Unprecedented SEC Year

January 11, 2024
Unprecedented Year for SEC Whistleblowers with Record-Breaking Rewards

The US Securities and Exchange Commission (SEC) has enjoyed an incredibly successful year for its SEC whistleblower program, thanks, in part to well-presented cases through SEC whistleblower counsel.  In 2023, The SEC reported 1) the largest amount of total recovery collected in a single year period, and 2) the largest single-case SEC whistleblower reward ever paid out. In its short 12-year history, the SEC whistleblower program has collected over $6 billion in financial remedies and awarded over $1.9 billion to SEC whistleblowers who have been instrumental to the process of fraud recovery[1].

SEC Whistleblower Awards for the 2023 Fiscal Year

On May 5th, $279 million dollars were awarded as a SEC whistleblower reward, whose identity remains anonymous. This unprecedented award was more than double the previous record amount, which was still an impressive $114 million sum. Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said this of the record setting recovery: “The size of today’s award – the highest in our program’s history – not only incentivizes whistleblowers to come forward with accurate information about potential securities law violations, but also reflects the tremendous success of our whistleblower program . . . This success directly benefits investors, as whistleblower tips have contributed to enforcement actions resulting in orders requiring bad actors to disgorge more than $4 billion in ill-gotten gains and interest. As this award shows, there is a significant incentive for whistleblowers to come forward with accurate information about potential securities law violations.” [2]

The May 5th award was of intrigue not only because of its astounding amount, but also because of the nature of its origination. The May 5th SEC whistleblower, who remains anonymous, may not in fact have been the first person to submit a tip to the SEC. According to Chief of the SEC’s Office of the Whistleblower, Creola Kelly, “while the whistleblower’s information did not prompt the opening of the Commission’s investigation, their information expanded the scope of misconduct charged.” In other words, there can still be considerable awards paid out to SEC whistleblowers who make contributions to even such cases of fraud that the SEC is already investigating.

Aside from the $279 million SEC whistleblower reward, 2023 witnessed several other substantial SEC whistleblowers pay outs. Some notable awards include: An August 4th award in the amount of $104 million, of which was divided among 7 whistleblowers. A December 4th award, which paid $38 million to a single Whistleblower. A January 24th award, which paid $29 million to four Whistleblowers. And finally, a December 12th award, which paid $20 million to one Whistleblower. In all, the SEC’s Whistleblower Program awarded approximately $600 million to 68 individual SEC Whistleblowers during the 2023 fiscal year—the biggest whistleblower payout in the program’s history.  Since the program began in 2011, 397 individuals have been paid over $1.9 billion.[3]

SEC Whistleblower Award Calculation Factors

Whistleblowers are awarded a proportion of the total recovery based on a few factors. In 2020, The Whistleblower Rule Amendments became effective, stipulating that in cases where the SEC anticipates a maximum award of less than $5 million, the maximum 30% award would apply. In cases where the SEC anticipates a maximum award that exceeds $5 million, the Commission bases the award amount based on the factors listed in Exchange Act Rules 21F-6(a) and (b). For example, a Whistleblower total award may be positively affected if a whistleblower’s tip generates law enforcement interest, if a whistleblower tip includes significant information, if a whistleblower provides assistance during the investigative process, and if a whistleblower contributes to internal reporting. Many of these factors are enhanced by the participation of an SEC whistleblower law firm who can economically present the information in a methodical digestible manner for the securities investigation.

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Scope of Whistleblower Participation

During the 2023 fiscal year, the SEC also reported a dramatic increase in the geographic scope of submitted tips. The Commission received tips (of which translated to recovery and awards) from all over the United States, and all of the world. Domestically, New York, California, Texas, South Carolina, and Florida produced the most tips. Abroad, tips were sourced at the highest rates from Canada, the United Kingdom, Australia, Germany, and India. These tips didn’t just vary in geographic origin, but in nature as well. According to the SEC, 24% of received misconduct tips had to do with Manipulation, 19% were related to Offering Fraud, 14% were related to Initial Coin Offerings and Crypto Asset Securities, and 10% were related Corporate Disclosures and Financials. [4]In other words, tips can be submitted from anywhere in the world, and there are several types of misconduct that can be tipped to the SEC.

Whistleblower Protections

Not only are Whistleblowers rewarded in cases where their information proves useful, but such Whistleblowers are also afforded a number of protections, both with regard to maintaining their anonymity, and with regard to actions taken against those who retaliate against them if their identity is known or suspected. Per the Dodd-Frank act, the SEC is charged with the protection of a whistleblower’s identity and is not supposed to disclose any information that could potentially reveal a whistleblower’s identity. This means that a whistleblower could conceivably report a tip to the SEC, and receive an award, without ever revealing their identity, even to the SEC itself through the use of an SEC whistleblower attorney. Moreover, the SEC has several protections in place such that Whistleblowers are insulated from any retaliation following their reporting. According to Exchange Act Rule 21F-17, “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation[s].” Additionally, “Section 21F(h)(1) of the Exchange Act prohibits an employer from taking retaliatory actions, either directly or indirectly, against a whistleblower who makes a report to the Commission in accordance with the Exchange Act; and Exchange Act Rule 21F-2, which provides anti-retaliation protection to whistleblowers who reasonably believe that the information they provide to the Commission relates to a possible violation of the federal securities laws and provide that information in a manner described in Section 21F(h)(1)(A) of the Exchange Act.” In the 2023 fiscal year, there were 26 instances where the SEC pursued actions pursuant to violations of these aforementioned protections—in one such case, the SEC recovered an additional $10 million in civil damages against D.E. Shaw & Co., L.P.[5]

SEC Whistleblower Law Firms

While SEC whistleblowers may choose to submit claims on their own (pro se), the process can be decidedly complicated and due to the overwhelming volume of tips, may prejudice the case if the tip is not succinctly presented in an easily digestible manner. There are a number of relevant laws, deadlines, and procedures that are best, and most effectively handled by experienced SEC counsel. Stand up for integrity and transparency with the assistance of the best SEC whistleblower attorneys in the field.

[1] [2] [3] [4] [5] Securities and exchange commission office of the whistleblower annual report to congress for fiscal year 2023. (2023). SEC Office of the Whistleblower.