 3: Determine Whether the Commission is Prompt in Responding 

to Information Provided by Whistleblowers; Responding to Applications for 

Awards Filed by Whistleblowers; Communicating with Interested Parties

Recommendation 1

Recommendation 2

Question 4: Determine Whether Minimum and Maximum Award Levels

are Adequate

Question 5: Determine Whether Appeals Process has been Unduly 

Burdensome for the Commission

Question 6: Determine Whether the Funding Mechanism for the Investor 

Protection Fund is Adequate

Question 7: Determine Whether a Private Right of Action Should be 

Added to SEC’s Whistleblower Program

Question 8: Determine Whether the FOIA Exemption Added by DoddFrank Aids Whistleblowers in Disclosing Information to SEC; What Impact 

it has had on the Ability of the Public to Access Commission Information; 

Should be Retained
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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Appendices

Appendix I: Abbreviations................................................................................33

...............................................................34

.......................................................................................... 37 

........................................................... 38 

....................39

............................................................. 41 

........10

.......... 11 

.............................................18 

..............................20

...24 

............................................................................................................. 32 

....................................................................................39

.................................................................................40

......................................40

Appendix II: Scope and Methodology

Appendix III Criteria

Appendix IV: List of Recommendations

Appendix V: Access to OWB’s Website from the SEC’s Website

Appendix VI: Management Comments

Tables 

Table1: OIG’s Review and Assessment of Final Rules – Clearly Defined

Table 2: OIG’s Review and Assessment of Final Rules – User-Friendly

Table 3: Length of Time OWB Takes to Issue Acknowledgement and 

Deficiency Letters to Whistleblower Applications

Table 4: OWB’s Telephone Callback Hotline Performance

Table 5: Comparison of Award Levels for Federal Whistleblower Programs

Table 6: SEC’s FOIA Exemption (b)(3) Denials During Fiscal Years 2010 

to 2012

Figures 

Figure 1: SEC Website.

Figure 2: SEC Questions and Complaints Webpage

Figure 3: OWB Website .
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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Background and Objectives 

Background 

Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(Dodd-Frank) amended the Securities Exchange Act of 1934 (Exchange Act) by

adding Section 21F, “Securities Whistleblower Incentives and Protection.” 

Section 21F directs the U.S. Securities and Exchange Commission (SEC or 

Commission) to make monetary awards to eligible individuals who voluntarily 

provide original information that leads to successful Commission enforcement 

actions resulting in the imposition of monetary sanctions over $1,000,000, and 

certain related successful actions. The SEC can make awards ranging from 10 

to 30 percent of the monetary sanctions collected, which are paid from its

Investor Protection Fund (IPF). In addition, Section 924(d) of Dodd-Frank 

directed the SEC to establish a separate office within the Commission to 

administer the whistleblower program. In February 2011, the Commission 

established the Office of the Whistleblower (OWB) to carry out this function. 

Section 922 of Dodd-Frank required the Office of Inspector General (OIG) to 

conduct a review of the whistleblower protections that were established under the 

amendments made by the section and to submit a report of findings not later than 

30 months after Dodd-Frank’s enactment to the: 

• Senate Committee on Banking, Housing and Urban Affairs; and 

• House Committee on Financial Services. 

Dodd-Frank further required that OIG make this report available to the public on 

our website. 

Overview of the SEC’s Whistleblower Program. On May 25, 2011, the 

Commission adopted final Regulation 21F to implement the provisions of Section 

21F of the Exchange Act. Regulation 21F became effective on August 12, 

2011.1

 Among other things, Regulation 21F defines terms that are essential to 

the whistleblower program’s operations, establishes procedures for submitting 

tips and applying for awards including appeals of Commission determinations 

whether/or to whom to make an award, describes the criteria the SEC will 

consider in making award decisions, and implements Dodd-Frank’s prohibition 

against retaliation for whistleblowing.

OIG met with OWB’s Chief and Deputy Chief to discuss how the office handles 

whistleblower complaints from the initial submission to an eligible whistleblower

receiving a monetary award. Our audit consisted of reviewing OWB’s 

 

1 Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934, 

Release No. 34-64545. 
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Report No. 511 

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procedures, decision points, whistleblower personnel practices, and its 

communications with whistleblowers. 

The whistleblower process includes the phases shown below and are discussed 

in the section that follows. 

(1) Phase 1 - Intake/Triage. 

(2) Phase 2 - Tracking. 

(3) Phase 3 - Claim for an Award. 

Phase 1 – Intake/Triage

During Phase 1 of intake and triage, whistleblowers submit a complaint to the 

SEC. Designated Division of Enforcement (Enforcement) staff review the 

complaint to determine whether it should be assigned for further investigation or 

based on their initial review no further action (NFA) is warranted. Whistleblowers 

can submit a complaint to the SEC through its public website, by mail, or by fax. 

Online submissions are automatically uploaded into the SEC’s Tips, Complaints, 

and Referrals (TCR) system. Complaints received by mail and fax are manually 

entered into the TCR system by the TCR intake group. 

The Office of Market Intelligence (OMI), located within Enforcement, reviews all 

TCRs and whistleblower complaints Enforcement receives.2

 OMI also triages all 

TCRs received by Enforcement. When OMI determines a complaint warrants 

further investigation, OMI assigns the complaint to one of the SEC’s 11 regional 

offices, an Enforcement specialized unit, or an Enforcement Associate Director

group located in the SEC’s Headquarters. Conversely, when it is determined that 

a complaint does not warrant further investigation or the complaint does not fall 

into Enforcement’s priorities, OMI will designate the complaint as NFA. NFAs get 

a second review before a final decision is made to close the complaint. In some 

cases NFAs may be referred to an external government agency or other agency 

for action.

On occasion the OWB Chief will determine that a whistleblower TCR is 

sufficiently specific, timely and credible which results in the TCR being expedited 

through the triage process and assigned to investigative staff by OMI. 

Communication with the Whistleblower. OWB sends an acknowledgement or 

deficiency letter to whistleblowers for all complaints that are received by mail or 

fax. This letter includes a TCR submission number and if applicable, a 

discussion of any deficiencies the office identified such as a missing TCR form

 

2 While OMI reviews all TCRs submitted through the public portal and most TCRs submitted internally, some 

internally-entered TCRs are routed, as appropriate, to the Office of Compliance Inspections and 

Examinations or the Office of Investor Education and Advocacy directly and not reviewed by OMI.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

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(which is required), missing signatures, etc.3 The letter further provides guidance 

to the whistleblower regarding resolving the issue. 

OWB also sends whistleblowers an acknowledgement letter when they 

subsequently submit additional information that is used to supplement their 

complaint. 

Whistleblowers that use the SEC’s website to submit a complaint through the 

TCR system receive a computer generated online confirmation receipt and are 

provided a TCR submission number.

Additionally, phone calls to the whistleblower hotline are returned within 24 

business hours. 

Phase 2 – Tracking

During Phase 2, OWB personnel monitor whistleblower submissions that are 

assigned to investigative staff. Also, during this Phase, OWB––tracks 

whistleblower cases to document the whistleblower’s cooperation and the 

content and helpfulness of whistleblower information, answers questions, and 

aids Enforcement staff by providing subject matter expertise regarding the 

whistleblower program.

Furthermore, OWB documents information needed to process whistleblower

awards. The office conducts quarterly conference calls with investigative staff to 

reconcile items that are tracked, with work that is assigned and resourced, and to 

discuss the quality of each whistleblower complaint.

A whistleblower complaint results in a successful action against a defendant if 

the monetary sanctions: 

• Exceed $1 million. The whistleblower may then be eligible for a

monetary award if all statutory criteria are met. 

• Do not exceed $1 million the whistleblower is not immediately 

eligible for a monetary award. However, if the case is aggregated 

with related SEC actions that arise out of a common body of 

operative facts and the total monetary sanctions in the related SEC 

actions collectively exceed $1 million, then the whistleblower may 

be eligible for an award. 

Communication with the Whistleblower. Enforcement’s policy requires its 

staff neither confirm nor deny that an investigation has been initiated in relation to 

whistleblower complaints the SEC receives. However, to further OWB’s outreach 

 

3 The final rules specify that a whistleblower complaint must be either submitted online through the 

Commission’s website, or the Form TCR must be either mailed or faxed to the SEC Office of the 

Whistleblower. Form TCR is located in the 17 CFR Section 249.100 final rules.
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Report No. 511 

Page 4 

efforts to whistleblowers, the Commission gave OWB authority to communicate 

with whistleblowers in limited circumstances. Pursuant to this authority, OWB 

works closely with Enforcement and OMI staff to engage in discretionary 

communication with whistleblowers when appropriate, under the following 

circumstances: 

• If NFA is determined, OWB can contact the whistleblower regarding 

the status of their complaint.

• If a whistleblower complaint has been assigned, OWB can inform 

the whistleblower their complaint has been reviewed and assigned 

to Enforcement staff.

Communication in these circumstances is not mandatory and is left to OWB’s 

discretion. Per Enforcement’s policy, OWB will not tell the whistleblower whether 

an investigation has been initiated, based on information the whistleblower has 

provided to the SEC. 

Phase 3 – Claim for an Award

During Phase 3 a whistleblower can claim an award if information he or she 

provided to OWB leads to, or significantly contributes to a successful SEC action. 

This action could result in the whistleblower receiving a monetary award if the 

sanctions ordered are over $1 million.

4

 OWB posts a Notice of Covered Action

on its website for cases that result in monetary sanctions over $1 million.5

 

Whistleblowers have 90 days to submit a claim for an award using the Form WBAPP (application). OWB’s website provides a notice date and a claim due date 

for each covered whistleblower action.

When OWB or Enforcement staff know that a whistleblower has provided a tip 

that led or significantly contributed to a successful action, they contact the 

whistleblower and inform him or her that a Notice of Covered Action has been 

posted on its website in connection with the tip or information he or she provided. 

OWB also advises the whistleblower on the process and timeline to apply for the 

award.

When a claimant submits an application, OWB reviews it to determine if it is 

procedurally complete and has the information needed to fully process the 

application. When the application does not have all the required information, 

OWB works with the whistleblower to ensure he or she successfully completes 

the application within the 90-day required timeframe by calling and/or sending a 

 

4 For the whistleblower program, a Commission action is considered a “covered action” under these 

circumstances. See Securities and Exchange Act of 1934, Section 21F(a)(1). 5 A Notice of Covered Action serves as a public notification that a particular case is potentially eligible for a 

whistleblower award, and it begins a 90-day deadline for any interested parties to file an application for a 

whistleblower award.
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Report No. 511 

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letter to the whistleblower that identifies deficiencies and advising the 

whistleblower on processes and deadlines.

OWB staff analyze the claims for awards to assess whether the whistleblower

satisfied the eligibility and definitional requirements for an award. When a

whistleblower is determined to have satisfied these criteria, OWB then uses four 

positive and three negative factors to derive a recommended award range 

between 10 to 30 percent of the dollar amount that was collected in the action. 

OWB’s process for its analyses includes reviewing and comparing the facts of a 

claim to the whistleblower statute and regulations, reviewing relevant databases 

for information regarding the case and subsequent enforcement action, 

interviewing Enforcement staff regarding the case and the whistleblower’s 

actions, interviewing the whistleblower and/or their counsel, and conducting due 

diligence and legal research to ensure proper consideration is given to each 

award claim.

The positive factors considered in recommending an award’s percentage include 

the significance of the whistleblower information, assistance and cooperation 

from the whistleblower in the investigation and proceedings, any law enforcement 

interest advanced by a potentially higher award, and whether the whistleblower

cooperated with the company’s internal compliance system in connection with 

the matter. The negative factors considered include the whistleblower’s

culpability, an unreasonable delay in reporting wrongdoing, and the 

whistleblower’s interference with the company’s internal compliance system. 

Though OWB considers both these positive and negative factors, the office has 

discretion in making award recommendations. 

When making an award recommendation OWB submits a recommendation 

package to Enforcement’s Claims Review Staff.

6

 They then meet with the 

Claims Review Staff. A preliminary determination is prepared and forwarded to 

the whistleblower. A whistleblower has 30 days to request a copy of the record 

the Claims Review Staff based its decision on; and/or to request a meeting with 

OWB staff. 

Whistleblowers can file an appeal with OWB within 60 calendar days of the later 

of: 

(i) The date of the preliminary determination; or

(ii) The date when OWB made materials available for the 

whistleblower’s review. 

 

6 Pursuant to SEC Regulation 21F (the final rules for the whistleblower program) Section 240.21F-10, 

members of the Claims Review Staff are designated by Enforcement’s Director to evaluate all timely 

whistleblower award claims in accordance with the criteria established in the final rules. Based on this 

evaluation, the Claims Review Staff will decide on a preliminary determination and consider appeals of their 

decision if submitted timely. The Claims Review Staff currently has five members, including Enforcement 

representatives from the home office, regional offices, and a representative from the Office of General 

Counsel. 
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Report No. 511 

Page 6 

When a whistleblower’s claim is denied in the preliminary determination phase

and the whistleblower fails to submit a timely response, the preliminary 

determination becomes the SEC’s final order. If the whistleblower submits a 

timely response to appeal the preliminary determination decision, OWB’s staff 

will assess the appeal and make a recommendation to the Claims Review Staff. 

OWB then meets again with the Claims Review Staff and the Claims Review 

Staff makes a proposed final determination. OWB then notifies the Commission 

of the proposed final determination. The Commission has 30 days to review this

determination. Any Commissioner can request within 30 days of receiving the 

proposed final determination notification, that the proposed final determination be 

reviewed by the Commission. If no Commissioner objects during the 30-day 

window, the proposed final determination becomes the final order and OWB then 

provides a copy of the final order to the whistleblower. 

After the final order has been issued, if a whistleblower has gotten an award that 

falls between 10 to 30 percent of the monetary sanctions collected in the action, 

the process is complete and the amount is not subject to appeal. However, if the 

whistleblower did not receive an award, or the award percentage is outside the 

statutory 10 to 30 percent that is collected from an action, the whistleblower may 

appeal the decision at the Federal Court of Appeals level. The Office of the 

General Counsel (OGC) handles these appeals for the Commission.

Whistleblower awards are paid out of the IPF that was established in the DoddFrank Act. Payments from the IPF are made through the SEC’s Office of 

Financial Management (OFM) and are based on amounts that were collected

from each individual case. A single payment can be made to the whistleblower if 

all monies are collected at the time the final order is issued, or the payment can

occur on a rolling basis if the monies are collected over time, after the final order 

is issued.

Communication with Whistleblowers. To the extent a whistleblower is known 

to have participated in a covered action, OWB contacts the whistleblower to 

advise him or her that a Notice of Covered Action was posted on OWB’s website 

and provide guidance on the processes and timeline to apply for an award.

An acknowledgement or deficiency letter is sent to anyone who submits a claim 

for an award to the SEC. The OWB may discuss with the whistleblower the 

evidence that was presented when assembling the claims recommendation 

package for the Claims Review Staff. 

Whistleblowers have the right to review the record, to request a meeting with 

OWB, and/or to appeal a preliminary determination decision. A copy of the 

preliminary determination, proposed final determination, if applicable, and the 

final order is sent to the whistleblower. 
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Report No. 511 

Page 7 

Objectives 

Objectives. Section 922 of the Dodd-Frank Act required OIG to evaluate the 

SEC’s Whistleblower Program and answer the questions described below. OIG 

will examine whether the: 

1. Final rules and regulation issued under the amendments of Section 

922 have made the whistleblower protection program (program) 

clearly defined and user-friendly.

2. Program is promoted on the SEC’s website and has been widely 

publicized.

3. Commission is prompt in:

a) responding to information provided by whistleblowers;

b) responding to applications for awards filed by 

whistleblowers;

c) updating whistleblowers about the status of their 

applications; and

d) otherwise communicating with the interested parties.

4. Minimum and maximum reward levels are adequate to entice 

whistleblowers to come forward with information, and whether the 

reward levels are so high as to encourage illegitimate whistleblower 

claims.

5. Appeals process has been unduly burdensome for the 

Commission.

6. Funding mechanism for the Investor Protection Fund established by 

Section 922 is adequate.

7. In the interest of protecting investors and identifying and preventing 

fraud, it would be useful for Congress to consider empowering 

whistleblowers or other individuals, who have already attempted to 

pursue a case through the Commission, to have a private right of 

action to bring suit based on the facts of the same case, on behalf 

of the government and themselves, against persons who have 

committed securities fraud.

8. The Freedom of Information Act (FOIA) exemption established in 

Section 21 F(h)(2)(A) of the Securities and Exchange Act of 1934, 

as added by the Dodd-Frank Act, 

a) Aids whistleblowers in disclosing information to the 

Commission.

b) What impact the FOIA exemption described above has had 

on the ability of the public to access information about the 

regulation and enforcement by the Commission of securities; 

and 

c) Any recommendations on whether the exemption described 

above should remain in effect.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 8 

The Inspector General was also given the discretion to review other matters 

related to the program as appropriate for this audit. 

Omission of Sensitive Information. Pursuant to Section 21F(h)(2) of the 

Exchange Act, we have not included any information in this report that could 

potentially reveal the identity of a whistleblower.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 9 

OIG’s Audit and Response to the Dodd-Frank 

Wall Street Reform and Consumer Protection 

Act’s Questions and Our Recommendations 

Question 1: Determine Whether Final Rules and

Regulation Issued Under the Amendments of 

Section 922 Have Made the Whistleblower 

Protection Program Clearly Defined and UserFriendly

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(A), we assessed whether the 

final rules and regulations issued under the amendments of Section 922 have 

made the whistleblower protection program clearly defined and user-friendly.7 

OIG determined that the implementation of the final rules have made the SEC’s

whistleblower program clearly defined and user-friendly for users that have basic 

securities laws, rules, and regulations knowledge. 

Final Rules Primary Audience Has Some Knowledge of 

Securities Laws, Rules, and Regulations

According to the OWB Chief, the final rules were primarily written for potential 

whistleblowers, compliance officers, corporate counsel, and law firms that are 

engaged in whistleblower litigation. The final rules generally exclude certain 

people from receiving awards under the whistleblower program such as directors, 

corporate officers, compliance officers, and auditors with some exceptions.

8

 The 

primary demographic for prospective whistleblowers include middle management

personnel, controllers, finance department personnel, and other employees who 

are involved in international transactions.9

 Prospective whistleblowers may 

submit tips or complaints related to securities law violations to the SEC. 

Prospective whistleblowers generally have some securities laws, rules, 

 

7 17 CFR Parts 240 and 249, Implementation of the Whistleblower Provisions of Section 21F of the 

Securities Exchange Act of 1934. 8 17 CFR 240 Section 21F-4(b)(4) excludes information from several sources as meeting the definition of 

providing “original information” required in the definition of a whistleblower. Some examples include 

information obtained under attorney-client privilege, if you obtain information because you were an officer, 

director, trustee, compliance officer, internal auditor, public accountant in an engagement required by the 

securities laws, etc. The rules provide for some exceptions whereby the above classes of people may 

submit original information as a whistleblower. 9 Employees involved in international transactions may have knowledge about the Foreign Corrupt Practices 

Act violations which is a reportable violation under the SEC’s whistleblower program.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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regulations knowledge and an understanding of the SEC’s role in the financial 

markets. 

The OWB has a hotline telephone number on its website that potential whistleblowers can call to inquire about the SEC’s whistleblower program. OWB’s Chief 

informed us that most hotline callers did not indicate they did not understand the 

rules, but instead, wanted reassurance from OWB’s staff regarding the filing 

process concerning their cases, before filing a formal complaint with the SEC. 

OIG reviewed the final rules from the perspective of an individual having basic 

knowledge of securities laws, rules, and regulations to determine whether they 

were clearly defined and user-friendly. Clearly defined final rules are specific, 

straightforward, and unambiguous. User-friendly final rules are easy to learn, 

use, understand, and navigate. OIG identified attributes of the final rules that 

make SEC’s whistleblower program “clearly defined” and “user-friendly.” As 

shown below, Tables 1 and 2 illustrate our review and assessment of the final 

rules. 

 Table 1: OIG’s Review and Assessment of Final Rules – 

Clearly Defined

Clearly Defined

Attributes

Text of Final Rules

Defines a whistleblower. You are a whistleblower if, alone or jointly 

with others, you provide the Commission with 

information pursuant to the procedures set 

forth in Section 240.21F-9(a) of this chapter, 

and the information relates to a possible 

violation of the federal securities laws 

(including any rules or regulations thereunder) 

that has occurred, is ongoing, or is about to 

occur. A whistleblower must be an individual. 

A company or another entity is not eligible to 

be a whistleblower. 

Explains the conditions 

required to receive an 

award. 

The Commission will pay an award or awards 

to one or more whistleblowers who: 

(1) Voluntarily provide the Commission 

(2) With original information 

(3) That leads to the successful enforcement 

by the Commission of a federal court or 

administrative action 

(4) In which the Commission obtains 

monetary sanctions totaling more than 

$1,000,000.

Clearly explains the 

pertinent terms related to 

receiving an award. 

The terms voluntarily, original information, 

leads to successful enforcement, action, and 

monetary sanctions are defined in Section

240.21F-4 of this chapter.

 Source: 17 CFR Parts 240 and 249
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 Table 2: OIG’s Review and Assessment of the Final Rules – 

User-Friendly

User-Friendly Attributes Text of Final Rules

Outlines procedures for 

submitting original 

information. 

To be considered a whistleblower . . ., you 

must submit your information about a 

possible securities law violation by either of 

these methods: 

(1) Online, through the Commission’s 

website located at www.sec.gov; or 

(2) By mailing or faxing a Form TCR (Tip, 

Complaint or Referral) (referenced in Section

249.1800 of this chapter) to the SEC Office 

of the Whistleblower, 100 F Street NE, 

Washington, DC 20549-5631, Fax (703) 813-

9322. 

Outlines procedures for 

making a claim for a 

whistleblower award. 

A claimant will have ninety (90) days from 

the date of the Notice of Covered Action to 

file a claim for an award based on that 

action, or the claim will be barred. 

To file a claim for a whistleblower award, you 

must file Form WB-APP, Application for 

Award for Original Information Provided 

Pursuant to Section 21F of the Securities 

Exchange Act of 1934 (referenced in Section

249.1801 of this chapter). You must sign this 

form as the claimant and submit it to the 

Office of the Whistleblower by mail or fax. 

 Source: 17 CFR Parts 240 and 249

OIG determined that an individual with basic securities laws, rules, and 

regulations knowledge can easily understand the SEC’s whistleblower program 

requirements by reading the final rules and information the SEC provides on its 

website. Further, the procedures for submitting original information (i.e., a 

whistleblower complaint) or an application for an award are easy to understand 

and navigate.10 Finally, OWB’s website, which is discussed in-depth in the next 

section, enhances the “user-friendliness” of the program by providing a direct link 

to the final rules and answering commonly asked questions about the program. 

The OWB hotline is also available to address questions about the SEC’s 

whistleblower program. Therefore, OIG determined that the final rules as 

implemented by OWB have made the program clearly defined and user-friendly 

for individuals having basic securities laws, rules, and regulations knowledge. 

 

10 The final rules state that the whistleblower must submit “original information” in order to be eligible for a 

whistleblower award. In order for a whistleblower submission (or complaint) to be considered original 

information, it must be: (i) derived from the whistleblower’s independent knowledge or analysis; (ii) not 

already known to the Commission from any other source, unless the whistleblower is the original source of 

the information; (iii) not exclusively derived from an allegation made in a judicial or administrative hearing, in 

a governmental report, hearing, audit, or investigation, or from the news media, unless the whistleblower is a 

source of the information; and (iv) provided to the Commission for the first time after July 21, 2010, DoddFrank Wall Street Reform and Consumer Protection Act enactment date.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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Question 2: Determine Whether the Whistleblower Program is Promoted on the SEC’s 

Website and has been Widely Publicized

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(B), OIG determined that the 

whistleblower program is promoted on the SEC’s website, that OWB’s website is 

readily accessible from the SEC’s website and the program has been widely 

publicized by a strong internet presence and OWB’s outreach efforts. 

The Whistleblower Program on the SEC’s Website and 

Accessibility to OWB’s Website 

OIG tested the ease of accessing whistleblower information on the SEC’s 

website to determine if this information is prominently displayed and promoted. 

We determined that information about the whistleblower program is prominently 

displayed on the SEC’s website and OWB’s website is easily accessible. SEC’s

website includes images related to SEC programs that rotate on its website every 

few seconds. One image consists of a large whistle with the caption 

“Whistleblower Information” that has a hyperlink to OWB’s website. The SEC’s

website also includes a “Submit a Tip or File a Complaint” hyperlink that takes 

users to a “Questions and Complaints” webpage. This webpage also includes 

hyperlinks that take the public directly to OWB’s website. 

Overall, OWB’s website can be accessed from SEC’s website in several different

ways. See Appendix V for detailed information on accessing OWB’s website. 

OIG’s review of the SEC’s website activity determined that OWB’s website

received 135,906 hits from August 2011 to September 2012. From July 2012 to 

September 2012, OWB’s website was ranked in the top 100 most viewed SEC 

uniform resource locators (URL).

11 

The SEC’s whistleblower program has been promoted on OWB’s website since 

August 12, 2011, when the whistleblower final rules went into effect.12 The 

website includes two videos from OWB’s Chief––a welcome video and a video 

explaining what happens to a whistleblower’s tip once the SEC receives it. OWB 

also coordinates with the Office of Investor Education and Advocacy and the 

Office of Public Affairs and “tweets” to approximately 200,000 followers each time 

a new group of Notices of Covered Actions is posted to its website. Also, OWB 

sends email alerts to GovDelivery13 when its website is updated.

14

 

11 In 2012, the website won the Chairman’s Award for Excellence in Information Technology. 12 See www.sec.gov/whistleblower. 13 GovDelivery is a vendor that provides communications services for public sector clients. 14 Request to close audit recommendation one from OIG’s report “Assessment of the SEC’s Bounty 

Program,” Report No 474. 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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OWB Website Presence on Major Internet Search Engines

OIG conducted an internet search using the key word “securities whistleblower”

to evaluate the SEC’s whistleblower program’s online presence and found 

OWB’s website on the first page of our Google, Yahoo, and Bing searches. 

Further, our use of the key word “whistleblower” found OWB’s website was 

located on the first page of Google15 and Yahoo’s16 internet search engines and 

on the second page for Bing.

17 

Outreach Efforts by the OWB

Internal Training. OWB posted training and guidance on both the Enforcement

and the Commission intranet sites regarding whistleblower issues and rules. 

OWB provided training to various SEC divisions, offices, and internal groups who 

are likely to be involved in whistleblower matters.

OIG reviewed a list of 40 different presentations that OWB personnel gave to 

SEC staff and others from May 2011 to November 2012. Eleven of these 40 

presentations were used in internal training sessions. Our review of the slides for 

the Miami Regional Office internal training given on April 30, 2012 included 

amongst other things, the OWB Chief’s background, office structure, office 

priorities, program creation, detailed overview of the program, and OWB staff’s 

contact information.

Public Speaking Appearances. OWB has a written policy regarding its staff 

accepting public speaking appearances to guard against the SEC appearing to 

favor the interests of one constituency over another. OWB’s three main 

constituencies are:

(1) Whistleblowers (general public); 

(2) Corporate counsel and compliance personnel; and 

(3) Plaintiff’s counsel. 

In deciding whether to make a public appearance, OWB’s policy requires a 

balance of factors such as, the expected size and constituency of the audience, 

the feasibility of participating remotely via video link or webinar, geography, and 

whether the group is considered an educational or lobby group. 

OIG found that of the 29 external presentations OWB gave from May 2011 to 

November 2012, four consisted of interviews for publications and 25 were for 

panels, summits, conferences and other professional events.

 

15 See www.goggle.com. 16 See www.yahoo.com. 17 See www.bing.com.
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Conclusion 

Because of the accessibility of OWB’s website from the SEC’s website, the 

program’s promotion through various social media methods, prominent presence 

on major internet search engines, and OWB’s internal and external outreach 

efforts, we determined the SEC’s whistleblower program is effectively promoted 

on its website and is widely publicized.

Question 3: Determine Whether the Commission 

is Prompt in Responding to Information Provided 

by Whistleblowers; Responding to Applications 

for Awards Filed by Whistleblowers; 

Communicating with Interested Parties

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(C), OIG determined the SEC 

was generally prompt in responding to information provided by whistleblowers, in 

responding to applications for whistleblower awards, and communicating with 

interested parties. However, the program’s internal controls need to be 

strengthened by adding performance metrics. 

The SEC, Enforcement, OWB and OMI have written policies and manuals that 

cover TCR processing which includes whistleblower TCRs, manual triage, 

whistleblower tracking and other procedures its staff use in processing 

whistleblower complaints that are submitted to the SEC.18

Whistleblower TCR Testing Attributes and Results

To determine the Commission’s promptness in responding to information that 

whistleblowers provide, OIG tested a statistical sample of 74 whistleblower TCRs 

that were submitted to the SEC from April 12, 2011 to September 30, 2012 using 

the following attributes: 19

• Date TCR was submitted.

• Who submitted the TCR (General public or SEC staff).20

• Date of initial review.

 

18 Manual triage is the process by which a TCR is evaluated to: (i) determine whether the information 

submitted suggests a possible violation of the federal securities laws; (ii) identify the relevant parties; and (iii) 

gather additional information to assess the credibility and potential risk associated with the TCR. Manual 

triage also includes making an initial determination as to whether and where the TCR should be assigned for 

resolution.

19 See Appendix II for our sampling methodology. 20 SEC staff manually enters TCRs into the TCR system received from whistleblowers in hard copy or 

facsimile.
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• Time elapsed between TCR submission and initial review.

• Date TCR was designated for No Further Action (NFA).

• Time elapsed between initial review and NFA.

• Date TCR was assigned to a point of contact (POC).

• Time elapsed between initial review and assigned to POC.

• Percentage of TCRs that were NFA and active Matters Under 

Inquiry (MUI)/Investigation.

• Whether active MUIs/Investigations were being tracked in OWB’s 

Case Tracking System.

The SEC, Enforcement, OWB, and OMI further have policies that govern how 

TCRs will be reviewed and allocated. The SEC’s promptness in responding to 

information whistleblowers provide is primarily determined by how quickly the 

TCR is processed while in Phase 1 manual triage. Although OMI generally 

responds promptly to whistleblower’s submissions and it has detailed written 

procedures for manual triage, OIG determined it has not established written 

timeliness standards for these processes. We found the average time TCR’s are 

in the manual triage process before it is either assigned to a POC or is 

designated as NFA is acceptable.

21 Although OWB tracks the progress of 

whistleblower TCRs in manual triage, OMI owns the process and is responsible 

for its performance. 

Our testing also revealed some general characteristics of the TCR whistleblower 

population such as: 

• The percentage of whistleblower TCRs submitted online by the 

public; 

• The percentage of whistleblower TCRs that were designated as 

NFA or were assigned to investigative staff; and 

• Whether OWB was actively tracking whistleblower cases.

Additionally our testing found that of 74 whistleblower TCR submissions in our 

sample, 85 percent (63 of 74) were submitted online and 15 percent (11 of 74) 

were submitted to the SEC in another format such as, through the mail or by 

fax.

22 In the later cases OMI or OWB staff manually entered the complaints into 

the TCR. 

Average Timeline for OMI Staff’s Initial Review. The average time it takes OMI 

staff to initially review a whistleblower TCR once OMI has received it, is less than 

one day. Moreover, our review of 74 complaints found that 53 percent (39 of 74) 

of complaints were reviewed the same day the SEC received it; 31 percent (23 of 

 

21 Based on their initial review, OMI determines that some complaints require NFA. The complaint is 

designated NFA and is closed in TCR. Every TCR is reviewed by two OMI attorneys before it is designated 

NFA. 22 The public may submit tips or complaints directly into TCR through the SEC’s public website. The SEC’s 

website has a hyperlink the public can use to submit tips and complaints that leads to the TCR portal.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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74) were reviewed in a day; 9 percent (7 of 74) were reviewed in 2 days; and 7 

percent (5 of 74) were reviewed in 3 days of being submitted to the SEC.

Average Timeline for Initial NFA Determination. OIG’s review of 51 NFA 

determinations found the average time from when the complaint is initially

reviewed by SEC staff, to when a NFA determination was made, was 31 days.

Our sample included a NFA determination being made the same day the TCR 

was submitted to the SEC, to one that was made 249 days after the TCR was 

submitted to the SEC. Overall, most NFA determinations were made in less than 

30 days. 

Our testing further found that 63 percent (32 of 51) of NFA determinations were 

made in less than 30 days. Twenty of the 32 were determined in less than 10 

days, while 37 percent (19 of 51) were made in 30 days or more.

POC Assignment Timeline. Whistleblower TCRs are assigned a POC when 

OMI staff determines the TCR warrants further investigation. Based on OMI’s 

allocation principles, the TCR is forwarded to a regional office, a specialized 

investigative unit, or a Headquarters Associate Director group in Enforcement. 

The average length of time from when the complaint is initially reviewed to a 

POC being assigned by OMI staff was 10 days.

The range of our testing consisted of a review of 38 POC assignments to include

those made the same day the SEC received the complaint and assignments that 

were made 44 days after the SEC received the complaint. Overall, OIG found 

that 92 percent (35 of 38) of complaints were assigned a POC in less than 30 

days after the SEC received it. Further, 25 of the 35 were assigned POCs in less 

than 10 days. Finally, 8 percent (3 of the 38) were assigned a POC in 30 days or 

more, after the SEC received the complaint.

NFA and Active MUIs/Investigations in Case Tracking System. OIG’s testing 

of whistleblower TCRs found that 69 percent (51 of 74) of complaints were 

designated NFA by OMI staff and 31 percent (23 of the 74) were still being 

actively worked on.23

OIG further reviewed and tested 18 TCRs that were identified as being related to 

active MUIs/Investigations and found 94 percent (17 of 18) were in OWB’s Case 

Tracking System.

24

 23 Designating a WB-TCR NFA does not necessarily reflect a negative assessment of the quality of 

information provided. Some TCRs may be designated NFA, if, for example, the tip related to a matter that is 

currently being investigated, or is more appropriate to be investigated by another regulatory law enforcement 

agency.

24 OWB’s system is used to track the progress of whistleblower cases and it helps ensure OWB attorneys 

maintain communication with investigative groups working whistleblower cases. The TCR from our sample 

that was not in the case tracking system is located in HUB, which is Enforcement’s tracking system for MUIs 

and investigations. 
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Documented Metrics. OIG requested documented metrics to support the 

number of days a TCR should be in manual triage before it is designated as 

NFA, or is assigned to a POC. The Acting Chief of OMI informed OIG that the 

office does not have written policy covering the number of days a TCR should 

remain in manual triage. She indicated the average length of time in the last year 

or so, was approximately 4 to 5 business days. However, some timeframes are 

much longer due to unusual circumstances, such as a TCR requiring 

independent privilege review prior to being assigned to investigative staff or 

additional information being needed from the complainant. OMI tracks the age of 

work items through weekly aging reports. Other than TCRs requiring privilege 

review, OMI encourages staff to act on work items within 60 days.

Although OMI is generally very responsive to TCRs in the manual triage process, 

there is no standard to determine whether the response time is prompt or not. 

Performance metrics are needed to strengthen the internal controls of the manual 

triage process. This is needed to ensure consistency in the SEC’s processes as 

new personnel are assigned to the office and as turnover occurs. A lack of 

performance metrics may result in the degradation of performance and pertinent to 

this review, unnecessarily long response times to whistleblower information.

Whistleblower Application Response

The final rules specify timelines and procedures for whistleblower award 

applications. When a Notice of Covered Action is posted to OWB’s website, 

whistleblowers have 90 days to submit an application for an award to the SEC 

using the Form WB-APP (application). When the application is received an OWB 

attorney logs it into a tracking sheet and then conducts a preliminary review of 

the application to determine its initial disposition. Each application receives 

either an acknowledgement or deficiency letter. If all the required information is 

properly addressed in the application, an acknowledgement letter is issued to the 

whistleblower applicant. If additional information is needed for the application, a 

deficiency letter is issued to the whistleblower applicant. 

Our review of 10 acknowledgement and deficiency letters found on average, 

OWB staff sent these letters to whistleblower applicants within 27 days after the

whistleblower’s application was received. Table 3 shown below, illustrates the 

results of our review of deficiency letters. When the 122 day outlier is removed 

from our sample, the average number of days the acknowledgment or deficiency 

letter is sent to whistleblowers drops to 16.
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Table 3: Length of Time OWB Takes to Issue Acknowledgement 

and Deficiency Letters to Whistleblower Applications

Sample 

Number

Application 

Received

Letter Sent Days 

Elapsed

1 10/19/11 11/18/11 30

2 2/7/12 6/8/12 122

3 2/24/12 3/6/12 11

4 8/6/12 8/28/12 22

5 2/8/12 2/15/12 7

6 10/28/11 11/18/11 21

7 11/9/11 11/18/11 9

8 2/22/12 2/27/12 5

9 2/2/12 2/27/12 25

10 4/24/12 5/8/12 14

Average 

Days

27

 Source: OWB Whistleblower Application Log and Acknowledgement/

 Deficiency Letters

In general, OWB is prompt in responding to applications for awards that are filed 

by whistleblowers. However, this is another area in the whistleblower program 

that OIG determined had no performance metrics. Although there were no 

adverse consequences for delayed response time shown in Table 3, sample 

number 2, there could have been adverse consequences. For example, if the 

whistleblower’s application was deficient, the deficiency letter would have arrived 

after the deadline for an award application (e.g., 90 days after the Notice of 

Covered Action was posted). This would have resulted in the whistleblower 

being ineligible for an award, unless special consideration was given by SEC. 

Updating Whistleblowers About the Status of Their Applications

Below are the ways OWB communicates with whistleblowers after they submit an 

award application to the SEC: 

• An acknowledgement or deficiency letter is sent to all applicants 

indicating whether the whistleblower’s application is procedurally 

correct.

• An OWB attorney who conducts a full review of a covered action 

generally communicates with whistleblowers who have submitted 

award applications under a covered action.

• A written notification of the Claims Review Staff’s preliminary 

determination and whistleblower rights in the awards claims 

process are sent to the applicant.

• There’s an opportunity for the whistleblower to request the record 

that was used by the Claims Review Staff in making the preliminary 

determination. 

• There’s an opportunity for the whistleblower to request a meeting 

with OWB to discuss the preliminary determination. 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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• If a claim is appealed to the Claims Review Staff, (1) a written 

acknowledgment of receipt of appeal and (2) the results of the 

appeal (i.e., proposed final determination), will be sent to the 

whistleblower. 

• If the preliminary determination is not appealed to the Claims 

Review Staff and no award is made, OWB sends a letter enclosing 

the final order of the Commission to the whistleblower. 

• Written notification of a proposed final determination being issued 

(whether pursuant to an appeal to the Claims Review Staff or by 

virtue of the preliminary determination becoming a proposed final 

determination under the statute in the case of an award being 

recommended). 

• Notification of the Commission’s final order. 

OWB uses different methods to update whistleblowers on the status of their 

applications. In most cases this communication is event-driven, (e.g., after a 

preliminary determination has been issued by the Claims Review Staff), rather 

than timeline driven. Our review determined that OWB’s communication with 

whistleblowers who submit award applications is effective and appropriate.

Communications with the Interested Parties

OWB’s communication with interested parties (the whistleblower and/or counsel 

for the whistleblower) is detailed in earlier sections of this report and was shown 

to be generally prompt. However, the whistleblower hotline voicemail offers 

another means whereby interested parties can communicate with OWB. OWB’s 

written policies specify that all voicemails received on its public telephone line are 

to be returned within 24 business hours and at least two OWB staff should be on 

the call.

We selected a sample of all calls that were received from various dates and 

tested them against OWB’s phone policy. Our testing included whether: (1) calls 

were returned within 24 business hours, and (2) calls were made with less than 

two OWB staff on the call. OWB’s callback hotline performance is shown in 

Table 4.
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 Table 4: OWB’s Telephone Callback Hotline Performance

Date Number of 

Calls

Less than 2 

Staff on Call

Calls Not 

Returned 

within 24 

hours

9/19/11 14 0 0

10/19/11 15 0 1

11/8/11 13 0 0

12/12/11 13 0 1

2/16/12 11 0 0

4/11/12 7 0 0

6/5/12 15 0 3

8/29/12 16 0 0

9/11/12 22 0 0

Total 126 0 5

 Source: OWB Phone Call Log

As illustrated in Table 4, OWB complied with its policy to have two staff on hotline 

call backs 100 percent of the time. Four percent (5 of 126) of OWB hotline calls 

were not returned with 24 business hours. Therefore, 96 percent of the time 

OWB complied with its call-back policy. For the 5 exceptions found in our 

sample, call backs were made within 48 hours after the calls were received. It 

should be noted that for some calls in OWB’s log such as hang ups, unintelligible 

messages, no call back number, and frequent/abusive callers––OWB did not 

return the call. 

Based on our review of OWB’s response to information provided by 

whistleblowers, their communication with whistleblowers and their prompt 

response to calls made on OWB’s hotline, we determined OWB promptly 

communicated whistleblower information to interested parties in whistleblower 

cases. 

Internal Controls for the Whistleblower Program

The Office of Management and Budget (OMB) Circular A-123, Management’s 

Responsibility for Internal Control, requires management to establish and 

maintain internal control to achieve the objectives of effective and efficient 

operations, reliable financial reporting, and compliance with applicable laws and 

regulations. Monitoring the effectiveness of internal control should occur in the 

normal course of business. In addition, periodic reviews, reconciliations or 

comparisons of data should be included as part of the duties of regular assigned 

personnel. We determined that adding metrics for certain key performance areas 

of the whistleblower program will assist OWB in monitoring program performance 

and making corrections as necessary.

In two particular areas OIG found that OWB and OMI have not established any 

performance metrics. First, with respect to OMI, there is no standard on how 

long a TCR should remain in manual triage. Our sample testing indicated the 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 21

average time a TCR is designated as NFA in the manual triage process is 31 

days. This included a TCR designated as NFA on the same day it was received, 

as well as a TCR that was designated as NFA 249 days after it was submitted to 

the SEC. On average TCRs assigned to a POC were in manual triage for 10 

days. These timelines may be appropriate; however there is no standard by 

which performance can be measured. Thoughtfully chosen performance metrics 

will strengthen the whistleblower program’s internal controls and ensure 

consistency in its processes and procedures as new personnel are assigned to 

OMI and turnover occurs. A lack of performance metrics may result in the 

degradation in performance and unnecessary long response times to 

whistleblower information.

OWB did not have a performance metric for the maximum length of time staff 

should respond to applications for awards filed by whistleblowers. Our audit 

found OWB sent an acknowledgement letter to a whistleblower applicant 122 

days after the application was submitted. Though there were no adverse 

consequences for this delayed response, there could have been consequences. 

For example, if the whistleblower application was deficient, the deficiency letter 

would have arrived after the award application deadline, which is 90 days after a 

Notice of Covered Action is posted. This would have resulted in the 

whistleblower being ineligible for an award, unless special consideration was 

given by the SEC. 

Conclusion 

OWB has developed an internal control plan that identifies several quantitative 

and qualitative key performance measures. An example of the quantitative

performance measure is “average length of time to respond to applications of 

awards filed by whistleblowers.” OWB and OMI should take this measure one 

step further and use the data collected on key performance measures to 

establish meaningful performance metrics that will enable the office to objectively 

measure the whistleblower program’s performance. For example, OWB could 

establish a policy that the office will send either an acknowledgement or 

deficiency letter to a whistleblower within 30 days after receiving the 

whistleblower’s award application. OMI could also establish a policy that TCRs 

should remain in manual triage no longer than 30 days unless a justification is 

provided to the OMI Chief. These examples are not intended to be prescriptive;

however, they are the types of metrics OWB and OMI should establish.

Recommendation 1: 

The Division of Enforcement should ensure that the Office of Market 

Intelligence (OMI) assesses the manual triage process and establishes

key performance metrics that can be used to measure process 

performance. These performance metrics should be documented in OMI’s 

written policies and procedures.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 22

Management Comments. Enforcement concurred with this 

recommendation. See Appendix VI for management’s full comments. 

OIG Analysis. We are pleased Enforcement concurred with this 

recommendation.

Recommendation 2: 

The Division of Enforcement should ensure that the Office of the 

Whistleblower (OWB) assesses the key performance measures that are 

contained in their internal control plan and develop performance metrics 

where appropriate. These performance metrics should be added to 

OWB’s internal control plan.

Management Comments. Enforcement concurred with this 

recommendation. See Appendix VI for management’s full comments. 

OIG Analysis. We are pleased Enforcement concurred with this 

recommendation.

Question 4: Determine Whether Minimum and 

Maximum Award Levels are Adequate 

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(D), our assessment of 

whether the minimum and maximum reward levels are adequate to entice 

whistleblowers to come forward with information and the reward levels are high 

enough to encourage illegitimate whistleblower claims found the SEC’s 

whistleblower award levels are comparable to other federal government agencies 

with the maximum award level being 30 percent in all the programs we reviewed. 

Based on the past experience of other whistleblower programs and practical 

concerns in the administration of the SEC’s program, we determined the SEC’s 

whistleblower minimum and maximum award levels are reasonable.

Review of Academic Literature on Minimum and Maximum 

Award Levels for Whistleblower Programs

Dodd-Frank Act allows qualifying whistleblowers to receive 10 to 30 percent of 

collected sanctions from successful lawsuits that are brought by the Commission, 

based on original information the whistleblower provided to the SEC. Since 

whistleblower award amounts were not a debated part of the Dodd-Frank Act, it 

appears the award levels may be based on the percentages used by other 

federal government agencies with whistleblower programs. Additionally, few 

empirical studies have been done on how monetary award levels influence 

whistleblowing behavior. The two most detailed studies we reviewed concluded 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 23

high rewards can motivate potential whistleblowers to come forward because the 

monetary amount may mitigate the cost of professional and social sanctions that 

can result. 

OWB Staff’s Views 

The OWB Chief informed OIG that it is important to have an award floor to 

incentivize whistleblowers to come forward. A guaranteed award amount 

mitigates the risk to whistleblowers’ employment prospects or reputation. 

Although he believes there’s no theoretical need for a ceiling on awards, OWB’s 

Chief feels it is useful for the office, for practical purposes to limit awards to 30

percent. Since OWB recommends the amount of each award based on merits 

without relation to other awards that are granted, this process is made simpler 

when limited to a clearly stated award range. The Chief further told OIG that the 

SEC’s current 10 to 30 percent range appears to be appropriate.

Views of Other Federal Government Agencies’ Whistleblower 

Programs

We solicited views from other federal government agencies with whistleblower 

programs on the minimum and maximum award levels that are established in 

their programs. Respondents typically indicated they did not have an opinion on 

award levels since the award levels were statutorily mandated. Further, 

respondents were not particularly concerned that award levels could induce 

illegitimate claims since they were confident their review process would weed out 

illegitimate claims through independent corroboration of asserted facts. One 

respondent suggested that a hard cap on whistleblower awards may be 

appropriate in cases where the recovery is substantial. However, the respondent 

also believed that whistleblower attorneys and advocacy groups would strongly 

oppose such caps. 

Comparison of Whistleblower Award Levels

As shown below, Table 5 compares the SEC’s whistleblower award levels to the 

award levels that are established at the U.S. Commodity Futures Trading

Commission (CFTC), U.S. Internal Revenue Service (IRS), and Department of 

Justice (DOJ).
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 24

 Table 5: Comparison of Award Levels for Federal

Whistleblower Programs

Government 

Agency

Minimum Award

Collected

Maximum 

Award

Collected

SEC 10% 30%

CFTC 10% 30%

IRS 15% 30%

DOJ

(Government)*

15% 30%

DOJ

(Non-government)*

25% 30%

 Source: OIG Questionnaire

* DOJ’s False Claim Act has two scenarios under which an individual 

may collect an award when the government: (1) intervenes; and 

(2) does not intervene.

Whistleblower award levels are comparable across federal government 

whistleblower programs. As shown in Table 5, the maximum whistleblower 

award level is 30 percent for each agency we identified. Based on the past 

experience of other whistleblower programs and practical concerns in 

administering the SEC’s program, we concluded the SEC’s minimum and 

maximum award levels are consistent with other federal agencies and appear to 

be reasonable.

Conclusion 

We determined the SEC’s minimum and maximum award levels are reasonable. 

Since there are few empirical studies on whistleblower award levels, to obtain 

cross-cutting results it may be beneficial if the Government Accountability Office 

would conduct a long-term, government-wide study on how whistleblower 

motivations are affected by award levels.

Question 5: Determine Whether Appeals Process 

has been Unduly Burdensome for the 

Commission

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(E), OIG’s assessment of 

whether the appeals process has been unduly burdensome on the Commission

found that, currently no whistleblower appeals have been filed with the Federal 

Court of Appeals. However, one whistleblower has appealed a preliminary 

determination that the Claims Review Staff made.25 Based on our analysis of the 

appeals process we do not believe it has been unduly burdensome on the 

Commission.

 

25 The date of the whistleblower appeal was November 6, 2012.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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Rights of Appeal in SEC’s Whistleblower Program

Section 21F of the Exchange Act provides the whistleblower with the opportunity 

to appeal SEC whistleblower final orders within 30 days after the order is issued 

to the Federal Court of Appeals under the following conditions:

• If the whistleblower has received an award that falls between 10 

to 30 percent of the monetary sanctions collected in the action, 

the process is complete and the amount is not subject to 

appeal.

• If the whistleblower was found to be ineligible for an award, or 

the award amount is outside of the statutory 10 to 30

percentage that is established for monetary sanctions, the 

whistleblower may appeal the decision at the Federal Court Of 

Appeals level.26 

The final rules also give the whistleblower a right to appeal a preliminary 

determination made by the Claims Review Staff. 

• Once the Claims Review Staff has issued a preliminary 

determination, the whistleblower has 30 days to request a copy 

of the record the Claims Review Staff used to make their 

decision and/or request a meeting with OWB staff to discuss 

their case.

• The claimant may file an appeal within 60 calendar days of the 

later of (i) the date of the preliminary determination, or (ii) the 

date when OWB made materials available for review.

Status of Appeals

To date no actual appeals of the Commission’s final order in a whistleblower 

case have been filed with the Federal Court of Appeals. Four whistleblowers

(includes two that submitted multiple applications for awards) have requested a 

copy of the record that the Claims Review Staff used in making preliminary 

determinations in their particular cases. One whistleblower sent an email to the 

OWB staff declaring their intention to appeal the preliminary determination. The 

OWB staff anticipates that the four whistleblowers who requested copies of the 

records will also appeal their preliminary determinations. To date, one appeal to 

the Claims Review Staff has been submitted to OWB. 

Appeals Process

When a whistleblower requests a copy of the record that the Claims Review Staff 

made a preliminary determination on, the OWB staff must review the record to

 

26 OGC handles the appeal for the Commission.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

 

Page 26

ensure sensitive information is not released and OWB redacts the record as 

appropriate. OWB staff coordinates with the whistleblower and has them sign a 

non-disclosure agreement before the record is released to them. In the event 

that an appeal of the SEC’s final order is filed in the Federal Court of Appeals, 

OWB would need to collect pertinent records to assist OGC with the litigation. 

These efforts by the Commission are reasonable and are generally expected in a 

regulatory agency. 

Conclusion

OIG determined that potential whistleblower appeals have not been unduly 

burdensome on the Commission.

Question 6: Determine Whether the Funding 

Mechanism for the Investor Protection Fund is 

Adequate

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(F), OIG determined that the 

funding mechanism for the IPF, which was established by Section 922, is 

adequate. The IPF was established at a funding level that has not required 

replenishment in over two years. If the IPF balance drops below $300 million, 

Enforcement and OFM will replenish it by identifying qualifying receipts for 

deposit. Currently, the fund is earning interest through short-term investments 

with the Bureau of Public Debt. 

Establishment of the Fund

The IPF was established in the fourth quarter of fiscal year 2010 to be available 

to the Commission, without further appropriation or fiscal year limitation for 

paying awards to whistleblowers and funding the work activities of OIG’s

employee suggestion program. The SEC is required to annually request and 

obtain apportionments from OMB to use these funds. OFM has developed 

policies and procedures for IPF that include a description of the whistleblower 

awards process, financial reporting requirements, budget request procedures, 

and procedures for replenishing the IPF. 

The IPF was first established in August 2010 with approximately $452 million of 

non-exchange revenue that was transferred to the fund from the SEC’s 

disgorgement and penalties deposit fund. In the SEC’s fiscal year 2013 

apportionment, nearly $452 million was still available in IPF. Since its 

establishment the IPF’s balance has not fallen below $300 million and no 

additional qualifying collections have been deposited into it. 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 27

Ongoing Funding Mechanism

The IPF can be replenished in the following ways:

• If the balance falls below $300 million, qualified collections 

identified by Enforcement and OFM’s Treasury Operations 

Branch can be used to replenish the fund.

27

• The SEC has authority to invest amounts in the IPF in overnight 

and short-term market-based Treasury bills through the Bureau 

of the Public Debt. The interest earned on the investments is a 

component of the balance of the IPF and is available to be used 

for the fund’s expenses. 

Use of the Investor Protection Fund 

In 2012, the IPF was used to pay one whistleblower award which amounted to 

approximately $46,000. As previously mentioned, the fund is also used to pay 

for OIG’s employee suggestion program activities which amounted to $112,000 

in fiscal year 2011 and $70,000 in fiscal year 2012.

28 Even though some 

expenditures were paid from the fund, its balance has not substantially changed 

since the fund was established. 

Conclusion

OIG determined that the funding mechanism for the IPF established by Section 

922 of the Dodd-Frank Act is adequate for three reasons. First, the IPF was 

initially established at a funding level that has not required replenishment since 

its inception. Secondly, if the IPF balance ever drops below $300 million 

Enforcement and OFM can replenish the fund by identifying qualifying receipts 

for deposit. Finally, interest earned on the IPF through short-term investments 

with the Bureau of Public Debt amounted to an additional contribution of 

$990,000 into the fund in fiscal year 2011, and $757,000 in fiscal year 2012. 

These contributions exceeded the total expenditures for both years. 

 

27 Exchange Act Section 21F(g)(3). 28 Exchange Act Section 21F(g)(2)(B).
Evaluation of the SEC’s Whistleblower Program January 18, 2013

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Question 7: Determine Whether a Private Right of 

Action Should be Added to SEC’s Whistleblower 

Program

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(G), OIG’s assessment of 

whether, in the interest of protecting investors and identifying and preventing 

fraud it would be useful for Congress to consider empowering whistleblowers or 

other individuals, who have already attempted to pursue a case through the 

Commission, to have a private right of action to bring suit based on the facts of 

the same case on behalf of the government and themselves, against persons

who have committed securities fraud––found that it is premature to introduce a 

private right of action into the SEC’s whistleblower program at this time, since the 

program is still relatively new and has only been in place since August 2011. 29 

Any fundamental changes in approach would disrupt the system that is currently 

in place. Upon collecting additional data and assessing the effectiveness of the 

program after a reasonable amount of time, the OIG will be in a better position to 

opine on the usefulness of adding a private right of action to the SEC’s 

whistleblower program.

Review of Academic Literature on Private Rights of Action for 

Whistleblower Programs

Since this provision of Dodd-Frank contemplates the possibility of a qui tam-type 

action for securities violations, our review of academic literature focused on the 

private rights of action under Rule 10b-5 of the securities regulation and the

False Claims Act (FCA) qui tam provision.30 

An overview of Rule 10b-5 offers insight into the issues that arise in the context 

of private enforcement of securities laws and the qui tam provision of FCA, which 

provides a procedural standard comparison to the right of action contemplated in

Dodd-Frank. Critics of private rights of action argue the private enforcement of 

broad regulations is likely to result in wasteful deterrence. Public entities may 

adjust enforcement levels, as well as the types of sanctions that are imposed on 

corporations in response to market realities, but private actors bring suit for the 

sole purpose of seeking monetary damages. Since qui tam actions could attract 

unscrupulous bounty hunters, a regulatory regime that relies on private 

enforcement may result in undesirable outcomes such as frivolous litigation, 

 

29 In the context of SEC’s whistleblower program a private right of action would allow an individual to sue a 

company or individual that violated the federal securities laws on behalf of themselves and the SEC.

30 The text of Dodd-Frank asks OIG to study whether it would be useful “for Congress to consider 

empowering whistleblowers or other individuals, who have already attempted to pursue the case through the 

Commission, to have a private right of action to bring suit based on the facts of the same case, on behalf of 

the government and themselves,” which suggests a qui tam right of action. Dodd-Frank Wall Street Reform 

and Consumer Protection Act Section 922(d)(1)(G), 124 Stat. 1376, 1849 (2010). For comparison to the 

language of the qui tam provision of the False Claims Act, see 31 U.S.C. Section 3730(b)-(c) (2010).
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 29

collusion between plaintiffs and defendants, and delays in bringing a suit for the 

purpose of increasing the bounty award amount. 

Some studies we reviewed concluded the best way to ensure that private 

enforcers’ interests are aligned with taxpayers’ is to permit a public regulator to 

oversee the proposed lawsuits. A public enforcer can allow legitimate claims to 

go through, but deny harmful, profit-seeking ones from reaching the judicial 

system. This gatekeeping mechanism would reduce the risk of the system being 

abused. Therefore, if Congress grants a private right of action to individuals who 

want to sue for securities fraud on behalf of the government and themselves, the 

studies suggest it is important to include the condition that a public enforcer has 

the authority to oversee such litigation and to exercise veto power over 

opportunistic lawsuits.

Views of the OWB Chief

OWB’s Chief informed OIG it is premature to consider the benefits of significantly 

restructuring the SEC’s approach to a whistleblower award program and

sufficient time has not passed to assess the effectiveness of the current program 

which has only been in-place since August 12, 2011. The OWB Chief is 

particularly concerned that the system currently in place would be disrupted if a 

private right of action were added to the enforcement mechanisms. Additionally, 

he anticipated adjustments to the OWB program that may address some of the 

same issues a private right of action could remedy. He suggested data should 

be gathered on the program’s effectiveness before considering a dramatic 

enforcement measure such as adding a private right of action to the existing 

laws.

Views of Other Whistleblower Programs

OIG solicited the views of other federal government agencies with whistleblower 

programs on the use of a private right of action in their programs. In general the 

respondents’ views were against a private right of action. Two respondents

suggested private rights of action tend to weaken the government’s ability to 

shape and develop the law and may lead to wasteful, detrimental developments, 

such as pursuing a position that is inconsistent with executive and judicial 

interpretations. Another respondent suggested a private right of action for 

whistleblowers in the securities industry could lead to moral hazard. For 

example, an uninjured plaintiff, who would not have a standing without the 

whistleblower statute, could short a company’s stock and then sue the company 

for an alleged violation of the securities laws in the hopes the suit would harm the 

stock price. On the positive side, one respondent said that a private right of 

action may be helpful when a government agency’s resources are constrained. 

However, this may mean that private individuals pursue a case that the 

government does not think should be pursued and would not have spent 

resources on anyway.
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 30

Conclusion

Our research determined that a private right of action to bring a suit based on the 

facts of a whistleblower complaint that previously was considered by the SEC, 

may be useful in furthering the interest of protecting investors and preventing 

fraud in some cases. However, the unintended consequences of such a 

legislative move is generally undesirable. It is premature to consider the benefits 

of significantly restructuring the SEC’s approach to the whistleblower award 

program. Sufficient time has is needed to assess the effectiveness of the current 

program. Fundamental changes in the current approach would disrupt the 

system that is currently in place. Upon collecting additional data and assessing 

the effectiveness of the program in another two or three years, OIG will be in a 

better position to opine on the usefulness of adding a private right of action to the 

SEC’s whistleblower program.

Question 8: Determine Whether the FOIA 

Exemption Added by Dodd-Frank Aids Whistleblowers in Disclosing Information to SEC; What 

Impact it has had on the Ability of the Public to 

Access Commission Information; Should be 

Retained

Pursuant to the Dodd-Frank Act, Section 922(d)(1)(H), OIG further assessed: 

(a) Whether the Freedom of Information Act (FOIA) exemption 

established in Section 21 F(h)(2)(A) of the Securities and Exchange 

Act of 1934, as added by the Dodd-Frank Act, aids whistleblowers 

in disclosing information to the Commission; 

(b) What impact the FOIA exemption described above has had on the 

ability of the public to access information about the regulation and 

enforcement by the Commission of securities; and 

(c) Any recommendations on whether the exemption described above 

should remain in effect.

OIG determined that the FOIA exemption added by Dodd-Frank aids 

whistleblowers in disclosing information to the Commission by serving as an 

additional safeguard for whistleblower confidentiality. Further, this exemption

essentially had no impact on the public’s ability to access information about the 

Commission’s regulation and enforcement of securities. Therefore, we 

determined the exemption should be retained. 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 31

FOIA Exemption (b)(3) Added Into the Dodd-Frank Act

There are nine FOIA exemptions the Commission and other federal agencies can 

use to deny the release of certain information the public may request. Exemption 

3, 5 U.S.C. Section 552(b)(3)(B) or (b)(3) pertains to information that is prohibited 

from disclosure by another federal law. 

The Dodd-Frank Act which became effective in July 2010, included FOIA 

exemption (b)(3), which provides an additional safeguard to whistleblower’s 

confidentiality and aids whistleblowers in disclosing information to the 

Commission. FOIA exemption (b)(3) states the following:

Except as provided in subparagraphs (B) and (C), the Commission 

and any officer or employee of the Commission shall not disclose 

any information, including information provided by a whistleblower 

to the Commission, which could reasonably be expected to reveal 

the identity of a whistleblower, except in accordance with the 

provisions of section 552a of title 5, unless and until required to be 

disclosed to a defendant or respondent in connection with a public 

proceeding instituted by the Commission or any entity described in 

subparagraph (C). For purposes of section 552 of title 5, this 

paragraph shall be considered a statute described in subsection 

(b)(3)(B) of such section.

Information that is withheld on the basis of the new FOIA exemption has always 

been withheld by the SEC’s FOIA office, based on other similar exemptions, in 

addition to exemption (b)(3), which indicates that whistleblower confidentiality 

was addressed under FOIA’s pre-existing exemptions.31 We discussed the use 

of FOIA exemption (b)(3) with the SEC’s FOIA Officer and determined the 

following:

• Whistleblower records are housed in the TCR system, and 

whistleblower records can be identified in TCR. The FOIA office

will determine whether a FOIA request is related to a whistleblower 

based on whether or not the records requested are flagged as 

such. 

• Under this exemption the FOIA office has no discretion regarding 

the release of “information provided by a whistleblower to the 

Commission, which could reasonably be expected to reveal the 

identity of a whistleblower.” Under other exemptions the FOIA 

office has discretion in weighing the privacy interest of the 

individual against the public’s right to know the information. 

Therefore, the new exemption allows the FOIA office to withhold 

 

31 Examples of the other FOIA exemptions that have caused SEC to withhold a whistleblower’s identity 

include: (i) Exemption 6 – information involving matters of personal privacy; and (ii) Exemption 7 – records 

or information compiled for law enforcement purposes . . . among others. 
Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 32

more information than would be withheld based on other similar 

exemptions. However, in practice this has never been the case.

The SEC’s FOIA Officer informed us the FOIA office has always withheld 

information based on FOIA exemption (b)(3), as well as other similar exemptions. 

Frequency that FOIA Exemption (b)(3) is Used at SEC

OIG reviewed the FOIA office’s statistics for fiscal years 2010 to 2012, regarding 

the frequency and use of FOIA exemption (b)(3). Our review found the 

exemption was not the sole reason for denying information request. Further, we 

determined the Dodd-Frank exemption has not impacted the public’s ability to 

access information about the SEC’s regulation and enforcement of securities, 

since information requested would have been withheld anyway under another 

FOIA exemption. We determined the exemption provides additional assurance 

to the whistleblower that their identity will be protected. The OWB Deputy Chief 

told OIG the exemption was a vital feature of the whistleblower program because 

it gives whistleblowers an additional level of comfort. OIG’s overall results of our 

review of the SEC’s FOIA exemption (b)(3) denials for fiscal years 2010 to 2012

are found below in Table 6.

Table 6: SEC’s FOIA Exemption (b)(3) Denials 

During Fiscal Years 2010 to 2012

Fiscal Years 2010 to 2012 Denials Number 

Number of FOIA requests processed 33,315

Number of times exemption (b)(3) used 26

Number of times exemption (b)(3) added by 

Dodd-Frank used 

7

Number of times request denied on the basis 

of exemption (b)(3) added by Dodd-Frank in 

conjunction with other exemptions

7

Number of times request denied solely on the 

basis of exemption (b)(3) added by the DoddFrank Act

0

 Source: SEC’s FY 2010 – 2012 Annual FOIA Report

nclusion

hough FOIA Exemption (b)(3) established in Dodd-Frank allows the FOIA 

ce to withhold more information than would have been withheld under other 

mptions, in practice this has not been the case. Therefore, the public’s ability 

ccess information about the SEC’s regulation and enforcement of securities 

ains essentially unchanged by this new exemption. OIG determined that 

istleblowers gained additional confidentiality safeguards and the Dodd-Frank 

IA exemption should remain in effect. 

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Appendix I

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 33

Abbreviations

CFTC U.S. Commodity Futures Trading

Commission

COSO Committee of Sponsoring 

Organizations of the Treadway 

Commission

DOJ Department of Justice

Enforcement Division of Enforcement

Exchange Act Securities Exchange Act of 1934

Dodd-Frank Dodd-Frank Wall Street Reform and 

Consumer Protection Act

FCA False Claims Act

FOIA Freedom of Information Act

IPF Investor Protection Fund

IRS U.S. Internal Revenue Service

MUI Matters under inquiry

NFA No Further Action

OFM Office of Financial Management

OGC Office of General Counsel

OMB Office of Management and Budget

OIG Office of Inspector General

OMI Office of Market Intelligence

OWB Office of the Whistleblower

POC Point of Contact

TCR Tips, Complaints, and Referrals

SEC or Commission U.S. Securities and Exchange 

Commission
Appendix II

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 34

Scope and Methodology

We conducted this performance audit in accordance with generally accepted

government auditing standards. Those standards require that we plan and

perform the audit to obtain sufficient, appropriate evidence to provide a

reasonable basis for our findings and conclusions based on our audit objectives. 

We believe that the evidence obtained provides a reasonable basis for our

findings and conclusions based on our audit objectives.

Scope. Our audit focused on the SEC’s policy and procedures for processing 

whistleblower complaints. As required by Dodd-Frank Section 922, we also 

reviewed the operations of OFM and the FOIA office related to the whistleblower 

program. Additionally, we tested whistleblower TCRs submitted to the SEC from 

August 12, 2011 to September 30, 2012.

Methodology. To meet the objective of determining whether the whistleblower 

final rules made the whistleblower program clearly defined and user-friendly, we 

defined and examined “clearly defined” and “user-friendly” attributes and 

reviewed the final rules to determine how these attributes were presented in the 

text of the final rules. Further, we reviewed and tested the SEC’s website 

pertaining to the whistleblowers program to determine if it was user-friendly.

To meet the objective of determining whether the whistleblower program is 

promoted on the SEC’s website and has been widely publicized, we tested the 

accessibility of OWB’s website from the SEC’s public homepage, reviewed 

webpage statistics, and assessed the public’s accessibility on major internet 

search engines to the SEC’s whistleblower program and whistleblower 

information. Finally, we reviewed OWB’s use of social media sources and its 

internal and external outreach efforts to promote the whistleblower program. 

To meet the objective of determining the SEC’s promptness in responding to 

whistleblower information, award applications, and general requests for 

information, we walked through the whistleblower process with OWB and 

reviewed Enforcement, OWB, and OMI policies and procedures on the 

whistleblower program and TCR. We also tested a statistical sample of 

whistleblower TCRs using different attributes related to processing timeliness. 

Finally, we tested OWB’s promptness in responding to award applications and 

OWB’s hotline telephone calls.

To meet the objectives of determining whether the whistleblower minimum and 

maximum award levels were adequate and whether the SEC’s whistleblower 

program should include a private right of action, we reviewed academic literature 

on both topics and solicited opinions from OWB and other federal government 
Appendix II

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 35

agencies with whistleblower programs. We also compared key features of SEC’s 

whistleblower program with these agency’s whistleblower programs.

To determine whether the appeals process was unduly burdensome for the 

Commission we reviewed potential appeals submitted to the SEC and reviewed 

the appeal processes and procedures. 

To determine whether the funding mechanism for the IPF is adequate, we 

reviewed OFM’s IPF policies and procedures, the IPF financial statements, and 

budget documents. Additionally, we reviewed the history of the IPF to include its 

establishment, expenditures, and investing activities. Finally, we reviewed the 

procedures established for replenishing the fund.

Finally, to determine whether the FOIA exemption added by Dodd-Frank aids 

whistleblowers in disclosing information to the Commission, its impact on the 

ability of the public to access SEC information, and whether the exemption 

should be retained, we reviewed the SEC’s annual FOIA report for fiscal years 

2010 to 2012, interviewed SEC’s FOIA Officer, and reviewed the history of SEC’s 

use of the new exemption.

Internal Controls. The Internal Control—Integrated Framework, published by

the Committee of Sponsoring Organizations of the Treadway Commission

(COSO) provides a framework for organizations to design, implement, and

evaluate controls that facilitate compliance with federal laws, regulations, and

program compliance requirements.

32 For our audit, we based our assessment of

OWB’s internal controls significant to our objectives on the COSO framework as 

follows: control environment, risk assessment, control activities, information and 

communication, and monitoring. Among the internal controls we assessed were 

the Commission and Enforcement’s controls related to processing TCRs, the 

annual risk assessment for the Federal Manager’s Financial Integrity Act 

assurance statement, OWB’s policies, procedures, OWB’s internal controls plan, 

and OWB’s controls over external communications of the whistleblower 

program.

33

Use of Computer-Processed Data. We used the SEC’s TCR system to 

generate the universe of whistleblower TCRs that were submitted to the SEC 

from August 12, 2011 to September 30, 2012. We also used the TCR system to 

retrieved key documents for our whistleblower TCR testing.

Statistical Sampling. To review the SEC’s promptness in responding to 

whistleblower information OWB used the TCR system to generate whistleblower 

TCR’s that were submitted to the SEC from August 12, 2011 through September 

30, 2012. Our audit universe consisted of 3,335 whistleblower TCRs. 

 

32 Committee of the Sponsoring Organizations of the Treadway Commission, Internal Control – Integrated

Framework (1992). 33 Federal Manager’s Financial Integrity Act of 1982.
Appendix II

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 36

We used the EZ Quant Statistical Analysis Audit Software to generate a 

statistical sample of 74 whistleblower TCRs.

34 Our sample was designed to 

project rates of occurrence (e.g., percentage of whistleblower TCRs that were 

submitted by the public) with 90% confidence and the point estimation was within 

± 5% of the universe of TCRs under consideration.

Prior Coverage. The OIG conducted an audit of SEC’s now defunct bounty 

program and issued Assessment of the SEC’s Bounty Program, Report No. 474 

on March 29, 2010. The objectives of this audit were to: 

(1) Assess whether necessary management controls have been 

established and operate effectively to ensure bounty 

applications are routed to appropriate personnel and are 

properly processed and tracked; and 

(2) Determine whether other government agencies with similar 

programs have best practices that could be incorporated into 

the SEC bounty program. 

The report found that although the SEC had a bounty program in-place for more 

than 20 years that rewarded whistleblowers for insider trading tips and 

complaints, there were very few payments made under the program. The report 

further found the Commission received few applications from individuals seeking 

bounties over this 20-year period and the program was not widely recognized 

inside or outside the Commission. Finally, the report determined the bounty 

program was not fundamentally designed to be successful. 

 

34 EZ Quant is statistical analysis software provided by the Defense Contract Audit Agency at their public 

website. It is freeware and its use and copying is unrestricted. EZ Quant has the capability to perform both 

attribute and variable sample selection and evaluation.
Appendix III

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 37

Criteria

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 

Section 922. Section 922 outlines the statutory requirements for SEC’s 

whistleblower program and required OIG to conduct an evaluation of the SEC’s 

whistleblower program. 

Securities and Exchange Act of 1934, Section 21F. This is an amendment in

Dodd-Frank that covers the SEC’s whistleblower program.

17 CFR Parts 240 and 249, Implementation of the Whistleblower Provisions of 

Section 21F of the Securities and Exchange Act of 1934. The final rules provide 

key definitions, determine who is eligible for a whistleblower award, and outline the 

procedures for submitting whistleblower complaints and applications for awards.

 

Enforcement Manual. This is Enforcement’s internal manual and it serves as a 

reference guide its staff uses to aid with investigating potential violations of 

federal securities laws. The manual also includes general guidance on the 

SEC’s whistleblower program.

SEC, Enforcement and OWB Policy on Handling TCRs. Internal SEC policy 

and procedures on handling tips, complaints, and referrals.

OWB Policies and Procedures. This includes OWB’s policy and procedures on 

the SEC whistleblower program’s operations, guidance on tracking and 

documenting whistleblower claims, procedures for notifying whistleblowers on the 

status on their complaints, OWB’s hotline telephone call protocol, etc. 

OMI Triage Manual and Allocation Principles. OMI’s internal policy and procedures 

covering the review, disposition and allocation of TCRs the SEC receives. 

OFM Policies and Procedures on the Investor Protection Fund. OFM’s 

internal policy and procedures covering IPF, to include financial reporting 

requirements, budget submissions, and replenishing the IPF.

5 USC Section 552, Freedom of Information Act. FOIA requires federal 

agencies to make certain agency materials available for public inspection and 

copying. FOIA also provides for exemptions to this requirement.

OMB Circular A-123, Management’s Responsibility for Internal Control. 

Establishes that management has a fundamental responsibility to develop and 

maintain effective internal controls. 
Appendix IV

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 38

List of Recommendations

Recommendation 1: 

The Division of Enforcement should ensure that the Office of Market Intelligence 

(OMI) assesses the manual triage process and establishes key performance 

metrics that can be used to measure process performance. These performance 

metrics should be documented in OMI’s written policies and procedures.

Recommendation 2: 

The Division of Enforcement should ensure that the Office of the Whistleblower 

(OWB) assesses the key performance measures that are contained in their 

internal control plan and develop performance metrics where appropriate. These 

performance metrics should be added to OWB’s internal control plan.
Appendix V 

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 39

Access to OWB’s Website from the SEC’s Website

There are four or more possible ways the public can access OWB’s website to 

learn about the whistleblower program or file a complaint with the SEC. The

SEC’s public website consists of two hyperlinks: (1) Submit a Tip File a 

Complaint, and (2) Large “whistle” image, as shown in Figure 1, that takes the 

public to OWB’s website. The third way to reach OWB’s website from the SEC’s 

homepage is by using the search engine on the SEC’s public website. OIG’s use 

of the keyword “whistleblower” and the option “SEC Documents” in the search 

engine resulted in 397 options, the first of which led us to OWB’s website. 

Finally, from the SEC’s public website, the “Education” drop down menu has a

“File a Tip or Complaint,” option that takes the public to OWB’s website. Overall, 

we found the quickest way to access OWB’s website is by clicking on the 

“Whistle” hyperlink. 

 Figure 1: SEC Website

 Source: http://www.sec.gov

When the hyperlink “Submit a Tip File a Complaint” is clicked from the SEC’s 

website, the public is taken to a “Questions and Complaints” webpage which 

consists of four options regarding various SEC programs that can be accessed, 

as illustrated below in Figure 2. 
Appendix V 

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 40

 Figure 2: SEC Questions and Complaints Webpage

 Source: http://www.sec.gov/complaint/select.shtml

The third option “Learn about the whistleblower provisions,” feeds directly into 

OWB’s website. OWB’s website is shown in Figure 3. 

 Figure 3: OWB Website

 Source: http://www.sec.gov/whistleblower
Appendix VI

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 41

Management Comments
Appendix VI

Evaluation of the SEC’s Whistleblower Program January 18, 2013

Report No. 511 

Page 42
Audit Requests and Ideas

The Office of Inspector General welcomes your input. If you would like to 

request an audit in the future or have an audit idea, please contact us at:

U.S. Securities and Exchange Commission

Office of Inspector General

Attn: Assistant Inspector General, Audits (Audit Request/Idea)

100 F Street, N.E.

Washington D.C. 20549-2736

Tel. #: 202-551-6061

Fax #: 202-772-9265

Email: oig@sec.gov

Hotline 

To report fraud, waste, abuse, and mismanagement at SEC, 

contact the Office of Inspector General at:

Phone: 877.442.0854

Web-Based Hotline Complaint Form:

www.reportlineweb.com/sec_oig