Better Markets Heralds SEC Whistleblower Program as a Model To Follow
Better Markets — a nonpartisan nonprofit promoting the public interest in financial reform and the economy — just released (on December 7) a report on the SEC Whistleblower Program, touting it as a $6 billion success story. In announcing its findings, Better Markets did not spare its high praise for the whistleblower program, highlighting “just how critical [it] has been as a law enforcement tool, allowing the SEC to better protect investors and maintain a fair marketplace.” So much so that the financial industry watchdog exhorted other agencies to follow the SEC’s lead and implement similar whistleblower programs of their own.
The report is founded on the premise that corporate crime is “rampant and increasing” largely because of the difficulty of uncovering it from the outside. Hence the need for whistleblowers. But so many would-be whistleblowers shy away from this noble quest given the retaliation and retribution whistleblowers commonly face when standing up and speaking out against fraud and misconduct. As the Report so keenly observes:
[W]histleblowers are almost always attacked by the corporate lawbreakers they are blowing the whistle on, often under the guidance of proclaiming their innocence. Whistleblowers get fired and then blackballed in their industry; have their reputations smeared, their careers destroyed, and their credit history ruined; and often lose their homes and sometimes their families. That’s a lot to ask someone to do to try to stop corporate crime.
Enter the SEC Whistleblower Program. Created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, it provides significant rewards and protections for whistleblowers to overcome these weighty impediments to reporting fraud. As for rewards, the program provides up to 30% of the government’s recovery to whistleblowers whose information leads to a successful government enforcement action. Some of these awards have been quite sizeable, many of them in the tens of millions of dollars. A few of them have even crossed the hundred-million-dollar threshold.
The SEC has been equally serious about whistleblower protections. It does not disclose the identity of its whistleblowers. Not in press releases announcing enforcement successes. Not even in press releases announcing the whistleblower awards tied to these successes. The agency also provides a mechanism for whistleblowers to file anonymously (through their lawyers) so even the agency cannot identify the whistleblower. And any company that dares to obstruct or retaliate against a whistleblower risks the mighty wrath of an agency determined to safeguard its whistleblowers.
As the Better Markets report describes, this combination of strong rewards and protections has made the SEC program a resounding success. Here are some of the numbers the report cites to back that up:
- More than $6.3 billion in total monetary sanctions from enforcement actions based on information reported by whistleblowers (from the program’s inception in 2011).
- Almost 83,000 whistleblower tips, a number that has increased every year, with roughly half these tips in just the last three years.
- More than $1.9 billion in whistleblower awards to roughly 400 whistleblowers, the bulk of which the SEC made in the last three years, with roughly $600 million in awards in the last year alone.
- Nine actions against companies for violating the SEC’s strict rules against impeding whistleblowers from reporting to the agency, 8 of them since 2021, and 5 of them this year.
Given these unequivocal results, Better Markets is calling on other agencies to adopt a similar whistleblower-friendly regime. It offers two approaches on how best to get there. One is for Congress to authorize (or better yet, require) agencies to adopt an SEC-style whistleblower program. Better Markets calls out a host of agencies to which this could apply that already are authorized to impose monetary penalties for enforcement breaches but do not yet offer any kind of whistleblower rewards program. These include the Department of Agriculture, Department of Labor, Environmental Protection Agency, Consumer Product Safety Commission, and Federal Communications Commission, to name a few.
The other approach Better Markets puts forward is for Congress to authorize any agency with the power to impose monetary sanctions to also adopt a whistleblower rewards program. As Better Markets frames it, the bottom line is no matter how Congress proceeds, “expanding whistleblower programs to other agencies would benefit the public because . . . [it] has the potential to provide incredible value as a supplement to the enforcement of the laws the agency administers.” As the SEC has made clear — and as the Better Markets report calls out — the proof is in the numbers.
So hats off to Better Markets for its eye-opening report and for making such a compelling pitch for Congress to expand upon the success of its SEC Whistleblower Program. You can learn more about the other whistleblower rewards programs Congress has authorized here. If you would like to learn more about any of these programs and what it means to be a whistleblower under any of them, please do not hesitate to contact us for a free and confidential consult with an experienced member of our whistleblower lawyer team.