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Board and Fraud is a blog that aims to bring a practical approach to issues facing the board of directors and the audit committee specifically in the area of governance, risk management, compliance, and internal audit, with a strong focus on fraud, ethics, and internal controls.

SEC Challenged Over Delay on Whistleblower Award Decision

Tipsters have grown frustrated with the length of time it has taken the the SEC ("Commission") to determine whether a tip warrants a reward. 

man and hour glassTipsters have grown frustrated with the length of time it has taken the the SEC (“Commission”) to determine whether a tip warrants a reward.  Between 2014 and 2017, the Commission took an average of more than two (2) years, according to a sample of whistleblower award decisions analyzed by The Wall Street Journal (“WSJ”) to decide if a whistleblower deserved a reward. That is more than twice (2x) as long as in 2012 and 2013, the early years of the whistleblower program.

This doesn’t shock me because the Commission received over 5,200 whistleblower tips in FY 2018. This represents the highest increase in tips since the beginning of the program – a nearly seventy-six percent (76%) increase since FY 2012. In FY 2018 alone, the SEC awarded more than $168 million in whistleblower awards to 13 individuals whose information and cooperation assisted the Commission in bringing successful enforcement actions. This amount exceeds the total amount awarded in all prior years combined and reflects the significance of the information that whistleblowers are reporting to the Commission.

Closing Thoughts

I’m anticipating it will probably get worse before it gets better.  Why?  Because the Digital Realty matter made it clear that a person must report a possible securities law violation to the Commission in order to qualify as a whistleblower protected against employment retaliation under Section 21F(h) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

According to the WSJ, suing the SEC in an effort to force a decision isn’t without precedent. In 2015, a similar lawsuit argued that the SEC had taken an unreasonable amount of time to come to a decision. The case was dismissed less than 60 days later because the agency had made a determination on whether to offer a reward.

Lastly, employees who witness acts of wrongdoing should seek counsel before acting.

I welcome your comments.


Jonathan T. Marks, CPA, CFE




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