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What happens to a whistleblower tip once it’s submitted to the SEC? How does the SEC determine which tips to actively investigate? These are crucial questions for any potential whistleblower, especially given that the SEC receives more than 20,000 tips, complaints and referral each year – more than 5,200 whistleblower tips in 2019 alone! – but the agency can only conduct about 2,000 active enforcement investigations each year. Here’s an overview of a tip submission process.
The SEC’s process for vetting and investigating tips starts when a whistleblower submits to the SEC a Form TCR – short for “Tips, Complaints and Referrals” – describing the securities violation(s) that he or she believes has occurred. It is crucial for any SEC whistleblower to submit his or her information using the Form TCR in order to remain eligible for a potential monetary award. Once the TCR is received by the SEC’s Office of the Whistleblower (OWB), the OWB will assign the submission a unique TCR number and send that number back to the whistleblower or the whistleblower’s attorney for record-keeping and tracking purposes.
At that point, the TCR is forwarded to the SEC’s Office of Market Intelligence (OMI), which has been described as a “point guard” for the entire agency. Comprised of more than 40 attorneys, former traders, accountants and other experts, the OMI is responsible for gathering and analyzing all tips and complaints received by the SEC. The OMI conducts an initial evaluation of each tip to determine, among other things, whether it relates to an existing investigation, whether similar information has already been submitted to the agency, and whether it relates to possible misconduct that occurred within the SEC’s five-year statute of limitations for enforcement actions. Most importantly, the OMI determines whether the tip is sufficiently specific, significant and credible to be referred to an investigative team within the Division of Enforcement – the division responsible for conducting investigations of possible securities violations and bringing charges against wrongdoers where warranted.
If a tip is referred to an investigative team in the Division of Enforcement, it’s then up to enforcement attorneys to determine whether, and how best, to further investigate the tip. In some instances, the enforcement attorneys may determine that the tip should not be pursued, either because it appears unlikely that an actionable securities violation occurred or for some other reason. In some cases, the Division may determine that the tip should be referred to a different government agency, such as the CFTC, IRS or Department of the Treasury. In many cases, though, the tip will be used as a valuable new lead in an existing SEC investigation or as the starting point for an entirely new SEC investigation.
As the statistics above and pathways traveled by a tip reflect, the SEC cannot launch a full-blown investigation into every new allegation, and instead must make difficult but necessary decisions about how best to allocate its resources. For that reason, it’s vital that any SEC whistleblower (whether using counsel or not) provide information to the SEC in clear, compelling, detailed and in an organized way, explaining exactly why he or she believes a securities violation has occurred and providing any supporting evidence. This type of tip is much more likely to catch the SEC’s interest than a vague or conclusory tip, giving both the SEC and the whistleblower a better chance at achieving a successful outcome.
Read more about the investigation process
No matter the source, when thinking about submitting a whistleblower tip to the SEC, our experience as senior attorneys in the trenches of federal securities law enforcement provides unique insight into the nature of misconduct and the quality of supporting evidence. We can leverage our knowledge of the investigative process to mitigate our clients’ fear and anxiety.
Sometimes prospective clients find our firm because they read an article in a newspaper or watch a segment on television. Sometimes other lawyers recommend our firm. Sometimes individuals are concerned about practices they observe in their workplace and, through an internet search, find they can talk to us confidentially.
As we regularly say, although the difficult decision about whether, how, and when to blow the whistle will depend upon the unique facts and circumstances of each case, knowledge is power. We know SEC whistleblowing and we encourage our clients and prospective clients to read through our site to learn as much as they can too.
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Think you have a tip for the SEC? Request a case evaluation, or call us at (212) 907-0700