The Securities and Exchange Commission (SEC) has announced over $176 million in whistleblower awards in the first four months of the current fiscal year, already more than any other year in its history.
The SEC acknowledged the record Thursday as part of a $600,000 payout to a tipster who “substantially contributed to an open investigation by providing detailed and highly valuable information resulting in critical investigative leads,” according to a press release.
“Since the beginning of October, the Commission has awarded 28 individuals over $176 million in whistleblower awards, which already surpasses the total dollar amount awarded in the entirety of any prior fiscal year,” said the chief of the SEC’s Office of the Whistleblower, Jane Norberg, in the release. “We hope these awards continue to encourage individuals with information regarding possible securities laws violations to report to the Commission.”
According to the SEC’s order, the whistleblower “provided new, detailed, and highly valuable information and substantial assistance during the course of an open investigation that significantly contributed to the success of the Covered Action.” The whistleblower “met with staff multiple times, provided critical investigative leads,” and the information provided dovetailed with the charges the agency eventually filed.
Compliance takeaway: Employees are blowing the whistle with the SEC on misconduct within their companies at an astonishing pace. Work-from-home situations brought on by the coronavirus pandemic may be a contributing cause.
In fiscal year 2020, the SEC doled out $175 million to 39 whistleblowers, which had been the agency’s payout record. Federal fiscal years run from Oct. 1 to Sept. 30.
In 2021, the SEC topped $176 million in less than four months. The bulk of the total can be attributed to a $114 million payout announced in October, which more than doubled the agency’s high-water mark for a single award.
From mid-March through Sept. 30, the Division of Enforcement’s Office of Market Intelligence “triaged approximately 16,000 tips, complaints, and referrals (a roughly 71% increase over the same time period last year), according to the division’s 2020 Annual Report.
Norberg was asked what she thought was fueling the dramatic uptick in tips during a Webcast with the Ethics & Compliance Initiative held last September.
“People are out of the office, they’re teleworking, people may have lost their jobs,” she said. “When you get that time and space away from the office, maybe people are thinking a little bit more about things that they may have seen that didn’t seem quite right. Maybe because they’re away from the office, they don’t feel that same connection to do an internal report; instead, they’re coming right to the SEC.”
Bottom line: The SEC has awarded approximately $738 million to 134 individuals since 2012. All payments are made from an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
The SEC neither identifies whistleblowers, nor discloses information that could reveal a whistleblower’s identity.