Posted by smeissnerdev

2012 SEC Report on Dodd Frank Whistleblower Program

As you know when the Dodd Frank whistleblower law was signed I authored the Forbes article https://www.smeissner.com/reference/Forbes-Article-7-27-10-WhistleblowerLaw.pdf . We then commenced and advertising campaign in NYC movie theatres coordinated with the release of Wall Street Money never sleeps along with a web site https://www.smeissner.com/sec-snitch which was titled SECSnitch.com.  Since then my firm has carefully screened hundreds of potential tips, some comical and others serious. We then actually filed several high quality submissions ranging from accounting fraud and intentional overvaluation of real estate assets within investment funds, to a violation of the Foreign Corrupt Practices Act or anti-bribery laws, involving major international corporations. Meanwhile the SEC this morning released its Annual Report for 2012 http://www.sec.gov/about/offices/owb/annual-report-2012.pdf , thus I thought I would share some of my comments regarding
the report in case you are interested:

* Although off to a good start the jury is still out on the program continuing to encourage whistleblowers to come forward since only one award has been issued so far since the statute took effect in August 2011.However,  especially now that the election is over and Dodd Frank appears to be safe, presumably the SEC will want to demonstrate that they are giving out awards and will do so in numbers.

Other Comments:

* Interesting focus on Residential Mortgage Backed Securities which indicates to me that whistleblowers within the financial world who have information regarding the fraudulent sale of such securities will be placed on top priority.  Notably in last month the Justice department and my former employer the NYS Attorney General’s office announced its first legal action involving RMBS http://www.justice.gov/opa/pr/2012/October/12-opa-1196.html . Therefore, it seems that employees within investment banking firms who are aware of internal misdeeds involving false or misleading representations to investors regarding the contents of mortgage back securities may wish to seriously consider filing a claim with the SEC.

* Although they refer to over 3000 tips in 2012, there is a lack of information with regard to the number of submissions which have been rejected early on in the process and not being followed up upon. Seems the SEC has not resolved the conflict of wanting to maintain confidentiality as to the status of any investigation vs. the whistleblowers interest in knowing whether their submission is being pursued or not. This feedback would assist potential whistleblowers and their counsel in knowing where they stand with respect to their submission rather than being left in the dark possibly for years or forever.

*So far there has been one single award of $50,000 to date just issued last August, which hopefully is just a start as the $50,000 did not place a dent in the $453 million the office has in its fund for whistleblowers.

*There apparently are a lot of whistleblowers in California, New York and Florida which account for over 35% of all submissions. Seems like Tinsel Town is full of snitches, as California was far ahead of the next great whistleblower state of NY by almost double. Most of our clients are from the NY region although we have received calls from  Asia, the middle-east and Europe. 

*It appears by the nature of the Annual Report that similar to colleges the SEC likes to show diversity in its complaints whether it be from what country or state. Thus presumably if the whistleblower is from a country or state which has few submissions your submission may gain greater focus.

* While we are provided with the statistics of the subject matter of the submissions, we dont see the statistics as to what the SEC actually followed up upon which would be helpful to discern their priorities and encourage whistleblowers in those areas

* It is clear to me both based on my personal experience with claims, and in this report, that the SEC takes seriously the confidentiality of whistleblowers recognizing the serious consequences of the reveling their identities when the whistleblower interacts through an attorney. This is critical to the programs success.