Record-Breaking Year for the SEC Whistleblower Program: What the SEC Annual Report Tells Whistleblowers

In its 2018 Annual Report to Congress, the SEC Office of the Whistleblower described a “record-breaking year,” with a substantial increase in the number of tips received and the largest whistleblower awards to date.  While these numbers illustrate the benefits of the SEC Whistleblower Program, the SEC rightly says that it is “most proud” of the benefits the Whistleblower Program offers to investors, with over $1.7 billion in monetary sanctions paid by wrongdoers in enforcement matters brought with information from whistleblowers.  The SEC reports that harmed investors have received, or are scheduled to receive, $452 million of payments collected as disgorgement.

Record-Breaking Rewards Paid to SEC Whistleblowers

In fiscal year 2018, the SEC Whistleblower Program awarded over $168 million in whistleblower rewards – more than it awarded in every prior year combined.  These awards were paid to 13 individuals, and include the three largest awards ordered to date.

The awards in FY2018 include:

• $83 Million to three individuals in the same covered action, reported to arise from a $415 million settlement with Merrill Lynch concerning the misuse of customer funds. Two whistleblowers shared a $50 million joint award, and the third received a $33 million award.
• $54 million to two individuals, with $39 million to one and $15 million to the other, in the same covered action.
• $16 million to two individuals in November, 2017.
• $4 million to an overseas whistleblower.

Record-Breaking Number of Tips Received

The SEC received over 5,200 whistleblower tips in FY2018.  While this continues a steady upward trend in the years since the program began, part of the increase this year may be attributed to the February, 2018 Supreme Court decision in Digital Realty v. Somers, which held that the Dodd-Frank law’s anti-retaliation provisions protected employees only if they had reported a possible violation to the SEC.

The tips received came from around the country and around the world.  Within the United States, tips were submitted by individuals from every state except Wyoming, as well as from the District of Columbia and Puerto Rico.

Many international whistleblowers also submitted claims, with submissions coming from more than 650 individuals in 72 different countries.  According to the SEC, 12% of the individuals making whistleblower claims submitted claims from abroad.  Canada, the United Kingdom, Australia collectively account for 219 of these individuals.  Also of note are 40 whistleblowers from the People’s Republic of China, 29 from Germany, 26 from India, 25 from Israel, 19 from Brazil, and 18 from Russia.

Lessons for Would-Be Whistleblowers

With 5,200 claims made in the year, the SEC Office of the Whistleblower has to triage incoming claims.  The Annual Report provides importance insights on the types of submissions that are more likely to be prioritized by the SEC.

• Specific Information. The SEC notes that successful whistleblowers named individuals involved in the misconduct, provided documents supporting their allegations (or explained where such documents could be located), and often identified specific financial transactions.
• Wrongful conduct. According to the SEC, whistleblowers often report relatively current or ongoing misconduct.  The SEC is particularly interested in widespread or multi-year securities violations, and in misconduct that impacts retail customers.
• Ongoing assistance. The report states that nearly all award recipients provided the Commission with assistance beyond the initial submission, by answering staff questions, providing testimony, or otherwise.

Notably, while the majority of award recipients made submissions that caused an investigation or enforcement action to be opened, fully one-third of whistleblower award recipients received awards because their information assisted with an already-existing investigation or examination.  Where a whistleblower is not the initiator of the action or investigation, the SEC considers factors such as whether the additional information provided by the whistleblower allowed the SEC to accelerate or streamline an action and whether it supported additional charges.

An attorney experienced in representing SEC whistleblowers can provide invaluable assistance in submitting a strong claim to the SEC.  The Whistleblower Lawyer Team at Constantine Cannon helps whistleblowers evaluate their potential claims and determine whether the misconduct can form the basis of a whistleblower claim.  With a history of successful partnerships with government agencies including the SEC, we know how to collect and present information to the relevant decision-makers, and how to provide effective assistance to the government throughout the investigation and any subsequent proceedings, including a claim for a whistleblower reward.  If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please Contact us for a Confidential Consultation.

Read More

• The SEC Whistleblower Program
• SEC Enforcement Actions
• Financial & Investment Fraud
• The CFTC Whistleblower Program 2018 Annual Report:  Program has a Banner Year, but Challenges Remain
• I Think I Have a Whistleblower Case

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