The SEC Whistleblower Program had a “record-breaking year” during the 2018 fiscal year that ended on September 30, 2018, according the latest annual report from the agency’s Office of the Whistleblower. During the fiscal year, the agency not only made total awards exceeding the aggregate amount awarded in the entire prior history of the program, but it also made the largest separate awards in the program’s existence. The number of whistleblower reports during the fiscal year also increased over 20 percent, the largest annual increase in the number of reports in the program’s history. The SEC’s Office of the Whistleblower’s 2018 Annual Report can be found here.


The Amount of Whistleblower Awards

According to the report, during FY 2018 the agency ordered whistleblower awards to 13 individuals totaling approximately $168 million. The $168 million in awards during FY 2018 exceeds the aggregate total of $158 million awarded in all of the program’s prior years. The agency has now awarded a total of $326 million to 59 individuals since the program’s inception.


Among these awards during the 2018 FY was the March 2018 award (discussed here) of a total of $83 million to three individuals, which was the largest award in the program’s history. The March 2018 award included an almost $50 million joint award to two individuals and a $33 million award to a third individual. The FY 2018 awards also included the second-largest award in the program’s history, the agency’s September 2018 $54 million award to two individuals (about which refer here). The September award included a $39 million award to one individual and a $15 million award to a second individual. 


Characteristics of Successful Whistleblowers

Interestingly, the FY 2018 awards included awards to individuals outside the U.S. The 2018 awards included a $4.1 million award to a foreign national working outside the United States who reported a “widespread, multi-year securities violation.” In September 2018, the agency awarded nearly $4 million to an overseas whistleblower.


The report notes that the reports of the whistleblowers that have received award share several characteristics in common: the information provided by the successful whistleblowers was specific, including the identification of specific individuals or specific transactions involved; the misconduct reported is often continuing at the time of the report; and the whistleblowers provided the agency with additional assistance or information after the submitted their initial tips. The report underscores the fact that the reports that are “specific, credible, and timely, and which are accompanied by corroborating documentary evidence, are more likely to be forwarded to investigative staff for further analysis or investigation.”


There is no requirement that an individual or entity making a report be an employee of the company that is the subject of the report, but the majority of successful whistleblowers have been employees. 69% of the award recipients to day have been current or former employees. Of the employee whistleblowers who received awards, 83% raised concerns internally to their supervisors or company compliance personnel before reporting the information to the Commission.


The Number of Whistleblower Reports

The number of whistleblower reports has increased each year of the program’s existence. In FY 2018, the agency received a total of 5,282 tips, an increase of more than 17% over the 4,484 whistleblower reports agency received in FY 2017. Since the program’s inception in August 2011, the agency has received over 28,000 tips.  Since FY 2012, the program’s first full year, the number of whistleblower reports received annually has increased by approximately 76%.


The report notes that one of the possible reasons for the significant increase in the number of reports in FY 2018 was the U.S. Supreme Court’s February 2018 decision in Digital Realty Trust, Inc. v. Somers. As discussed at length here, the Court ruled in the Digital Realty Trust case that the Dodd-Frank Act’s whistleblower anti-retaliation protections extend only whistleblowers who make their reports to the SEC and not to those who only make their reports internally. At the time of the Court’s ruling, there was speculation that the Digital Realty Trust decision might encourage more whistleblowers who might in the past only have made their reports internally to come forward and make their reports to the SEC, in order to ensure that they can claim entitlement to the protection of the Dodd-Frank Act’s protections. Based on the report, it appears that more whistleblowers are in fact reporting to the SEC arguably as a result of the Digital Realty Trust decision.


During FY 2018, the most common complaint categories reported by whistleblowers were Offering Fraud (20%), Corporate Disclosures and Financials (19%) and Manipulation (12%). The report notes that the types of securities violations reported by whistleblowers have remained generally consistent over the last seven years. However, the report also notes that during FY 2018 the agency received 39 tips relating to initial coin offerings and cryptocurrencies, representing a new category of reports.


During the 2018 FY, the agency received tips from whistleblowers located in all 50 states, the District of Columbia, and Puerto Rico. The state with the largest number of whistleblower reports was California, with 554, followed by New York (345), Florida (276), Texas (251), and New Jersey (162).


The agency also received a number of reports during FY 2018 from individuals located 72 countries outside the U.S. The country with the largest number of whistleblower reports during the year was Canada with 85 individuals submitting whistleblower reports, followed by the United Kingdom (85), Australia (45), China (40), Germany (29), India (26), and Israel (25). During the program’s history, the agency has received tips from individuals located in 119 different countries.


Proposed Changes to the Whistleblower Rules

In July 2018, the SEC proposed a number of revisions to the whistleblower rules. The changes were proposed in order to try to introduce efficiencies in whistleblower report review process and to “provide the Commission with additional tools in making whistleblower awards to ensure that meritorious whistleblowers are appropriately rewarded for their efforts.” The new rules also align the agency’s anti-retaliation approach with the U.S. Supreme Court’s ruling the Digital Realty Trust case (discussed above).


Among other things, the proposed changes to the agency’s award-making authority would ensure that whistleblowers whose reports lead to deferred prosecution agreements or non-prosecution agreements are not disadvantaged in terms of receiving an award because of the form in which the action was pursued. The proposed rules also included revisions that would allow the agency to make upward adjustments to very small award and leveling adjustments to very large awards. With respect awards in cases in which the monetary sanctions imposed exceed $100 million, the agency would have the discretion to adjust the award percentage so that it would not exceed a payout (subject to the 10% statutory minimum) that does not exceed an amount that is reasonably necessary to reward the whistleblower and to incentivize other similarly situation whistleblowers.


The Comment period for the proposed changes ended on September 18, 2018. The agency likely will release the final years in the current fiscal year.



There can be no doubt that in the SEC’s whistleblower program, now in its eighth year, has become a very significant phenomenon. Along those lines, it is important to consider not only the amount of awards that the agency has made, but the amount that the agency says it has been able to recover because of the program. According to the report, since the program’s inception, the agency has ordered wrongdoers in enforcement matters brought with information from meritorious whistleblowers to pay over $1.7 billion in total monetary sanctions, including more than $901 million in disgorgement in ill-gotten gains and interest, of which approximately $452 million has been, or is scheduled to be returned to harmed investors.


Given these recovery statistics, it is hardly surprising that the whistleblower program is a high priority for the agency. The focus of the program continues to be to “incentivize the reporting of specific, timely, and credible information.”


The size of the recoveries, the magnitude of the whistleblower award, and the sheer number of whistleblower reports means that the possibility of a company of being the subject of a whistleblower report represents a very significant potential operational risk and liability exposure.


Indeed, if all of the foregoing considerations  were not enough to underscore the fact that the possibility of a whistleblower report could represent a significant area of corporate exposure, there are a couple of additional considerations to keep in mind as well.


The first is, as noted above, due to the U.S. Supreme Court’s February 2018 decision in the Digital Realty Trust case, the likelihood that a whistleblower will make his or her report to the SEC first rather than internally is even greater than it was in the past.


In addition, there is also the fact that there is a segment of the plaintiffs’ bar focusing on supporting potential whistleblowers in order to share in their award recoveries. (I discussed this evolving aspect of the plaintiffs’ bar in my blog post this past year about the all-time largest whistleblower recovery, here, which involved the active participation and support of an outside plaintiffs’ law firm.)


Given the existence of these risks, well-advised companies will want to consult with their outside counsel and other advisors to consider ways to try to reduce their potential exposure to the risks of being the subject of a whistleblower report. These steps might include an active and comprehensive program of internal audit, to try to uncover wrongdoing before it becomes the subject of a whistleblower report. Another possibility is for the company to adopt robust internal anti-retaliation protections, in order to try to eliminate the incentives that whistleblowers might have to report first the SEC before reporting wrongdoing internally.


In any event, there is no doubt that the SEC’s whistleblower program has become a very big deal indeed. It represents a very significant aspect of companies’ potential corporate liability exposures.