SEC Whistleblower Award (January Update)

The U.S. Securities and Exchange Commission (SEC) Issues Awards to Whistleblowers Who Report Possible Securities Law Violations, Corporate Fraud, Investment Fraud, and Financial Crimes

Like other federal law enforcement agencies, the U.S. Securities and Exchange Commission (SEC) relies heavily on whistleblowers. The SEC is tasked with uncovering securities law violators, corporate accounting violations, fraud on the market, and other similar forms of wrongdoing—and, in many cases, it can only do so if it receives claims from insiders.

The SEC Whistleblower Office carefully reviews every submission involving potential securities laws violations, ensuring that credible information is investigated and that deserving individuals are considered for awards.

As a result, the SEC manages one of the most active Whistleblower Programs within the federal government. In addition to providing strong protections for whistleblower’s identity, the SEC whistleblower reward is given to those who come forward with claims that lead to successful SEC enforcement action. If you believe that you have whistleblower information that would be of use to the SEC and are interested in seeking an SEC awards, our whistleblower lawyers can help you make informed decisions about your next steps in the whistleblower process.

In recent months, the SEC announced record-breaking whistleblower awards following covered actions that generated substantial monetary sanctions paid by corporate violators. These awards are calculated as a percentage of the total monetary sanctions and are distributed from money collected through successful enforcement actions—not from investor funds.

Whistleblowers who provide independent knowledge that leads to further investigation and offer ongoing assistance during the agency’s investigation are often more likely to be eligible for an award. The SEC’s Whistleblower Program creates a powerful financial incentive to report fraud, while also protecting those who have suffered retaliation for doing the right thing.

The Commission also considers whether the whistleblower attempted to use internal compliance channels before reporting to the SEC, and whether their efforts contributed to the covered action. By rewarding integrity and transparency, the program strengthens oversight and ensures that vulnerable investors benefit from accountability in the marketplace.

SEC Whistleblower Awards: Eligibility and Amounts

The SEC issues whistleblower sec awards under the Dodd-Frank Act. Enacted in 2010, the Dodd-Frank Act was intended as a preventive measure to avoid a repeat of the financial crisis of 2008. In addition to establishing new corporate accounting requirements and instilling various other checks designed to ensure that corporations and lenders do not engage in excessively risky practices that threaten investors’ savings or the overall stability of the U.S. markets, the Dodd-Frank Act also laid the groundwork for the SEC’s Whistleblower Program. The SEC launched its SEC Whistleblower Reward Program a year later, on August 12, 2011.

Since then, the SEC has awarded approximately $2 billion to whistleblowers. In the government’s 2023 fiscal year alone, the SEC awarded nearly $600 million to 68 individual whistleblowers. As the SEC explained in its Annual Report to Congress for Fiscal Year 2023, this is “the highest annual total by dollar value in the Program’s history,” and it includes “a single award for almost $279 million—the largest in the history of the Program.” It also includes an award of $104 million issued to a group of whistleblowers who came forward to report claims of corporate fraud across multiple jurisdictions, as well as three additional awards of $20 million or more.

Many of the largest SEC whistleblower awards have been granted in cases involving complex securities fraud and other serious breaches of federal securities laws, highlighting the importance of insider cooperation with regulators.

While the Dodd-Frank Act created the SEC’s Whistleblower Program, the SEC’s enforcement efforts under the program are not limited to Dodd-Frank Act violations. Whistleblowers can—and do—report all forms of corporate fraud, investment fraud, and other financial crimes to the SEC office of the whistleblower. In all cases, SEC whistleblower awards range from 10 to 30 percent of the amount the SEC recovers based on the claims a whistleblower provides, as long as the SEC’s recovery is $1 million or more. The funds to pay whistleblower awards comes from the Investor Protection Fund. The SEC reports receiving whistleblower claims involving the following issues, among others:

• Market manipulation
• Fraudulent securities offerings
• Fraudulent initial coin offerings (ICOs) and crypto asset securities 
• Corporate disclosure violations and financial fraud
• Insider trading
• Trading and pricing fraud
• Unregistered offerings
• Fraudulent market events
• Foreign Corrupt Practices Act (FCPA) violations
• Municipal securities and public pension fraud

When monetary sanctions collected from a case exceed $1 million, eligible whistleblowers may receive monetary awards ranging from 10 to 30 percent of the total, depending on their level of cooperation and the value of the information provided.

In 2020, the SEC adopted a new rule that presumes the maximum award of 30 percent should apply in most cases where an SEC whistleblower awards would be $5 million or less. When this presumption does not apply, the SEC considers seven factors when determining the appropriate percentage for a whistleblower award. This includes four “positive factors” that may increase an SEC whistleblower award and three “negative factors” that may suggest an award on the lower end of the range is appropriate:

Positive Factors that Support a Higher SEC Whistleblower Award

• The Significance of the Information the Whistleblower Provides – According to the SEC, “[t]his is a critical driver of the award percentage and, in certain circumstances, could be the most important factor when apportioning award amounts . . . as the Commission often focuses on the relative significance (and timing) of . . . whistleblowers’ submissions.” 
• The Level of Assistance the Whistleblower Provides – Beyond submitting information in a whistleblower complaint, the SEC also relies on whistleblowers to provide assistance with the Commission’s ensuing investigation. The more assistance whistleblowers provide, the more likely they are to receive the maximum SEC whistleblower award of 30 percent. 
• The Level of the SEC’s “Law Enforcement Interest” – The SEC’s interest in pursuing a whistleblower’s complaint is also a key factor in determining the amount of the whistleblower’s award. As the SEC explains, “[t]he law enforcement interest may be high when the whistleblower provides information about ongoing violations that are harming investors . . . [or] for securities violations with elements occurring abroad.”
• Whether the Whistleblower Reported the Fraud Internally – As the SEC also explains, “[w]hile claimants are not required to report internally, their award percentage may be increased if they do so.” This is because the SEC encourages voluntary self-compliance, and it has a greater interest in punishing organizations that knowingly fail to rectify (or continue to engage in) fraudulent conduct.

Negative Factors that Support a Lower SEC Whistleblower Award

• An Unreasonable Delay in Filing a Whistleblower Complaint – An unreasonable delay in reporting fraud or other misconduct to the SEC can result in reduction of the whistleblower’s award. In its annual report, the SEC writes that it “reduced the ward percentages of five whistleblowers who unreasonably delayed in reporting.” 
• The Whistleblower’s Personal Culpability – While individuals who personally participate in fraud or other misconduct may be eligible to receive SEC whistleblower awards, personal culpability can reduce the amount of an individual’s award. 
• Interference with Internal Reporting Systems – If a whistleblower interferes with an organization’s internal reporting systems in order to file a whistleblower complaint with the SEC, this can also result in a reduction in the percentage of the whistleblower rewards 

SEC whistleblower award eligibility is not limited to U.S. residents and citizens. As of 2023, the SEC reports accepting whistleblower complaints from individuals located in countries including Australia, Canada, Germany, India, and the United Kingdom. Within the United States, the SEC reports that the jurisdictions with the most whistleblower complaints filed are California, Florida, New York, South Carolina, and Texas. As a result, regardless of where you live, if you believe that you may have information that would be of interest to the SEC, you should consult with an SEC whistleblower lawyer promptly.

Our attorneys can help you report anonymously through the SEC’s Whistleblower Program, preserving your confidentiality while still qualifying you for potential financial recovery tied to successful enforcement actions resulting from your information.

FAQs: SEC Whistleblower Complaints and Awards