The Dodd-Frank Act enacted in July 2010 contained whistleblower provisions applicable to all securities law violations including those under the Foreign Corrupt Practices Act.
In this prior post from July 2010, I predicted that the whistleblower provisions would have a negligible impact on FCPA enforcement. As noted in this prior post, my prediction was an outlier (so it seemed) compared to the flurry of law firm client alerts predicting that the whistleblower provisions would have a significant impact on FCPA enforcement. Many FCPA Inc. participants seemed so eager for a marketing opportunity to sell compliance services, that some even called the generic whistleblower provision the FCPA’s “new” whistleblower provisions.
Whatever your initial view was on how the whistleblower provisions may impact FCPA enforcement, it was previously noted that the best part of the whistleblower provisions was that its impact on FCPA enforcement could be monitored and analyzed because the SEC is required to submit annual reports to Congress.
Recently, the SEC released its annual report for FY2021 and, like the prior ten years, FCPA “tips” continue to be a minor component of the SEC’s whistleblower program.
Specifically, according to the SEC’s report, of the 12,200 whistleblower tips received by the SEC in FY2021, 258 (2.1%) related to the FCPA. This percentage of FCPA “tips” vs. overall tips is the lowest in the history of the whistleblower program.
- As noted here, of the 6,900 tips received by the SEC in FY2020, 208 (3.0%) related to the FCPA.
- As noted here, of the 5,200 tips received by the SEC in FY2019, 200 (3.8%) related to the FCPA.
- As noted here, of the 5,282 tips received by the SEC in FY2018, 202 (3.8%) related to the FCPA.
- As noted here, of the 4,484 tips received by the SEC in FY2017, 210 (4.7%) related to the FCPA
- As noted here, of the 4,218 tips received by the SEC in FY2016, (238) (5.6%) related to the FCPA.
- As noted here, of the 3,923 tips received by the SEC in FY2015, (186) (4.7%)related to the FCPA.
- As noted here, of the 3,620 tips received by the SEC in FY2014, (159) (4.4%) related to the FCPA.
- As noted here, of the 3,238 tips received by the SEC in FY2013, (149) (4.6%) related to the FCPA.
- As noted here, of the 3,001 tips received by the SEC in FY2012, (115) (3.8%) related to the FCPA.
- As noted here, in FY2011 (a partial reporting year) of the 334 tips received by the SEC, (3.9%) (13) related to the FCPA.
Another interesting figure to note is that the approximate 1,950 FCPA tips since FY2011 have yielded perhaps only 6-8 whistleblower bounties paid in connection with an FCPA enforcement action (see here and here for examples). If so, this represents a paltry .4% yield. Stated differently, 99.6% of FCPA “tips” received by the SEC have not, it appears, yielded a whistleblower bounty.
Regardless, I stand by my prediction, now 11.5 years old, that Dodd-Frank’s whistleblower provisions will have a negligible impact on FCPA enforcement. Indeed, it is no longer a prediction but a fact.
More broadly, it is interesting to note that according to the SEC’s most recent report, since the inception of the whistleblower program, the SEC has received approximately 52,400 tips but that awards have been issued to approximately 215 individuals. This likewise represents a paltry .4% yield rate. Stated differently, 99.6% of SEC whistleblower tips have not yielded a whistleblower bounty.
Set forth below are some additional interesting tidbits about the SEC’s whistleblower program.
“An individual may be eligible to receive an award where their information leads to a successful enforcement action—meaning generally that the original information either caused the staff to open an examination or investigation, or the original information significantly contributed to a successful enforcement action where the matter was already under examination or investigation. Of the whistleblowers who received awards in FY 2021, approximately 56% provided original information that caused staff to open an investigation or examination, and approximately 44% received awards because their original information significantly contributed to an already existing investigation or examination. In assessing whether information assisted with an ongoing matter, the Commission considers factors such as whether the information allowed the Commission to bring an action in significantly less time or with significantly fewer resources, and whether it supported additional successful charges, or successful claims against additional individuals or entities.
Approximately 60% of the award recipients in FY 2021 were current or former insiders of the entity about which they reported information of wrongdoing to the Commission. Of those recipients, more than 75% raised their concerns internally to their supervisors, compliance personnel, or through internal reporting mechanisms, or understood that their supervisor or relevant compliance personnel knew of the violations, before reporting their information of wrongdoing to the Commission.”
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