Anti-Corruption & Compliance Blog

In August 2021, the Securities and Exchange Commission (the “SEC”) announced multiple sizable whistleblower awards totaling approximately $16.1 million to 14 individuals. The awards ranged from $150,000 to $3.5 million. These recent awards continue a pattern by the SEC in late 2020 and 2021 of high dollar awards, some of which have topped $50 million.

The SEC whistleblower program began after Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010. Dodd-Frank authorizes the SEC to pay individuals that provide information leading to enforcement actions where over $1 million in sanctions is collected between 10% to 30% of the total award. According to the SEC, it has awarded approximately $959 million to 203 individuals since 2012.

Also of note in August, SEC Chairman Gary Gensler issued a statement regarding two September 2020 amendments to the SEC’s whistleblower program rules that resulted in industry concerns that the amendments would discourage whistleblowers from coming forward. Specifically, one of the amendments could preclude a whistleblower award if another whistleblower program might apply. The second amendment may lower the amount of an award. In response, the Chairman announced that he has directed his staff to consider revisions to the amendments in order to address the perceived disincentives to potential whistleblowers.

Given the SEC’s continued use and publicity of its whistleblower program to incentivize individuals to come forward and identify potential violations, it is important for companies to create a culture of compliance that prevents violations before they occur.