SEC LogoOn November 15, 2013, the Securities and Exchange Commission’s (SEC) Office of the Whistleblower (OWB) released its third Annual Report on the Dodd-Frank Whistleblower Program to Congress, which details information on OWB’s activities and bounty payouts for the fiscal year, as described in our post on the 2012 Annual Report.


The OWB facilitates the Dodd Frank Whistleblower bounty payout program and coordinates with the SEC’s enforcement branch to investigate whistleblower tips and complaints.  The OWB must annually inform Congress on the whistleblower award program, including a description of the number of awards granted and the type of cases in which awards were granted during the preceding fiscal year.

Four Payouts in FY2013, including $14m Payout

The OWB made four bounty payouts during Fiscal Year 2013.  In an SEC action regarding a “sham” hedge fund, OWB paid out three whistleblowers a total of approximately $832,000.  The fourth OWB payout was a record-breaking $14,000,000 for information leading to the recovery of substantial investor funds.  In another case cited in the Annual Report, a whistleblower will receive a bounty payout in FY2014.    

Total Complaints on the Upswing

The OWB received 3,238 tips in the 2013 fiscal year (an increase of approximately 8% from 2012) coming from all fifty states and fifty-five countries.  California (375), New York (215) and Florida (187) led the list of the most domestic complaints and tips, while the United Kingdom (66), Canada (62) and China (52) topped off the international list.  Additionally, the SEC’s Office of Inspector General has lauded the OWB’s “accessible” online complaint mechanism and responsive hotline.  The list of the three most frequent types of complaints has remained consistent over the last two years, with the most common reports being corporate disclosures and financials (17.2%), offering fraud (17.1%), or manipulation (16.2%).

The Take-Away

Until recently, some may have questioned whether concerns over the SEC’s bounty program were justified given that thousands of complaints yielded only a few relatively small payouts.  However, in light of the most recent well-publicized massive bounty payout, we expect that the number of whistleblower complaints filed with the SEC will continue to increase in 2014.  We also believe that the SEC will pursue an increasing number of enforcement actions arising from whistleblower complaints made pursuant to the program.

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Photo of Lloyd B. Chinn Lloyd B. Chinn

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative…

Lloyd B. Chinn is a partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd’s practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media, education and technology, he focuses a substantial portion of his practice on the financial services sector. He has tried to final verdict or arbitration award substantial disputes in this area.

Due to Lloyd’s litigation experience, clients regularly turn to him for advice regarding the full range of employment matters, including terminations, whistleblower policy and procedure, reductions in force, employment agreements, and employment policies. For example, in the wake of the financial crisis, he has counseled a number of firms through reductions in force and related bonus and deferred compensation disputes. Lloyd has also been retained to conduct internal investigations of allegations of workplace misconduct, including claims leveled against senior executives.

Lloyd has represented global businesses in matters involving Sarbanes-Oxley and Dodd-Frank whistleblower claims. He has taken an active role in the American Bar Association on these issues, currently serving as Co-Chair of the Whistleblower subcommittee of the ABA Employee Rights and Responsibilities Committee. Lloyd has spoken on whistleblowing topics before a numerous organizations, including the American Bar Association, ALI-ABA, Association of the Bar of the City of New York, and New York University School of Law. He has testified twice before Congressional subcommittees regarding whistleblower legislation and has also published blog postings, articles and client alerts on a variety of topics in this area, including the Dodd-Frank Act’s whistleblower provisions. Lloyd is a co-editor of Proskauer’s Whistleblower Defense Blog, and he has been widely quoted by on whistleblower topics by a number of publications, including the New York Times, the Wall Street Journal, the National Law Journal and Law 360.

Lloyd has also become active in the International Bar Association, presenting on a variety of subjects, including: the #MeToo movement, the COVID-19 pandemic and employment law, and cross-border harmonization of employment provisions in transactions. Lloyd also hosts a quarterly roundtable discussion among financial services industry in-house employment lawyers. He has also published articles and given speeches on a variety of other employment-law topics, including non-solicitation provisions, FINRA arbitration rules, cross-border discovery, e-discovery, and the use of experts.