How Well is the SEC’s Whistleblower Program Working?


Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act created the SEC’s whistleblower program, awarding cash to individuals who report misdeeds that result in successful SEC cases. If the SEC collects more than $1 million, the whistleblower can receive between 10% and 30% of the award. Section 922 also required the Office of Inspector General to conduct a review of the whistleblower program within 30 months.

Surprisingly, the Inspector General had only good things to say about the program, with only two minor recommendations. I say ‘surprisingly’ because the reports from the Inspector General have recently been harsh criticisms. Not this time.

The implementation of the final rules made the SEC’s whistleblower program clearly defined and user-friendly for users that have basic securities laws, rules, and regulations knowledge. The whistleblower program is promoted on the SEC’s website and the public can access OWB’s website from the site in four or more possible ways to learn about the whistleblower program or to file a complaint with the SEC. Additionally, OWB outreach efforts have been strong and the SEC’s whistleblower program can be promptly located using internet search engines such as Google, Yahoo, and Bing.

The two recommendations from the OIG are both related to adding metrics to in the program to better monitor program performance. For example there is no standard on how long a filing should stay in the manual “triage” step in the program. The average is 31 days. By adding thoughtful metrics and performance goals the SEC could help to avoid degradation in performance and longer response times.

One key finding in the report is that there is no current need to create a private right of action based on the facts of a whistleblower complaint. The OIG report points to a possible reduction of the government’s ability to shape and develop the law. Private suits could lead to wasteful, detrimental developments that are inconsistent with executive and judicial interpretations.

But the concept is not dead. The OIG promises to revisit the private action concept in a few years after there is more data from the new whistleblower program.