The SEC’s whistleblower program is now entering its seventh year. The SEC’s Office of the Whistleblower’s November 15, 2017 annual report to Congress underscores that the agency’s whistleblower program continues to grow and remains an important part of the agency’s enforcement efforts. The number of whistleblower reports submitted to the agency once again increased in the 2017 FY, and the whistleblower reports continue to lead to significant enforcement recoveries, as well as to significant bounty awards to the whistleblowers, as detailed below. The Office of the Whistleblower’s 2017 report can be found here.
According to the report, there were 4,484 whistleblower reports to the SEC in FY 2017, representing an increase of about 6.3% over the prior fiscal year. The number of whistleblower report in FY 2017 is nearly 50 percent greater than the number of reports in FY 2012, the first full-year period in the whistleblower program. Since the program’s inception in August 2011, the agency has received 22,818 whistleblower reports. The number of reports the agency has received has increased each year that the program has been in existence.
During the 2017 FY, the most common complaint in whistleblower reports involved corporate disclosures and financials (19%), offering fraud (18%), and manipulation (12%). 210 of the reports during the 2017 FY (about 4.6%) related to the Foreign Corrupt Practices Act.
The agency received whistleblower reports from all 50 states and from the District of Columbia. The states with the highest number of whistleblower reports were California (500), New York (438), Texas (250), and Florida (229).
Many of the whistleblower reports come from abroad. The agency received whistleblower reports from 72 different countries. Since the program’s inception, the agency has received reports from individuals in 114 different countries outside the U.S. During FY 2017, the agency received over 550 reports from foreign individuals, representing about 12 percent of reporting individuals in FY 2017. The non-U.S. countries with the highest number of reporting individuals were the United Kingdom (84); Canada (73); Australia (48); China (39); and Russia and Mexico, both with 26.
The vast majority of whistleblower reports (62%) come from insiders (including current or former employees, consultants, and affiliates), with other reports coming from investors or prospective investors (19%) and various outsiders (15%).
The report emphasizes that the “demonstrable benefits of the program continue to materialize” and that the program has “provided tremendous value to the SEC’s enforcement efforts.” The agency has returned hundreds of millions of dollars to investors as a result of actionable information that whistleblowers brought to the agency. The report notes that the agency has ordered wrongdoers in enforcement matters involving whistleblower information to pay over $975 million in total monetary sanctions, including more than $671 million in disgorgement of ill-gotten gains and interest, the majority of which has been (or will be) returned to harmed investors.
These many recoveries have also lead to a number of whistleblower bounty awards. During the program’s existence the agency has awarded approximately $160 million to 46 individuals. In the most recent fiscal year, the awards totaled nearly $50 million to 12 individuals. Three of the ten largest all-time whistleblower awards were made during FY 2017, including the third-largest all-time award, an award of more than $20 million in November 2016.
A significant part of the report is devoted to reporting on the agency’s efforts to battle actions taken in retaliation against whistleblowers, as well as actions by employers’ use of confidentiality, severance, and other measures and practices to “interfere with individuals’ ability to report potential wrongdoing to the SEC.” The report notes that during the 2017 FY, the SEC brought a number of enforcement actions to address instances where companies unlawfully retaliated against their employees or impeded their ability to report to the SEC.
As detailed in a November 22, 2017 Law 360 article discussing the SEC’s whistleblower report (here), it remains unclear whether or to what extent the Trump administration and the SEC’s new leadership will continue to support the whistleblower program. However, as a number of commentators in the article note, it seems unlikely that the administration would move to cut or eliminate a program that has led to nearly $1 trillion in recoveries.