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SEC Has Made Awards to Only 0.2% of Whistleblowers


The SEC reported near-record activity in its whistleblower program for 2019.  The Office of the Whistleblower received more than 5,200 tips in fiscal in 2019, nearly equaling last year’s record total.  However, only eight individuals received a portion of the $60 million in whistleblower awards in 2019.  Since the program began in 2011, the SEC has received over 33,000 tips but has awarded a total of $387 million to 67 individuals.   The most common tips involve corporate disclosures and financials, offering fraud, and manipulation.  The SEC expects to adopt new rules that expand the program in 2020.

The SEC whistleblower program has made awards to only 0.2% of tips (67/33,300).  While we laud the $2 Billion that has been recovered, we wonder whether the SEC could develop a more efficient reporting mechanism. 

Large Asset Manager Pays $340,000 Fine because Separation Agreements Violated Whistleblower Rule


The SEC fined a large asset manager $340,000 because it added provisions to its separation agreements prohibiting employees who received severance payments from collecting whistleblower awards.  The SEC contends that the respondent added the provisions after the SEC adopted the Dodd-Frank rule prohibiting any action that could impede a potential whistleblower.   The SEC imposed the fine even though the respondent voluntarily changed the language and even without any evidence that any employee was actually impeded or that the respondent ever sought to enforce the restrictions.  An SEC official faulted the firm for taking “direct aim at our whistleblower program by using separation agreements that removed the financial incentives for reporting problems to the SEC.”

OUR TAKE: Registrants must immediately review and revise confidentiality and separation agreements to strike any potentially violative language.


SEC Imposes $1.4 Million Fine for Whistleblower Rule Violations

whistleblower woman

The SEC fined a public company $1.4 Million because its severance agreements violated the Dodd-Frank’s whistleblower rules and because it retaliated against an internal whistleblower.  The SEC maintains that the firm’s severance agreements, which included non-disparagement and confidentiality provisions, violated the whistleblower rules because they impeded severed employees from communicating with the SEC.  Also, the SEC asserts that the respondent terminated an internal whistleblower for raising concerns about how the firm calculated oil and gas reserves.  The SEC’s Whistleblower Chief noted, “This is the first time a company is being charged for retaliating against an internal whistleblower.”

OUR TAKE: In addition to the retaliation action, the SEC, for the first time this year, imposes a 7+ figure fine for violating the whistleblower rules.  As we predicted, the SEC continues to bring more cases assessing punitive fines for violations of the whistleblower rules.  Compliance officers should review severance agreements and internal complaint processes.


Company Fined for Whistleblower Retaliation


The SEC fined a public company $500,000 for terminating and otherwise retaliating against a whistleblower who claimed financial statements may have been misstated.  The whistleblower reported his concerns to management, an internal hotline and, ultimately, to the SEC.  The company limited certain career opportunities and finally terminated him after an internal investigation found that the company’s financial statements were not misstated.  The employee had received consistently positive performance reviews.  The SEC claims that the job actions violated the whistleblower anti-retaliation provisions of the Dodd-Frank Act.

OUR TAKE: Dodd-Frank protects whistleblowers even if their assertions are later determined to be incorrect.  Notably, the respondent agreed to pay a fine to the SEC.   What about the aggrieved whistleblower?  We assume he will hire a lawyer and file a claim for wrongful discharge, if he hasn’t already sued or settled.