The Dodd-Frank Wall Street Reform And Consumer Protection Act ("Dodd-Frank") became a federal law in the US in 2010. With the passage of the Dodd-Frank US federal law they later created as part of this legislation the US Securities and Exchange Commission ("SEC") Office of the Whistleblower ("OWB"). The very large lucrative pay-outs for whistleblowing is a considerable attraction for individuals considering that one can achieve in the range of between 10% and 30% of the amount that the US SEC secures through a settlement or a court decision.
There have been many complaints from large corporations in the US that it undermines a company's good internal compliance programme. Some of the US business institutions together with the American Bar Association ("ABA") wanted the SEC to request company whistleblowers to firstly go through the company's own internal compliance programme before they whistle-blowed. In the end, it was a double-edged sword result for US business because the SEC rule encouraged potential whistleblowers to report first through a company's internal compliance programme because the whistleblower gets credit for doing so if he, likewise, within 120 days reports the same information to the SEC. In addition, the whistleblower will still get the benefit even if the company does its own internal investigation and reports the results to the SEC. Even in that scenario, the whistleblower may qualify again for the percentage range as previously described. Corporate in-house lawyers are also allowed participate in the percentage award programme but with limitations, for example, anything learnt in the solicitor client relationship unless waived is not allowed.
The SEC OWB programme commenced in August 2011 and is now in operation two years. In August 2012 they actually paid out the first award of approximately 40,000 and in August 2013 they paid out their largest sum to date of $14million to a whistleblower where the US SEC also recovered substantial investor funds. The US SEC advocate that their whistleblowing programme is quicker in payingwhile the US IRS take several years to crystallise into an actual award as those kinds of cases require additional work.
In the first annual report on the Dodd- Frank Whistleblower programme for 2012 they received 3,000 Tips, Complaints and Referrals ("TCR"). In the second annual report for 2013 the number of TCR have now risen to 3,238 which is an increase of approximately 8% from 2012.