FCPAméricas Blog

Whistleblowers: 2015 Year in Review

Author: Carlos Ayres

Whistleblower2015FCPAThe SEC 2015 Annual Report to Congress on the Dodd-Frank Whistleblower Program was published on November 16, 2015. This post highlights four relevant aspects of the report.

Continuous increase in number of tips received by the SEC. The number of whistleblower tips the Commission receives annually continues to increase: 3,001 tips in the 2012 fiscal year, 3,238 tips in the 2013 fiscal year, 3,620 tips in the 2014 fiscal year, and 3,923 in the 2015 fiscal year. The number of tips related to FCPA issues also continues to rise. In total, 186 tips received in the 2015 fiscal year were related to alleged FCPA violations. In fiscal year 2012, 2013, and 2014 , the tips related to FCPA issues were 115, 149, and 159, respectively. Since August 2011, when the SEC’s Office of The Whistleblower was established, until the end of fiscal year 2015, a total of 14,116 tips from whistleblowers were received.

Tips from more countries in the Americas. The SEC is receiving numerous tips from abroad. The 2015 Annual Report indicates that, since the beginning of the whistleblower program, the Commission has received tips from 95 countries outside of the United States. In fiscal year 2015 alone, the SEC received tips from 61 foreign countries.

From the Americas (not including the United States and Canada, where most of the whistleblowers in the region reside), in fiscal year 2015, the SEC received 48 tips from 12 countries: Argentina (1), Bahamas (1), Belize (1), Brazil (14), Chile (11), Ecuador (1), El Salvador (2), Honduras (1), Jamaica (1), Mexico (13), Panama  (1), and Venezuela (1). It is not clear whether the tips from the Americas are related to FCPA or other securities issues.

In fiscal year 2014, the SEC received 50 tips from 10 countries: Argentina (14 tips), Brazil (6), Colombia (4), Costa Rica (1), Curaçao (13), Dominican Republic (2), Ecuador (2), Mexico (6), Nicaragua (1), and  Peru (1).

In fiscal year 2013, the SEC received 25 tips from 10 countries: Argentina (6 tips), Brazil (4), Mexico (4), Curacao (4), Colombia (2), Costa Rica (1), Belize (1), Cayman Islands (1), El Salvador (1), and Panama (1). In fiscal year 2012, the SEC received 17 tips from 5 countries: Venezuela (6 tips), Mexico (4), Brazil (3), Argentina (1), Bolivia (1), Curaçao (1), and Dominican Republic (1).

Although the number of tips from the Americas decreased slightly in fiscal year 2015, the tips are coming from more countries and from countries from which tips had not come before (Bahamas, Chile, Honduras and Jamaica – 11 tips came from Chile only). It is also noteworthy the continuous increase in the number of tips coming from Brazil: 3, 4, 6, and 14, in fiscal years 2012, 2013, 2014, and 2015, respectively.   

Anti-retaliation protection. On June 16, 2014 the SEC exercised its anti-retaliation authority for the first time. The 2014 Annual Report summarized:

[T]he head trader of Paradigm Capital Management reported to the SEC that the company had engaged in prohibited principal transactions. After learning that the head trader reported the potential misconduct to the SEC, the firm engaged in a series of retaliatory actions, including changing the whistleblower’s job function, stripping the whistleblower of supervisory responsibilities and otherwise marginalizing the whistleblower. The Commission ordered the firm to pay $2.2 million to settle the retaliation and other charges.

In connection to that matter, on April 28, 2015, the SEC announced a maximum whistleblower award payment of 30% of amounts collected. The whistleblower received over $600,000 for providing key original information that led to a successful action by the SEC. In determining the award percentage, the SEC “considered the substantial evidence that the whistleblower suffered unique hardships as a result of reporting, and also found its law enforcement interest to be compelling given the previous findings of unlawful retaliation against the whistleblower”.

In August 2015, the SEC issued interpretive guidance clarifying that the Dodd-Frank anti-retaliation provisions apply to individuals who report information of possible violations regardless on whether such information was reported internally or to the SEC. In September 2015, the Second Circuit Court of Appeals in Berman v. Neo@Ogilvy LLC, deferred to the SEC’s position that employees who report securities law violations to their employers, regardless of whether they also separately report to the SEC, are protected by the Dodd-Frank anti-retaliation provisions

Profile of whistleblower award recipients. The Annual Report also sheds some light, with aggregate information, on the profile of whistleblower awards recipients. According to the Annual Report, almost half of the individuals who receive awards are current or former company employees. Out of them, 80% raise their concerns internally first. Approximately only 20% of the individuals who have received awards under the program submitted their information anonymously to the SEC through counsel. Finally, the Annual Report informs that award recipients have provided specific information, identifying particular individuals involved in the fraud, pointing to specific documents that substantiated their allegations, and explaining where relevant documents could be located.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author’s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2016 FCPAméricas, LLC

Carlos Henrique da Silva Ayres

Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor

Categories: Anti-Corruption Compliance, Enforcement, English, FCPA, Whistleblowers

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