SEC whistleblower cases have been in the news lately. An award was just announced this past weekend in the $500,000 range (exact amount is yet to be determined). A very large award ($30 mil) was all over the news in late 2014. So, does it really pay to become a whistleblower? I say ABSOLUTELY NOT and here’s why:
- Most awards are not that big. Could you live the rest of your life on a few hundred thousand dollars? Highly unlikely. According to the SEC’s October 16, 2014 press release detailing its 2014 Enforcement Actions, nine whistleblowers were awarded approximately $35 mil in total for 2014. One of those nine was awarded $30 mil of that amount. So, the remaining eight divvied up $5 mil; pretty good still. However, the $5 mil was not split evenly; most of individuals just received a few hundred thousand. A review of the 2014 Dodd-Frank Whistleblower Program Report did not provide detailed clarification on the amounts paid out. However, the few examples it cites do support the notion that most whistleblowers received a few hundred thousand dollars if the claim was successful.
- The chance of “winning” and being awarded a claim is very small. According to the cases listed under Final Orders on the SEC Office of the Whistleblower website, only five of the fourteen cases listed for 2014 resulted in an award being issued. That’s a 36 percent success rate or 64 percent failure rate, depending on your perspective. Not very attractive odds when considering a likely career ending maneuver.
- By becoming a whistleblower, one faces a career altering decision (that’s an understatement). Although Section 21F of the Exchange Act protects whistleblowers from retaliation by employers, the fact remains that the work life of a whistleblower is not a happy one. Most whistleblowers leave their positions of their own volition. The financial world is very close knit and the identity of a whistleblower will most likely be unmasked by either the press or the whistleblowers themselves who want “bragging rights.” Once you’re a known whistleblower, good luck finding a job on Wall Street.
Last year when I stopped by the National NSCP Conference, the CFTC’s Whistleblower Office had an exhibit booth. Since NSCP, a compliance industry support group, had decided to allow an “end of career offer” to be whistleblowers (head scratch), the CFTC was able to promote whistleblowing, including a giveaway stress ball shaped like a whistle. Not even an air horn promo item could help these programs unless some serious changes are made.