SEC Reports Significant Increases In FY2021 Whistleblower Program
Fiscal Year 2021 was a record year for the Whistleblower Program (the “Program”) of the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”). The Commission released its 2021 Annual Report to Congress (the “Report”) last Monday and it reflects substantial increases in many different metrics. The Program has already awarded more than $1.1 billion to over 200 individuals who provided “high quality information” in successful enforcement actions of the SEC and other agencies since its inception a decade ago. FY2021 marked the highest number of awards to both the number of individuals and in dollar amounts awarded. Awards totaling approximately $564 million were made to 108 individuals in FY2021. This exceeds a total of $562 million paid to 106 people combined since the Program’s beginning. These totals included three of the largest awards ever in the history of the Program: two awards of $114 million (one to two individuals; the second to a single whistleblower) and a $50 million award to joint whistleblowers.
Additionally, the past year included the largest number of whistleblower tips ever received. Tips rose approximately 76% to over 12,200; this is up from 6,911 in total from the prior year. This increase included an almost tripling of reports of market manipulation from 942 in FY2020 to 3,090 in FY2021. Reports relating to corporate disclosures and financial and offering fraud were the second and third largest types of allegations asserted.
Approximately 60% of award recipients were current or former insiders of the entity about which they reported. Of those, over 75% had previously raised their concerns internally through various methods or were aware that the violations were known within the company before approaching the Commission as a whistleblower.
Further, the international range of the whistleblower program was strengthened. Successful whistleblowers recognized by the Commission originated from six continents, with approximately 20% of the meritorious claimants in FY2021 based outside the United States. Domestically, California far exceeded other states and territories as the location of 1,006 of the total 6,470 tips submitted from the United States.
The Report emphasized that the Office of the Whistleblower views anti-retaliation protections as “a high priority” to ensure reports are made to the Commission with no fear of reprisal. Exchange Act Rule 21F-17(a) is cited to note that “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce a confidentiality agreement . . . with respect to such communications.” To date, the Report mentions that 14 enforcement actions or administrative proceedings have been brought by the Commission involving violations of this Rule. These included actions in FY2021 that focused on prohibitions noted in compliance manuals, training materials, settlement releases and confidentiality and separation agreements.
Emily Pasquinelli, Acting Chief, Office of the Whistleblower, stated in the Report that these noted successes “demonstrates that [the Program] is a vital component of the Commission’s enforcement efforts” and exhibited her hope that continued awards would “enhance the agency’s ability to detect wrongdoing and protect investors and the marketplace.”
To review the full Report, see 2021 Annual Whistleblower Program Report to Congress (sec.gov)