Crime Pays…For Whistle Blowers
November 14, 2012
Today, the Securities and Exchange Commission will issue its first annual report on the usefulness of its Whistleblower Program, which incents employees and other parties to give the inside scoop on wrongdoing at public companies.
The results?
Better than could have been imagined says Jordan Thomas, partner at the law firm Labaton Sucharow and chair of the nation’s first Whistleblower Representation practice.
“The SEC successfully prosecuted 457 enforcement actions where the monetary sanctions exceeded $1 million,” Thomas said on a SEC-sponsored webinar Tuesday.
That’s not bad for a program that was born under Dodd-Frank and didn’t kick off until August, 2011. And already the program has paid its first reward, 30 percent of the monetary sanctions collected by the SEC paid to an individual who provided the commission with information about a violation. The program permits anonymous reporting and provides significant employment protections and monetary awards of 10 to 30 percent of whatever it collects. “The IRS started it whistleblower program in 2008 and didn’t make its first payout until 2011,” Thomas said.
According to Thomas, the six most common violations that may lead to an SEC investigation are
• Misrepresentation or omission of important information about securities
• Manipulating the market prices of securities
• Stealing customers' funds or securities
• Violating broker-dealers' responsibility to treat customers fairly
• Insider trading (violating a trust relationship by trading on material, non-public information about a security)
• Selling unregistered securities.
A survey conducted by Labaton Sucharow showed that two-thirds of all enforcement actions involved corporate defendants in the United States; Approximately 10% of these actions involved corporate defendants in foreign jurisdictions while; nearly 15% resulted in orders for monetary relief in excess of $50 million;
Of the 307 actions involving corporate defendants in the US, 36% were prosecuted in the Northeast region of the United States. This was followed by the Southern region (32%); the Western region (25%); and the Midwestern region (7%).
“Whistleblowers are now breaking silence and reporting to the SEC,” Thomas said.
