CURRENT ISSUES IN
SECURITIES LITIGATION
Monday, February 23, 2015
Bar Association of San Francisco
Presented By the ABA Section of Litigation
Securities Litigation Committee and
Alternative Dispute Resolution Committee
Whistleblowers, Self-Reporting
Parallel Proceedings, Retaliation
Increasing Whistleblower Claims: 2014 Annual
Report to Congress
 With the Dodd-Frank whistleblower bounty program maturing,
the number of whistleblowers and whistleblower retaliation
enforcement claims is increasing.
 SEC issued whistleblower awards to more individuals in Fiscal 2014 than in all
previous years combined (Nine our of the 14 total awards made under the program
were paid in 2014).
 SEC received 3,620 whistleblower tips in 2014, a 20% increase over two years ago
 Record-breaking $ payments: $30M to one individual in Sept. 2014
 SEC brought its first enforcement action under anti-retaliation provisions of DoddFrank in June 2014
2
2014 Annual Report to Congress
 Whistleblower tips by allegation type: 2014
Corporate
Disclosures
and Financials
Offering
Fraud
Manipulation
Insider
Trading
Trading and
Pricing
FCPA
Unregistered
Offerings
Market
Event
Municipal
Securities and
Public Pension
Other
Blank
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
3
2014 Annual Report to Congress
 Whistleblower tips by allegation type: 3 year comparison
Corporate
Disclosures
and Financials
Offering
Fraud
Manipulation
Insider
Trading
Trading and
Pricing
FCPA
Unregistered
Offerings
Market
Event
Municipal
Securities and
Public Pension
Other
Blank
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
4
2014 Annual Report to Congress
 In Fiscal 2014, the SEC received whistleblower submissions from
individuals in all fifty states, thee District of Columbia and the U.S.
territory of Puerto Rico.
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
5
2014 Annual Report to Congress: Excerpts
 Whistleblower tips received by state: Fiscal 2014
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
6
2014 Annual Report to Congress: Excerpts
 Whistleblower tips received by international location Fiscal 2014:
Source: 2014 Report to Congress on the Frank-Dodd Whistleblower Program
7
Whistleblowers, Self-Reporting,
Parallel Proceedings, Retaliation
Hypothetical
Joe Blow is employed as a Vice President of MyToot, a publicly-traded U.S.
manufacturer of high tech whistles (used primarily in Celtic tin whistle pieces).
MyToot has commenced the manufacture and sale of a new whistle that will surely
revolutionize the whistle business. Blow has had performance problems and
thinks he may get fired. He has just learned that MyToot has stolen the underlying
unpatented technology from another California-based whistle manufacturer, and
advises outside counsel, Fred Law, of the theft of technology, adding that he,
Blow, loaded up on MyToot stock before the Company disclosed that it had begun
manufacturing the new whistle, in anticipation of the stock’s soaring, and then
quickly sold after that news was announced.
Blow fingers Bacall, the Company’s CEO (who toyed with him briefly and then
ended the relationship abruptly) as the main culprit in the theft of the technology.
Blow suggests to Law that he, Blow, could be a whistleblower concerning the
underlying technology theft and said that he also intends now to short the stock
and buy puts since the truth is bound to come out. Bacall knows nothing about
the theft of the technology but she sees Blow go into Law’s office, suspects he is
accusing her of sexual harassment and fires him on the spot.
8
Whistleblowers, Self-Reporting,
Parallel Proceedings, Retaliation
1.
Assume Law tells the Audit Committee (whose charter
requires it to supervise investigations of possible misstatements
in SEC filings and insider trading) of Blow’s allegations and
insider trading. What are the Audit committee’s action items?
When, if ever do they self-report?
9
Whistleblowers, Self-Reporting,
Parallel Proceedings, Retaliation
2.
Assume Law himself wants to be a whistleblower and is
either inside or outside counsel. He seeks your advice. Can he
be a whistleblower? What restrictions/pitfalls?
10
Whistleblowers, Self-Reporting,
Parallel Proceedings, Retaliation
3.
The Company issues an 8-K saying it’s received some
government subpoenas focusing on its disclosures and financial
statements concerning its innovative whistle. Stock drops; Class
actions and derivative actions follow; DOJ and SEC are
investigating; What does the company do about the parallel
proceedings? How does Bacall react when invited to a get
together by the DOJ/SEC?
11
Whistleblowers, Self-Reporting,
Parallel Proceedings, Retaliation
4.
Blow wants to be a whistleblower and collect beaucoup
$$$. You’re his lawyer. What do you advise? How do you deal
with his insider trading problem.
12
Whistleblowers, Self-Reporting,
Parallel Proceedings, Retaliation
5.
Blow wants to bring an employment action for retaliation.
The SEC wants to bring a retaliation action too, to set another
example. Should they? Can they under these facts?
13