SEC Whistleblower Chief Discusses "Bounty Awards" and Retaliation in Wall Street Journal's Risk and Compliance Blog

The head of the Securities and Exchange Commission’s (“SEC’s”) Office of the Whistleblower, Sean McKessy, spoke with the Wall Street Journal’s Risk and Compliance blog on September 24, 2013, to discuss the pace and size of whistleblower awards under the SEC's new “bounty” program and his agency’s role in enforcing the whistleblower protection provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).

McKessy addressed the criticism from some quarters that the agency has not delivered the large awards to whistleblowers that many hoped for at the outset of the program.  McKessy explained that “logically speaking, the longer we get away from the statute that created the program, which was July 21, 2010, the more time we have for whistleblower tips to actually ripen into investigations, and those investigations to ripen into litigation and litigation to ripen into successful actions where we get over a million dollars in sanctions.”

McKessy also explained the agency’s reasoning for the size of the awards it has made to whistleblowers so far.  Although acknowledging that it was not “a very mathematical, scientific, step-by-step process,” McKessy shed some light on the thinking behind the awards.  He noted that the SEC had awarded a 30 percent payout with its first award because the tipster “met the paradigm of an ideal whistleblower” by being very persistent in reporting and ensuring the SEC continued to pay attention to the misconduct, and by helping the SEC “get to the finish line” by working with the agency throughout the proceedings.  By contract, the whistleblowers who won the second award, while providing the SEC with very important information, were not in a position to give the SEC ongoing assistance, and therefore fell short of the maximum award.

McKessy explained that he has asked his staff to “be on the lookout” for opportunities to enforce the Dodd-Frank Act’s anti-retaliation provisions.  These would be found in fact patterns showing that a company “didn’t treat their employees in good faith” after the employees made a report to the SEC.  Mr. McKessy also made the point that even if it turned out a report was wrong, as long as the whistleblower had reason to believe that what he or she reported was true, the SEC would still enforce the Dodd-Frank anti-retaliation provisions if a whistleblower was retaliated against on the basis of those reports.