SEC Whistleblower Payouts Top $1 Billion
Takeaway: 2021 has been a record year for the SEC’s whistleblower program with awards for fiscal year 2021 topping $500 million and total awards now exceeding $1 billion. This reflects both a pro-whistleblower administration and a growing private-public partnership in exposing corporate malfeasance. As the SEC’s whistleblower program matures and knowledge of its existence spreads, the program’s ability to remedy securities abuses grows.
On September 15, 2021, the Securities and Exchange Commission (SEC) announced that it had issued two awards under its whistleblower program in the amounts of $110 million and $4 million. The $110 million award amounts to the second largest award under the program to date, just falling short of the $114 million award issued in October 2020. Given the SEC’s policy of keeping whistleblowers’ identities secret, the nature of the violations at issue and names of the tipsters were not revealed. However, the SEC noted that the recipient of the $110 million award had “provided significant independent analysis that substantially advanced the SEC’s and the other agency’s investigations,” while the other whistleblower had provided more limited information relating to a matter already under investigation. The disparity highlights the SEC’s calculus in crafting awards, providing greater bounties for those who provide substantial, well-prepared information to the agency.
The award numbers speak volumes. With these payments, the SEC’s whistleblower program has now paid out over $1 billion to 207 whistleblowers since issuing its first award in 2012. That means the average award under the program is approximately $4.8 million – with several nine-figure payouts in the mix. More strikingly, as of last year, the total awards under the Whistleblower Program (from 2012 through fiscal year 2020) amounted to $500 million. Now, in fiscal year 2021 alone, the SEC has paid out over $500 million in awards, making fiscal 2021 a record-setting year. And it’s not even close. In 2020, the second-highest year for whistleblower awards, the SEC paid out approximately $175 million.
To put things in perspective, over the last ten years, whistleblower awards under the False Claims Act (FCA) have averaged slightly under $500 million per year. If this pattern continues, SEC awards will be on par with those issued under the FCA, the federal government’s premier whistleblower statute. In fact, this year is likely to be the first time that SEC awards surpass FCA awards. That is because, outside of a blockbuster and apparently non-qui tam FCA settlement with Purdue Pharma earlier this year, FCA recoveries in 2021 have been modest to date.
Not only are the 2021 SEC awards highly substantial, but the pattern of increasing awards is remarkable. This reflects both a pro-whistleblower administration and a growing private-public partnership in exposing corporate malfeasance. As the SEC’s whistleblower program matures and knowledge of its existence spreads, the program’s ability to remedy securities abuses grows. Given that securities violations are often highly complex and hidden from public view, securities regulators must in many cases rely on ordinary citizens to root out wrongdoing – whether they be corporate insiders or outsiders with significant information. The $1 billion in awards shows that this partnership is yielding fruit for taxpayers and whistleblowers alike. Given the current administration and the recent uptick in the number of whistleblower tips submitted to the SEC, the pattern of robust annual awards should continue.