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Cady Bar the Door Insight & Commentary on SEC Enforcement Actions and Related Issues

SEC Posts Whistleblower List (Means Little)

Posted in Whistleblowers

On February 1st, the SEC’s Office of the Whistleblower released its latest list of candidates for which a whistleblower might claim an award.  What cases are eligible?  As you may know, the Dodd-Frank Act gave the SEC authority to give cash bounties to whistleblowers in certain instances, and the Act was passed on July 21, 2010.  Basically, if you give original information to the SEC that allows the Enforcement Division to bring a case, you could stand to make a lot of money, 10 to 30% of what is collected from a final judgment.   As the Office of the Whistleblower’s website explains:

We post Notices of Covered Action for each Commission action where a final judgment or order, by itself or together with other prior judgments or orders in the same action issued after July 21, 2010, results in monetary sanctions exceeding $1 million.

The most recent list includes cases a bid-rigging case against Wachovia (covered here), an FCPA case against Aon Corp., and a piece of the Primary Global Research expert network/insider trading extravaganza.  But what is the SEC trying to do with this list?  Is it targeting these cases especially aggressively?  What does it all mean?

Well, not much.  Understand that the Office of the Whistleblower has a huge logistical task in keeping track of the thousands of tips and complaints that come into the SEC and linking them up with matters that are actually filed and brought to judgment.  It will often be the case that investigations have already been started when tips adding supplementary information are brought to the SEC’s attention.  In other instances, multiple sources may bring similar evidence to the Enforcement Division, and the Office of the Whistleblower will have to sort out who brought what first.  It seems likely to me that at some point litigation between competing whistleblowers will ensue as tippers fight over who should get paid for bringing justice to the perpetrators of a massive fraud.  When that happens, you can be sure that the SEC will want to have its ducks in a row.  The federal district judge that gets that case will want to be able to turn to the SEC and get a clear answer on who said what and when and dispense with any substantial fact-finding.   If there is no clear answer on that, you can be sure that the district court’s judgment will be harsh and swift – and quite embarrassing to the SEC.

That is what this list is about.  The cases are already public.  But by announcing them in this way, and giving any whistleblowers another chance to speak up and claim their awards, the list takes a step toward ensuring that when the awards do get paid, they are paid to the right people.