As the host of The Business Integrity School podcast, I recently had the privilege of interviewing Jane Norberg. Jane is the former Chief of the Office of the Whistleblower at the U.S. Securities and Exchange Commission (SEC), and now a partner with the Arnold & Porter law firm.
After the insightful conversation, I took a deeper dive into the 2022 SEC Annual Whistleblower Office Report to Congress. The report, released shortly after our episode, provides a comprehensive overview of the program's growth and significance. Drawing upon Jane's reflections and the report's key insights, I’ve collected my own observations on the vital role of whistleblowers and practical tips for potential whistleblowers.
What is the SEC’s Whistleblower Program?
In our conversation, Jane emphasized the invaluable contributions of whistleblowers to the SEC's mission to protect investors, maintain fair markets, and facilitate capital formation. Since its inception in 2010, the SEC Whistleblower Program has awarded over $1.3 billion to individuals who provided original information leading to successful SEC enforcement actions. Jane also highlighted the democratization of whistleblowing, with a diverse array of individuals, from corporate insiders to outside analysts, contributing valuable tips.
The 2022 Whistleblower Report underscores the program's success, as evidenced by the staggering $229 million in awards distributed to 103 individuals in FY 2022 alone. The SEC also received over 12,300 whistleblower tips – the largest number ever received in one fiscal year, up slightly from 2021. These figures testify to the ongoing enhancement of the program and the importance the SEC places on information from whistleblowers.
New Amendments to Whistleblower Program Adopted by SEC
In 2022, two important amendments were adopted to the rules that govern the whistleblower program.
One significant change expanded awards. The SEC can now pay awards to whistleblowers for actions brought by other regulatory bodies. For example, if the other body’s program isn’t comparable to the SEC’s program (i.e., limited range of awards, awards that are not mandatory) or if the maximum amount the SEC could pay on the related action would not exceed $5 million, the SEC could pay an award, although double-dipping is not allowed.
Second, the SEC clarified an earlier amendment and said the dollar amount of an award would be considered only for a potential increase, not a decrease.
These amendments expand the scope of the awards to help incentivize and appropriately reward whistleblowers’ efforts for reporting.
The Global Reach of the Whistleblower Program
Another key point from the report is the global reach of the program. Tips have been received from all over the world with the largest number of international tips coming from:
- Canada
- UK
- Germany
- China
- Mexico
- Brazil
Domestically, Florida, South Carolina, California, Texas, and New York were the leading sources of tips.
Many types of allegations have come through, but a few consistently top the list:
- Manipulation
- Fraud
- Initial coin offerings and cryptocurrencies
- Corporate disclosures and financials
For these top allegation types, the most significant increase in fiscal year 2022 came in the number of tips related to initial coin offerings and cryptocurrencies. Tips in this category increased 125% year over year.
So, What Can Whistleblowers Do?
From the conversation with Jane and the SEC report, it's evident that the SEC is committed to protecting and rewarding whistleblowers, viewing them as crucial allies in ensuring the integrity of financial markets. But for those contemplating blowing the whistle, the process can seem daunting. Here are five practical tips to guide potential whistleblowers:
1. Keep Documentation: Keep a detailed record of your observations and any actions you take such as reporting to your supervisor or internal compliance. Documenting evidence of the alleged misconduct strengthens your credibility and assists the SEC in its investigation.
2. Understand the Process: Familiarize yourself with the SEC Whistleblower Program's process and procedures. Understanding the process will help you manage your expectations and prepare for possible outcomes.
3. Seek Legal Advice: Navigating the legal complexities of whistleblowing can be challenging. Engaging a lawyer experienced in SEC whistleblower matters can ensure your rights are protected and guide you through the process. Additionally, to receive an award, you must be represented by counsel.
4. Consider Anonymity: As a whistleblower, you have the right to remain anonymous. Anonymity can protect you from potential retaliation or backlash.
5. Act Timely: The SEC places importance on timely reporting, enabling it to act swiftly to protect investors and gather evidence. Delaying reporting can potentially decrease your award.
Whistleblowers play a pivotal role in upholding the integrity of our financial markets. The SEC Whistleblower Program not only acknowledges these individuals but also rewards them significantly for their contributions. For potential whistleblowers, understanding the process, and acting promptly and responsibly can lead to more effective outcomes, benefiting both the whistleblower and the wider investing public.
Post Author:
Cindy Moehring is the founder and executive chair of the Business Integrity Leadership Initiative
at the Sam M. Walton College of Business at the University of Arkansas. She recently
retired from Walmart after 20 years, where she served as senior vice president, Global
Chief Ethics Officer, and senior vice president, U.S. Chief Ethics and Compliance
Officer.
