Fiscal-year 2021 was a record year for whistleblower awards, the SEC’s Office of the Whistleblower (OWB) revealed in its annual report. The Securities and Exchange Commission awarded a total of $564 million to 108 whistleblowers. That one-year total was higher than all of the prior years of the program combined.

The program also received its highest number of tips ever — more than 12,200.

Who’s behind all these disclosures of potentially illegal or illicit activity?

  • The SEC’s OWB received tips from individuals in 99 foreign countries and every state in the United States and the District of Columbia. In addition, successful whistleblowers awarded money by the commission hailed from six continents. In total, about 20% of the deserving claimants in fiscal-year 2021 were based outside of the United States. The largest number came from Canada, the People’s Republic of China, and the United Kingdom.
  • About 60% of the award recipients in fiscal-year 2021 were current or former insiders of the entity about which they reported information of wrongdoing. Of those recipients, more than 75% raised their concerns internally to their supervisors, compliance personnel, or through internal reporting mechanisms, or understood that their supervisor or relevant compliance personnel knew of the violations before they told the SEC.
  • Besides insiders, award recipients last year included investors who had been victims of the fraud they reported, professionals working in the same or related industry in which the misconduct occurred, or other kinds of outsiders, such as individuals with unique expertise in a market.
  • Of awarded whistleblowers, more than half provided original information that caused staff to open an investigation. In addition, about 44% received awards because their original information significantly contributed to an already existing investigation or examination.
  • Whistleblowers who won awards rarely just dropped a dime to the SEC and let the regulator take it from there. For example, a whistleblower who received a $114 million award in fiscal-year 2021 provided “substantial independent analysis of publicly available information derived from multiple sources that significantly contributed to an existing investigation and the success of the actions,” the OWB said. “[This] whistleblower applied specialized skill and unusual effort in developing the analysis that [revealed] important insights into the misconduct.” Another whistleblower “assisted [SEC} staff by providing an interview, testimony, and identification of a key witness, all of which saved the staff’s time and resources.”

While whistleblowing can be lucrative, and the SEC continues to adopt rules to protect employees and others that disclose possible frauds, blowing the whistle often results in severe personal and professional hardship. Here are two other things to keep in mind if you’re ever in a position to be a whistleblower:

  1. Don’t delay in reporting wrongdoing. One whistleblower’s award was lowered because the whistleblower “unreasonably delayed” in sharing the information. Another fact in the smaller award, the SEC said, was that “while the whistleblower did not direct, plan, or initiate the misconduct, [he or she] was involved in the underlying scheme.”
  2. Be sure you have good information. The SEC adopted a rule this past fiscal year under which claimants who submit three or more frivolous award claims may be permanently barred from the whistleblower program. The SEC issued permanent bar orders against two serial submitters in fiscal 2021 who were responsible for hundreds of frivolous award applications.

, , ,

Leave a Reply

Your email address will not be published. Required fields are marked *