SEC Whistleblower Program

Overview

Under the SEC Whistleblower Program, the SEC will issue awards to whistleblowers who provide original information that leads to enforcement actions with total monetary sanctions (penalties, disgorgement, and interest) in excess of $1 million. In exchange for the valuable information, a whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected.

In determining an award percentage, the SEC considers the particular facts and circumstances of each case. For example, positive factors that may increase an award percentage include the significance of the information, the level of assistance provided by the whistleblower and the whistleblower’s attorney, and the law enforcement interests at stake. On the other hand, negative factors that may decrease an award percentage include unreasonable delay in reporting the violation to the SEC and the culpability or involvement of the whistleblower in the violation.

Under the SEC Whistleblower Reward Program, whistleblowers can submit tips anonymously to the SEC through an attorney and be eligible for an award for exposing any material violation of the federal securities laws.

The SEC Whistleblower Program continued its remarkable run of success in FY 2020. According to the SEC Whistleblower Office’s 2020 Annual Report to Congress, the office received more than 6,900 tips in the fiscal year. This is the highest number of tips the office has received in one year. Most whistleblower tips related to corporate disclosures and financials (25%), offering fraud (16%) and market manipulation (14%). Other notable areas of tips included insider trading, trading and pricing schemes, foreign bribery and other FCPA violations, unregistered securities offerings and fraud in connection with initial coin offerings (ICOs) and cryptocurrencies. Since 2011, the SEC Whistleblower Office has received more than 40,200 tips that have enabled the SEC to recover more than $3.5 billion in monetary sanctions from wrongdoers.

Consistent with prior years, the states that yielded the highest number of tips in FY 2020 were California, New York, Florida, Texas, and Pennsylvania. Other states that reported a high number of tips were Arizona, Georgia, Massachusetts, Michigan, North Carolina, Ohio, New Jersey, Virginia and Washington. The SEC Whistleblower Office also received tips from 78 foreign countries in FY 2020. The highest number of tips were from whistleblowers in Canada, the United Kingdom and the People’s Republic of China.

Whistleblowers need not be U.S. citizens to be eligible for SEC whistleblower awards. According to the 2017 Corruption Perceptions Index, a majority of countries are making little or no progress in ending corruption. This finding is consistent with PwC’s 2018 fraud survey, which reported the highest fraud levels in organizations in the past 20 years, and the ACFE’s 2021 fraud survey, which reported that 51% of organizations have uncovered more fraud since the pandemic and 71% of anti-fraud professionals expect the level of fraud to increase over the next year. As the SEC continues to promote worldwide public awareness of the SEC Whistleblower Program, we expect to see an increase in whistleblower tips and awards in the coming years.

SEC Whistleblower Program A Success

The report also indicates that the SEC Whistleblower Program is gaining momentum. In particular, the SEC Office of the Whistleblower, which first opened its doors in August 2011, has issued a majority of the whistleblower awards in the past several years:

• In FY 2015, the SEC issued $37 million in awards to whistleblowers.
• In FY 2016, the SEC issued $57 million in awards to whistleblowers.
• In FY 2017, the SEC issued $50 million in awards to whistleblowers.
• In FY 2018, the SEC issued $168 million in awards to whistleblowers.
• In FY 2019, the SEC issued $60 million in awards to whistleblowers.
• In FY 2020, the SEC issued $175 million in awards to whistleblowers.

Notably, FY 2021 is shaping up to be the best year in the SEC Whistleblower Program’s history. On October 22, 2020, the SEC issued the largest whistleblower award in the program’s history of $114 million. In addition, according to the SEC’s 2020 Agency Report, the SEC recognized a $255 million contingent liability for potential whistleblower awards to be paid in FY 2021.

SEC Office of the Whistleblower

In 2011, the SEC Office of the Whistleblower was created pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to run the SEC Whistleblower Reward Program. The program offers monetary incentives to individuals who report information about violations of the federal securities laws to the SEC. In its short history, the SEC Whistleblower Reward Program has been extraordinarily successful in enabling the SEC root out securities fraud and protect investors. To date, the SEC Office of the Whistleblower has issued more than $500 million in awards to whistleblowers.