2013 SEES AN INCREASE WHISTLEBLOWER TIPS AND AWARDS; MORE TIPS LIKELY IN 2014

The Securities and Exchange Commission (“SEC”) reported in its Annual Report on the Dodd-Frank Whistleblower Program that it received a total of 3,238 whistleblower tips in 2013. This number represents a new high and an increase of 237 tips from the previous year. The Whistleblower Program provides monetary incentives for individuals to report possible violations of the securities laws to the SEC by authorizing the SEC to award the tipper between 10% and 30% of the amount the government recovers. Like in 2012, the most frequent categories of tips were Corporate Disclosure and Financials (17.2%), Offering Fraud (17.1%), and Manipulation (16.2%). Although the SEC reported that the number of tips originating from Texas actually decreased from 159 to 135 in 2013, Texas retained its position as the state with fourth-highest number of tips, trailing only California, New York, and Florida.

This past year also saw the SEC distribute its first significant whistleblower award. On October 1, 2013, the SEC announced it was awarding a whistleblower an award of over $14 million for information that resulted in the recovery of a substantial amount of investor funds. The SEC also made seven other awards in 2013 ranging in value from $25,000 to $150,000. The increase in frequency and amount of whistleblower awards could result in a further rise in the number of whistleblower tips in 2014. In fact, Mary Jo White, Chair of the SEC, remarked that she hopes that the October 1, 2013 award “encourages more individuals with information to come forward.”¹

Furthermore, the Fifth Circuit recently placed an important limitation on how whistleblower tips must be made. In Asadi v. G.E. Energy (USA), L.L.C., the court held that under the Dodd-Frank Act, 15 U.S.C. § 78u-6(h), a whistleblower is only protected from retaliation arising from whistleblowing activities if he or she provides “information relating to a violation of the securities laws to the SEC.”² Accordingly, an employee who reported a possible Foreign Corrupt Practices Act violation internally to his supervisor, and then was later terminated, could not state a retaliation claim under the statute.³ The Fifth Circuit’s holding could increase the likelihood that employees will provide whistleblower tips directly to the SEC rather than internally, which could result in more whistleblower tips to the SEC in 2014.

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¹ Press Release, SEC, SEC Awards More than $14 Million to Whistleblower (Oct. 1, 2013).
² 720 F.3d 620, 630 (5th Cir. 2013) (emphasis added) (internal quotation marks omitted).
³ Id.