SEC’s Whistleblowing Statistics Continue To Set Records Through Pandemic
Government/Regulatory Enforcement
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  • SEC’s Whistleblowing Statistics Continue To Set Records Through Pandemic
    Following the Securities and Exchange Commission (“SEC”) September 2020 amendments to the rules governing its whistleblower program, which we previously discussed in this newsletter, the SEC is on track to shatter its previous records of awards paid out to whistleblowers.  Halfway into its fiscal year (“FY2021”), which started in October 2020, the SEC has already awarded nearly $200 million to whistleblowers, surpassing last year’s record of $175 million paid out to whistleblowers.  And the awards have been sizable:  At the start of FY2021, the SEC issued a record $114 million dollar award; and so far this month, the SEC has already issued two multi-million dollar awards.  If this pace continues, the SEC will be on pace to award in one year the same total amount that it had awarded over the previous nine years, since the inception of the whistleblower program, combined.  In terms of the number of awards paid out, the SEC is also likely to have a banner year:  it has paid out 31 awards so far in FY2021, compared to 39 awards paid out last year. 

    As we previously discussed, in amending the program rules in September, the SEC intended to provide eligible whistleblowers with greater insight into the program and improve efficiencies in the review of awards.  The amendments addressed a variety of areas in the whistleblower program and notably added a presumption that whistleblowers will be paid the statutory maximum award amount (i.e., 30% of the amount collected in an enforcement action) when the potential award amount is less than $5 million in many cases, presumably increasing the incentives for potential whistleblowers. 

    Even before the September amendments were announced, however, the coronavirus pandemic appeared to have already had a material impact on the SEC’s ability to attract whistleblower tips:  in FY2020, the SEC received a record-breaking 6,911 tips from whistleblowers, representing a 31% increase over tips received in FY2019 after a slight decrease in tips received in FY2018. Similarly, the Commodity Futures Trading Commission also saw a significant increase in the number of whistleblower tips it received in FY2020, receiving a record-high 1,030 tips, which represented a jump of 126% over the tips received in FY2019 and an increase of 36% over the previous record set in FY2018.

    The increase in tips may be a result of the social isolation caused by the pandemic, but it also may simply be the result of continually increasing awareness in the industry of the availability of potentially large whistleblower awards.  Regardless of the cause of the continued uptick, as companies continue to assess their legal risks and compliance programs, they should consider the compliance challenges raised by the virtual environment and work on strategies to bolster a culture of compliance remotely.