With the latest whistleblower awards to two individuals totaling $114 million (including an award to one individual of $110 million), the total amount awarded under the SEC whistleblower since its first award in 2012 now totals over $1 billion. The pace in the number and size of awards has accelerated significantly in the past year, as the SEC under the Biden Administration had pursued a pro-whistleblower approach. A copy of the SEC’s September 15, 2021 press release about the latest awards can be found here. The agency’s September 15, 2021 order regarding the awards can be found here.
The latest awards to two individuals pertain to an unnamed enforcement action. The first individual receiving an award received a total of approximately $110 million, consisting of a $40 million award in connection with an SEC enforcement action and a $70 million award arising out of related actions by another agency. The SEC press release states that the individual receiving the award provided “significant independent analysis that substantially advance the SEC’s and the other agency’s investigations.”
The $110 million award represents the second largest award in the program’s history, exceeded only by the $114 million the agency awarded to a whistleblower in October 2020. It also exceeds what had been the second largest award, the April 2021 award to a whistleblower of over $50 million.
In its latest award, the SEC also awarded a second individual a separate award of $4 million, noting that the individual “voluntarily provided original information that led to the successful enforcement action, but this information was provided to the SEC after the staff had opened and investigation and taken significant investigative steps, and was much more limited as compared to the information and assistance provided by the first whistleblower.”
Consistent with the agency’s past practices in making whistleblower awards, and in order to protect the whistleblowers’ identity, the public version of the actual administrative order making the whistleblower awards is highly redacted, included an entire page of the order (page 10) that is entirely redacted.
The SEC’s press release about the latest awards emphasizes that the awards bring the total amounts awarded in the program’s history to over $1 billion. It is worth noting in that regard that the three largest awards in the program’s history have taken place just in the last eleven months. Indeed of the more than $1 billion awarded in the program’s history, half of that amount has been awarded just since July 2020. The fact is that the number of awards and the total number of awards has accelerated since last summer, a reflection of what is undoubtedly a pro-whistleblower stance at the SEC under the Biden Administration.
The statements of SEC officials accompanying the latest awards underscores the priority that the current SEC leadership is giving to whistleblower activity. The agency’s press release about the latest awards unusually includes a statement from the SEC Chair, Gary Gensler, who is quoted as saying that “Today’s announcement underscores the important role that whistleblowers play in helping the SEC detect, investigate, and prosecute potential violations of the securities laws,” adding that “the assistance that whistleblowers provide is crucial to the SEC’s ability to enforce the rules of the road for our capital markets.”
There is no doubt that in stepping up the number and size of awards, the SEC actively seeks to encourage other whistleblowers. The agency’s press release quotes the head of the agency’s Enforcement Division, Gurbir S. Grewal, as saying “We hope that today’s announcement encourages whistleblowers to continue to come forward with credible information about potential violations of the securities laws.”
In considering the agency’s recent activity, it is worth considering that, as the agency detailed in its press release, over the course of the agency’s whistleblower program history since the first award in 2012, the agency has awarded approximately $1 billion to 207 individuals. But of that amount, about half has been awarded since last July – the agency only just hit the $500 million mark in July 2020. Just looking at the 2021 fiscal year (which began October 1, 2020), the agency has already awarded approximately $438 million to 101 individuals, meaning that this fiscal year the agency has already exceeded the previous fiscal year record of $175 million to 39 individuals.
A September 15, 2021 Law360 article (here) about the latest awards and the agency’s $1 billion milestone quotes the former head of the SEC’s whistleblower office as saying that “the pace is incredible – and I think it’s going to continue at this pace,” adding that “for anyone who has any doubt, this is clearly a very pro-whistleblower administration, and they’re pulling out all the stops to attract and incentivize whistleblowers to report to them.”
To the extent whistleblowers are in fact encouraged to come forward as a result of the current administration’s pro-whistleblower stance, it likely will mean an increased number of SEC enforcement actions. It is also possible that increased enforcement actions from a increased numbers of whistleblowers coming forward could also translate into increased numbers of follow-on securities class action lawsuits based on information coming to light from the whistleblower reports. As I discussed here, at least one securities class action lawsuit filed this year, against ExxonMobil, was filed based on information that came to light through a whistleblower report.
In any event, as the former SEC whistleblower office official quoted in the Law360 article noted, it is likely the heightened pace of whistleblower awards will continue in the months ahead. This will undoubtedly lead to further SEC enforcement activity as well.