SEC’s Initial Dodd-Frank Whistleblower Report

by Mike Mintz on November 30, 2011 · 0 comments


On August 12, 2011, the SEC’s final regulations for the Dodd-Frank whistleblower program went into effect. While Section 924(d) of the Dodd Frank Act requires the agency to report annually to Congress on its activities, in November, the SEC filed its first whistleblower report. The agency reports having received 334 whistleblower tips, coming from 37 different states and eleven foreign countries, China and the UK being the top foreign whistleblowers.

The Dodd-Frank Act provides bounty rewards between 10% and 30% of the amount of SEC recoveries based on the whistleblower submissions, whenever the SEC’s recovery exceeds $1 million. Therefore, upon its enactment, there was a sense of trepidation that there would be inadequate funds to reward the whistleblowers. However, the agency’s November report indicates that the SEC’s whistleblower awards’ fund is over $452 million. With such a bountiful fund, we should expect to see a significant rise in whistleblower submissions in the future, and as soon as rewards are granted, the number of submissions will certainly increase.

Nevertheless, the November report shows that the agency received a record number of 99,947 charges during the fiscal year of 2011. One of the contributing factors in the rise of charges is the significant rise of cases involving U.S.-listed Chinese companies. Thus far in 2011, there have been a total of 36 securities class action lawsuits against U.S.-listed Chinese companies, and a total of 47 since January 1, 2010. Ultimately, plaintiffs’ attorneys will have to run out of companies to sue, but it appears that for the time being, securities class action suits will continue to flood the courthouses.

For a more in-depth discussion on the SEC’s Initial Report, see “SEC Releases Initial Report on the Dodd-Frank Whistleblower Program.”

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