SEC Issues Report on FY 2011 Whistleblower Tips on FCPA, Etc.
The Securities and Exchange Commission has issued its first annual report on the Dodd-Frank Whistleblower Program for fiscal year 2011. Most whistleblower tips submitted to the SEC concerned complaints related to the Foreign Corrupt Practices Act and market manipulation, among other topics. Additionally, most tips were submitted by individuals in California, New York, and foreign countries, including China. However, because the final rule establishing the program became effective in August 2011, only seven weeks of data was available for FY 2011. As a result, the SEC states it is too early to identify any specific trends or conclusions from the data collected to date.
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(The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111--203) amended the Securities Exchange Act of 1934 to provide a new whistleblower rewards for securities violations, including violations of the FCPA, which prohibits individuals or companies from bribing foreign government officials to obtain or retain business. The SEC established this whistleblowers incentives and protection program in August 2011 to award individuals who voluntarily provide original information that leads to successful SEC enforcement actions and result in monetary sanctions over $1 million. Awards are 10% to 30% of the monetary sanctions collected and are paid from an Investor Protection Fund, which started with a balance of $451.9 million in FY 2011.)
3.9% of Tips Submitted Relate to FCPA Complaints
In the period August 12 through September 30, 2011, 334 whistleblower tips were received. The most common complaint categories were market manipulation (16.2%), corporate disclosures and financial statements (15.3%), offering fraud (15.6%), insider trading (7.5%), unregistered offerings (5.4%), trading and pricing (5.1%), and Foreign Corrupt Practices (3.9%), etc.
Most Domestic Tips from CA & NY, Foreign Tips from China, UK, Etc.
The SEC received whistleblower submissions from individuals in 37 states, as well as from several foreign countries. States with the most whistleblower submissions were California (10%), New York (7%), Florida (6%), and Texas (5%), etc.
Cumulatively, whistleblower tips from foreign countries accounted for 10% of all tips received. These tips were received from countries including China (31.3%), the United Kingdom (28.1%), Australia (9.4%), Spain (6.3%), the Netherlands (6.3%), etc.
SEC Did Not Pay Any Whistleblower Awards in FY 2011
The award process begins following the entry of a final judgment or order for monetary sanctions that exceeds $1 million. Following the entry of such a judgment or order, a Notice of Covered Action is published on the SEC's website, after which individuals have 90 days to apply for an award.1 Because the 90-day application period had not passed with respect to any notices of Covered action as of the end of FY 2011, applications for awards had not yet been processed. Accordingly, the SEC did not pay any whistleblower awards in FY 2011.
1The report states that it is anticipated that as the program evolves, the SEC's Office of the Whistleblower's standard practice will be to provide individualized notice to whistleblowers who may have contributed to the success of an SEC action resulting in monetary sanctions exceeding $1 million.
(See ITT's Online Archives 10072230 for summary of the Dodd-Frank Act.
See ITT's Online Archives 11081213 for detailed summary of the SEC's whistleblowers incentives and protection program.
See ITT's Online Archives 11081516 for summary of the SEC's new webpage for whistleblower violations and awards.
See ITT's Online Archives 11011023 for summary of trade concerns that the whistleblowers incentives and protection program could weaken their compliance programs.
See ITT's Online Archives 11051032 for summary of the "facilitation payments" exception to the FCPA's anti-bribery provisions.
See ITT's Online Archives 11070109 for summary of the FCPA liability for illegal payments made via intermediaries and successor firms.)