Congress established the SEC whistleblower program through the 2010 Dodd-Frank Act, pursuant to which tipsters can receive between 10% and 30% of any amounts collected by the SEC as a result of the whistleblower’s information. Since the whistleblower program’s passage, the SEC has strongly encouraged international whistleblowers to come forward with information about fraud in the United States securities markets, and exercised its authority to substantially reward international whistleblowers for doing so.
According to SEC fiscal year-end reports, overseas whistleblowers account for approximately 12 percent of its tips. Indeed, since the beginning of the whistleblower program, the SEC has received whistleblower tips from individuals in 83 countries outside the United States. In Fiscal Year 2014 alone, the Commission received whistleblower submissions from individuals in 60 foreign countries. As depicted in the following chart, the SEC received the highest number of international whistleblower tips in Fiscal Year 2014 from individuals in the United Kingdom, India, Canada, the People’s Republic of China, and Australia.
Geographic Location of Whistleblower and Number of Tips: United Kingdom (70); India (69); Canada (58); China (32); Australia (29); Argentina (14); Germany (13); Curacao (13); Malaysia (12); Russia (10); Singapore (9); Philippines (7); Poland (7); Brazil (6); Mexico (6); Thailand (6)
The defense bar has taken notice of this rise in international whistleblowers. In a Dec. 11, 2014 seminar for Securities Docket, an experienced defense attorney cited, “an explosion of Chinese whistleblowers,” adding that “[t]hey have found the [Securities and Exchange Commission’s] office of the whistleblower very quickly. It’s almost [like it’s] down the street from Tiananmen Square.” The same attorney also noted that he’s seen an uptick in whistleblower tips from Mexico. https://www.brighttalk.com/webcast/513/135835
These international tips have resulted in significant awards. In total, four of the fourteen whistleblowers that have received awards from the whistleblower program, including the two largest SEC awards to date, were based overseas. http://www.sec.gov/about/offices/owb/annual-report-2014.pdf. In 2013, the SEC awarded $14 million to a foreign-based whistleblower who disclosed a scheme to defraud about 250 investors, mostly Chinese, who were allegedly duped into paying a total of more than $155 million to invest in a hotel and conference center, based on claims that they were boosting their chances of obtaining green cards. The SEC topped that 2013 award when, in 2014, it announced that a foreign tipster would be awarded a record award of more than $30 million. Notably, the SEC keeps whistleblower identities secret so it typically does not share information about the tipster or case when announcing an award.
At the time of the 2014 award, the SEC went to great lengths to explain that it has authority to grant awards to international whistleblowers. The SEC stated that its territorial connection to fraud in United States securities markets would be operative whether “the claimant was a foreign national, the claimant resides overseas, the information was submitted from overseas, or the misconduct comprising the U.S. securities law violation occurred entirely overseas.” Moreover, Sean McKessy, the SEC’s whistleblower chief stated, “Whistleblowers from all over the world should feel similarly incentivized to come forward with credible information about potential violations of the U.S. securities laws.”
The SEC’s strong, supportive statements should encourage international whistleblower to continue to come forward with information about fraud in United States securities markets.