In the largest such award so far this year, the SEC has awarded more than $27 million to a whistleblower, an award amount that the Commission increased above staff recommendations in recognition that the whistleblower had “repeatedly and tenaciously” voiced his concerns about the misconduct within his organization before reporting it to the agency. As discussed below, there are a number of noteworthy features about this award. The Commission’s April 16, 2020 order about the award can be found here. The Commission’s April 16, 2020 press release about the award can be found here.


According to the Commission’s order, the whistleblower involved “voluntarily provided original information” to the Commission that led to the “successful enforcement” of a Commission enforcement action against the whistleblower’s organization. According to the order, the whistleblower is to receive a payout of more than $27 million.


In keeping with the requirements of the requirements of the Dodd Frank Act and the Commission’s practices, the Commission’s order has taken steps to protect the anonymity of the whistleblower involved, and the agency has also withheld the identity of the organization involved as well. The Commission’s redacted order omits all enforcement action identifiers and does not specify the specific allegations involved and does not describe the specific outcome of the enforcement action other than to say that the enforcement action was “successful.”


The Commission’s order states that in calculating the award amount, the Commission considered a number of factors, including the fact that the information provided to the agency allowed the Commission to “uncover hidden conduct”; the fact that the whistleblower provided a “substantial amount of ongoing and assistance,” including numerous meetings with agency staff, and providing relevant documentation and critical investigative leads, all of which saved the Commission time and resources; and the fact that the whistleblower “repeatedly and strenuously raised … concerns internally.”


Despite the order’s numerous redactions, there are a number of interesting things about this order.


First, the order states that the Commission staff had actually recommended a lower award amount, but the Commission “chose to depart” from the staff’s preliminary recommendations and to “increase the award” resulting in a payout of “more than $27,000,000.” The order does not specify the exact amount of the award, or the amount by which it was increased, stating only that the payout was over $27 million.


Second, while the order says little about the specific misconduct alleged in the enforcement action that result from the whistleblower’s report, the order does expressly note that the “hidden conduct” that was unearthed as a result of the whistleblower’s report occurred at least in part overseas.


Third, in the press release that accompanied the order, the Commission reported that the award was the largest announced so far this year, and is the sixth largest since the time of the Commission’s first award in 2012. (The largest award so far is the Commission’s March 2018 award in which two whistleblower’s shared in an award of nearly $50 million and a third whistleblower received a separate award of $33 million, for a total of approximately $83 million. A table of the Commission’s top ten whistleblower awards and other statistics can be found here.)


Fourth, the Commission’s press release also reports that with this award, the total amount of 79 awards the Commission has made as part of the whistleblower program has now reached approximately $425 million. The press release highlights the fact that the awards are made out an investor protection fund authorized by Congress and “financed entirely through monetary sanctions paid to the SEC by securities law violators.”


Fifth, the order expressly states that in determining the amount of the award, it actively considered whether the whistleblower “unreasonably delayed” in reporting the information to the Commission. The Commission emphasized that it is “mindful of the importance of whistleblowers reporting … promptly” and that the Commission will continue to “make appropriate reductions” to award amounts where the whistleblower “unreasonably delayed” in coming forward. However, in this case, the Commission determined that it should make no reductions “due to the strength of the positive factors” and the fact that the whistleblower “repeatedly and tenacious objected to and escalated” the concerns about misconduct within the whistleblower’s own organization.



While there are a number of noteworthy aspects to this whistleblower award, the award’s most noteworthy feature is its sheer size. The whole point of the whistleblower program was to provide prospective whistleblowers with financial incentives to come forward and report information about possible misconduct. An award of $27 million, along with the other large awards in the program’s history, is certainly large enough to capture prospective whistleblowers’ imagination.


Another interesting feature about this award is the fact that the Commission went out of its way to make it clear that it was not only not punishing this whistleblower for first trying to go through internal channels before reporting to the SEC, but that in fact the Commission increased the amount of the award in part because of the tenacious way the whistleblower first sought to report the concerns internally. As one commentator noted in the April 16, 2020 Law360 article about the award (here), the Commission seems to want “to send a message that they will hold corporate America and Wall Street companies accountable if they fail to respond to internal reporting.” This aspect of the agency’s order also suggests that organizations with responsive internal mechanisms could have the opportunity to address concerns first before they come to the Commission’s attention.



Another interesting feature of the award is that the underlying misconduct took place at least in part overseas. The foreign aspect of this matter is interesting because it is a reminder of the importance of U.S. reporting companies of maintaining controls in their overseas operations, even where standards, practices and expectations may differ from what is required for reporting companies in the U.S., and that shortcomings overseas can lead to enforcement actions in the U.S.



Although the circumstances underlying this whistleblower award predated the current coronavirus outbreak, I found myself unable to think about this award without thinking about the current circumstances arising from the pandemic. (Maybe that is just because the pandemic is so disruptive that it is impossible to think about anything else, but I still think there is some actual relevance here.) My concern is that as companies struggle to regain their footing in the wake of the outbreak, they will be challenged by disrupted financial and operating conditions – concerns about cash flow, liquidity, customer solvency and other factors relating to business health, as well as concerns about supply chain integrity, material supplies, process support and logistics, and other factors relating to operating performance and efficiency, will be critical. Opportunities for actual circumstances to diverge from those publicly reported will abound. Whistleblowers represent one significant way that these divergences could come to light.


While as I noted above the amount of this award clearly is sufficient to motivate other prospective whistleblowers, there are a number of other features about the award that might give some would-be whistleblowers pause.


For starters, it is clear that this whistleblower did not just come forward with information. He or she also met with staff numerous times and provided the staff with key documentation. (The possible need to provide documentation is one consideration that might well cause some whistleblowers to hesitate). One message that Commission’s order might communicate to a would-be whistleblower is that while the awards can be significant, in order to win a substantial award, a whistleblower must undertake a significant burden and substantial risks.


In reviewing the Commission’s statistical information about the program, I did note some other important details about the program that might also give a prospective whistleblower some pause. That is, while this whistleblower did obtain a substantial award, and while the aggregate amount awarded in the history of the program is impressive, the likelihood of any whistleblower to obtain any award arguable is vanishingly small.


The Commission’s statistical overview page reports that in the history of the program, there have been a total of 26,076 whistleblower reports to the agency. In other words, while 79 whistleblowers have enjoyed their share of the total of over $400 million the agency has awarded, the remaining 25,997 whistleblowers have gotten bupkis. Those kinds of statistics could undercut the incentives that the large awards otherwise provide.


The possibility of getting a large award like this whistleblower might encourage whistleblowers to come forward, but anyone who does come forward must recognize that the likelihood for any particular whistleblower of receiving any award is exceedingly small (less than one third of one percent).


One final thought about the SEC whistleblowing program. I had thought at the program’s outset that the whistleblowing program, and the enforcement action that it would produce, would in turn lead to follow-on civil litigation. As far as I know, this has not happened. I am not aware of any specific civil lawsuit that has followed after a whistleblower report-based enforcement action. There probably are a number of reasons why this hasn’t happened, but at least one is the extent to which it is not possible from the agency’s whistleblower award orders to even tell what organization is involved or what the underlying misconduct consisted of. There may yet be civil actions following after whistleblower report-related enforcement actions, but so far I haven’t seen it.