Business Irish

Saturday 18 November 2017

Stage is set for US watchdog to create first whistle-blowing millionaire in Ireland

Anyone supplying a tip-off on suspected corporate wrongdoing could be in line for a huge payout under an American regulatory scheme

The US Securities and Exchange Commission has received 65 tip-offs from people in Ireland. Photo: Reuters
The US Securities and Exchange Commission has received 65 tip-offs from people in Ireland. Photo: Reuters

Greg Glynn

Since 2012, the US Securities and Exchange Commission (SEC), through its whistle-blower programme, has received 65 tip-offs regarding suspected corporate wrongdoing from individuals in Ireland.

In that same period, over $111m (€105m) in awards has been paid to 34 whistle-blowers under the scheme.

Although the latest figures for 2016 show that tips from Ireland are down slightly on last year, awards made to those who do disclose continue to rise -with the potential for a lucrative payout more real than ever.

With an award of more than $30m (€28.4m) made to a whistle-blower living in a foreign country in 2014 (the largest award made by the SEC to date) - the stage remains set for Ireland's first whistle-blower millionaire.

Dodd-Frank

The Dodd-Frank Wall Street Reform and Consumer Protection Act became federal law in the US in 2010.

The Act recognises the valuable role whistle-blowers can play in uncovering and prosecuting corporate wrongdoing by offering significant financial incentives to encourage whistle-blowers to come forward.

Under the Act, individual whistle-blowers who provide "original information" on corporate wrongdoing to the SEC, which leads to the wrongdoer being fined $1m or more, are awarded between 10pc-30pc of the amount of the fine.

Whistle-blowers can submit information alone or jointly with another individual. The information must be 'original' (that is to say not known to the SEC from any other source), and must come from the whistle-blower's independent knowledge or analysis.

Significantly, the whistle-blower does not have to be an employee of the organisation in question. The information is submitted directly to the SEC's Office of the Whistleblower, which was established by the Act to administer the programme.

Whistle-blowing: The latest figures

There is no denying that, since its inception in 2012, the programme has gone from strength to strength.

The Chief of the Office of the Whistleblower, in her foreword to the 2016 Annual Report, describes the 'transformative effect' the programme has had on the agency's enforcement activities.

The continued success of the programme is borne out in the figures: in 2016 the information and assistance provided by 34 whistle-blowers led to successful enforcement actions in which more than $584m (€554m) in financial sanctions were ordered.

As in previous years, the number of tips received in 2016 continued to increase apace.

In 2012, 3,001 tips were submitted to the agency. The figure for 2016 is 4,200, an increase of over 40pc. In financial year 2016, the agency issued awards totalling more than $57m (€54m) - higher than all award amounts issued in previous years combined. Six of the 10 highest awards ever made were in that same year: $22m in August; $17m in June; $5m-6m in May; $4m in September; $3.5m in May and $2m in March.

Notably an award of $16.5m (€15.6m), which would have been the third-largest in the programme's history, was turned down by an employee of Deutsche Bank in August in protest at what the employee saw as a failure of the SEC to punish executives at the bank for misstating the bank's accounts.

The Irish element

The majority of the tips received still come from within the United States. However, tips received from outside the US remain steady. In 2016, the Commission received submissions from individuals in 67 foreign countries.

Canada, the UK and Australia remain the largest source of tips from outside the US, with 68, 63 and 53 submissions respectively. Although tips from Ireland fell slightly last year (from 20 in 2015 to 14 in 2016), the overall trajectory since 2012, the first year for which records are available and during which nine submissions came from Ireland, is upwards.

The future

The 2016 Report indicates that awards under the programme will continue to increase. As the Chief of the Office stated, the SEC believes that "the continued payment of significant awards, like those made this past year, will continue to incentivise company insiders, market participants and others with knowledge of potential securities law violations to come forward and report their information to the agency".

As US foreign direct investment in Ireland remains steady, the potential for Irish individuals to engage with, and potentially uncover incriminating information regarding US corporations endures.

The fact that whistle-blowers do not have to be an employee, or even an insider of the company that they are reporting on, to be eligible for an award, further underlines its wide availability to anyone with relevant information on corporate wrongdoing to benefit.

Given this, and the increasing level of the lucrative payouts for some informants, the stage remains set for Ireland's first whistle-blower millionaire.

Greg Glynn is a partner at Arthur Cox

Sunday Indo Business

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business