The Whistleblower Industrial Complex

How do a few dozen SEC and CFTC staffers sift through the avalanche of tips submitted under Dodd-Frank whistleblower “bounty” programs to determine which ones to investigate?

The answer: They don’t.

Using new data obtained from both agencies under the Freedom of Information Act, my new working paper demonstrates that the tip-triage function has been outsourced to a group of well-connected, repeat-player, private whistleblower lawyers who are exempt from any meaningful transparency, regulation, or public accountability.

Key findings from the analysis, which includes all successful whistleblowers from the programs’ inception through 2020, include the following:

  • Lawyers Dominate – Both the

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Legal Guardrails for a Unicorn Crackdown

The SEC is undertaking an historic effort to redraw the boundary between public and private companies.  After years of watching – and sometimes encouraging – the explosive growth in less tightly regulated private markets and the proliferation of so-called “unicorns,” the agency is now reclaiming jurisdiction.

A key arrow in the agency’s regulatory quiver is its authority under Exchange Act Section 12(g) to force private companies to “go public” when they reach a certain size. The provision requires any company whose shares are “held of record” by more than 2,000 persons to take on the obligations imposed by federal securities … Read more


Once upon a time, a successful startup that reached a certain maturity would “go public” – selling securities to ordinary investors, perhaps listing on a national stock exchange, and taking on the privileges and obligations of a public company under the federal securities regulations.

Times have changed. Successful startups are now able to grow quite large without public capital markets. Not so long ago, a private company valued at more than $1 billion was rare enough to warrant the nickname “unicorn.” Now, over 800 companies qualify.

Legal scholars are worried. A recent wave of academic papers makes the case that, … Read more

Beyond “Going Dark:” The SEC’s 13F Proposal and Hedge Fund Activism

This past summer, the Securities and Exchange Commission (SEC) proposed eliminating quarterly disclosures for 90 percent of institutional investment managers by raising the reporting threshold under Section 13F of the Exchange Act from $100 million to $3.5 billion.  The proposal generated widespread opposition.  One key criticism — advanced on this blog, in various media outlets, and by many of those who submitted comments to the agency — was that the agency’s proposal would bolster hedge fund activism by allowing many activists to “go dark,” build up positions in companies in secret, and then “ambush” unsuspecting managers.

Although … Read more

The SEC and “Piggyback” Securities Litigation

Leading securities regulation scholars have repeatedly called for legislatively expanding the Securities and Exchange Commission’s (SEC) control over private securities litigation.[1] These proposals grow out of profound doubts about the private securities class action regime and frustration with the decentralized multi-enforcer approach to securities enforcement. But these centralization proposals have failed to gain traction.

In a new paper, I map out a different way to harness the SEC’s power to improve the private securities litigation regime.  Rather than expand SEC authority, I argue that the SEC can and should make better use of its existing authority in this domain.… Read more