SEC’s whistleblowing program reports record-breaking tips and awards

Since 2010, whistleblowers who provide information to the US Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC) that leads to a successful enforcement action of more than $1 million are eligible to collect monetary awards equal to 10 to 30% of the total enforcement amount.  In its recently-released sixth annual report to Congress on its whistleblowing program, the SEC reported its highest number of whistleblowing tips and second-highest total amount of awards in any single year:

• 4,484 total tips, representing a 50% increase from the first year of the program;
• nearly $50 million in awards to 12 individuals, representing almost 30% of the $160 million total awarded to date to 46 individuals; and
• 3 of the largest 10 individual awards issued to date, including a single award of $20 million.

But just who are these newly-minted millionaires?  The SEC reports that 63% of all award recipients to date were current or former company insiders and 83% of these insiders raised their concerns within the company before reporting to the SEC.

Tips also continue to pour in from other jurisdictions, with submissions received from more than 114 countries since the inception of the program, including many from the developing world.  Last year, the highest number of foreign tips were received from China and Hong Kong (62), Canada (73), and the UK (84). 

Finally, the SEC and CFTC continue to emphasize the importance of protecting the confidentiality of and not retaliating against company whistleblowers – even long after an investigation has concluded.  Companies have recently been hit with stiff penalties for requiring employees to waive their rights to receive whistleblower awards or for including non-disparagement or confidentiality provisions in separation agreements that may discourage employees from cooperating with regulatory investigations.   

The results of our own global survey on recent whistleblowing trends indicate that the rates of whistleblowing in the US are close to the global average, so it is unclear if the financial incentives offered to whistleblowers in the US make a difference in practice.  However, the results of our survey do indicate that the US management mindset is becoming more aligned with the SEC’s view that financial incentives can promote an effective whistleblowing culture:

• There has been a 10% increase since 2014 in the number of business managers in the US who believe financial incentives encourage openness in their organization.
• Over the same period, the proportion of managers who believed financial incentives might result in false claims was cut almost in half to 26%.

Outside the US, however, our survey found that skepticism of financial incentives has increased, with 40% of business managers polled in Germany, France, Hong Kong, and the UK believing that financial incentives would encourage false claims and 36% believing it would erode trust in their organization.

You can read more about the results of our September 2017 whistleblowing survey and key takeaways for companies looking to improve their compliance culture here.