January 27, 2022
On November 15, 2021, the Securities and Exchange Commission (SEC) released its annual report highlighting the success of its Whistleblower Program. The SEC Whistleblower Program was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). It incentivizes and encourages individuals to report wrongdoing in the financial sector. The incentives are clearly working as the program received 12,200 tips in fiscal year 2021, a record-breaking number.
In FY2021, the Program broke records for the overall number of whistleblower awards. It also set a record for the amount of those awards. In fact, the $564 million awarded in FY2021 exceeds the $562 million in total awards for all prior years combined. The program’s two largest whistleblower awards to date—a $114 million award to one whistleblower, and a combined $114 million award to two whistleblowers – were made in FY2021. Notably, last year, the program passed $1 billion in awards.
Amendments to the SEC Whistleblower Program, which became effective in 2021, favored whistleblowers. One of the amendments adopted a presumption setting awards at 30% of the monetary sanctions collected for awards under $5 million. This amendment clearly had an impact on the 2021 numbers. The presumption was applied 89% of the time to eligible awards.
The 2021 Amendments also make it possible for SEC whistleblowers to receive credit for successful results in related enforcement actions. Going forward, SEC whistleblowers may be entitled to awards based upon successful results obtained by other agencies. For example, Deferred Prosecution Agreements, Non-Prosecution Agreements, and corporate fines obtained by the United States Department of Justice.
The bulk of meritorious whistleblowers in FY2021, were current or former insiders of the defendant entity. The rest of whistleblower award recipients were investors who had been victimized by the fraud they reported, professionals working in the same or a related industry as the offending entity, or other types of outsiders.
If you are considering submitting a tip, complaint, or referral to the SEC, we suggest that you contact us for a free, confidential consultation. We will discuss the SEC whistleblower process and review your options. Our experienced whistleblower attorneys can explain the filing process and the steps the SEC takes to protect the confidentiality of whistleblowers and their information.