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Securities Law

SEC Received 64 Tips on Muni- and Pension-Related Abuses in Fiscal 2012

NOV 15, 2012 1:59pm ET
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WASHINGTON — The Securities and Exchange Commission received 64 whistleblower tips about possible securities law violations in connection with municipal securities and pensions during fiscal 2012, which ended Sept. 30.

Fifteen of those tips were made during the last quarter of 2011 and the rest were made this year, the commission said in an annual report on its whistleblower program.

The whistleblower program was established under the Dodd-Frank Act to provide monetary incentives for individuals that come forward and report possible violations of the federal securities laws.

“In just its first year, the whistleblower program already has proven to be a valuable tool in helping us ferret out financial fraud,” said SEC chairman Mary Schapiro. “When insiders provide us with high-quality road maps of fraudulent wrongdoing, it reduces the length of time we spend investigating and saves the agency substantial resources.”

The 64 muni- and pension-related tips for fiscal 2012 were 2.10% of the overall 3,001 whistleblower tips received.

Eighteen muni and pension-related tips were provided to the SEC in August and September of 2011, the end of fiscal 2011 and the first two months of the program. The 18 were 2.7% of the 334 tips received those two months.

The largest number of tips in fiscal 2012 — 435 or 17.4%, of the total amount from the 50 states, the District of Columbia and Puerto Rico — were from individuals in California. The second largest, 246, or 9.8%, came from tipsters in New York.

About 324 tips were from other countries and 170 were submitted without any foreign or domestic geographical categorization.

The greatest amount of tips, 547 or 18.20%, revolved around corporate disclosure and financials. The next highest amount, 465 or 15.5%, were for offering fraud, with 457 or 15.2% for manipulation, and 190 or 6.30% for insider trading. There were 703 or 23.40% tips in the “other” category and 131 or 4.40% where no category was identified by the tipster. 

The 64 muni- and pension-related tips were the smallest among the 11 categories cited by the SEC in the report.

Under the SEC program, whistleblowers who provide original, “high quality” information about potential securities law violations are entitled to awards of between 10% and 30% of monetary sanctions exceeding $1 million that are collected in successful tip-related enforcement actions brought by the SEC or other authorities.

The SEC made its first award under the program during fiscal 2012. On Aug. 21, the commission made an award of 30% or nearly $50,000 to a whistleblower who helped it stop an ongoing multi-million dollar fraud.

During the fiscal year, there were 143 enforcement judgments and orders issued that potentially qualify as eligible for whistleblower awards, the SEC said.

Tips can be made anonymously, though the tipster must be represented by an attorney in such cases. The SEC is committed to trying to keep the identity of the tipster confidential, but need to use documents or information he or she provided in its investigation and enforcement action.

More information about the program is available at http://www.sec.gov/whistleblower.

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