SEC receives more than 3,000 tips in first full year of new program

UK and Canada lead sources of tips to SEC from outside the US, while California leads US states in whistleblowers.

In its first full year of operation, the SEC’s whistleblower program has received a total of 3,001 tips from 50 countries and all 50 states, according to a year-end report by the commission.

Tips to the SEC’s whistleblower program in the fiscal year 2012 are led by information related to corporate disclosure and financials, which account for 18.2 percent of all tips, according to the SEC’s Annual Report on the Dodd-Frank Whistleblower Program.

In second place, accounting for 15.5 percent of all tips, comes ‘offering fraud’, or attempts to obtain collaboration for fraud, according to the SEC data.

In a close third place, with 15.1 percent of all tips, is ‘manipulation’. Insider trading comes fourth, at 6.3 percent of tips, followed by tips related to trading and pricing-related crimes, at 4.8 percent.

The US state generating the highest number of tips is California, which accounts for 435 tips, or 17.4 percent of the total, according to the SEC.

Next comes New York State, with 246 tips (9.8 percent of the total).

In third place is Florida, with 202 tips (8.1 percent), followed by Texas with 6.3 percent, Washington State and New Jersey tied at 4.1 percent, and Illinois at 4 percent.

Outside of the US, the UK is the most common country of origin for a whistleblower complaint to the SEC, with a total of 74 tips, according to the report.

Canada comes second, with 46 complaints, and India third, with 33.

Residents from countries across the globe, including Australia, Bolivia, Pakistan, Rwanda, Thailand and Portugal, offered tips to the commission in the 2012 fiscal year.

The SEC’s whistleblower program, which started operating in August 2011, awarded its first cash prize for a tip in August this year, giving $50,000 to a tipster.

The award was also significant as it constituted 30 percent of the money collected by SEC enforcement actions – the maximum allowable.

The SEC can grant awards of between 10 percent and 30 percent of its collections. 

‘The award recipient in this matter submitted a tip concerning the fraud and then provided documents and other significant information that allowed the commission’s investigation to move at an accelerated pace and ultimately led to the filing of an emergency action in federal court to prevent the defendants from ensnaring additional victims and further dissipating investor funds,’ the SEC says in its annual report.

When the new rules came into effect, disclosure experts warned that the whistleblower program could discourage employees from reporting securities fraud internally.


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