SEC Adopts Amendments to Whistleblower Award Program

October 16, 2020

On September 23, 2020, the SEC adopted amendments to the rules governing its whistleblower award program. The amendments were proposed on June 28, 2018, and were adopted substantially as proposed with the notable exception of a provision that had been assailed by critics as unduly capping large awards.

The SEC’s Office of the Whistleblower has awarded approximately $562 million to 106 whistleblowers since issuing its first award in 2012. Whistleblower awards can range (based on the application of certain enumerated award factors) from 10 to 30 percent of the money collected by the SEC in enforcement actions where the monetary sanctions exceed $1 million, with no cap on awards.

According to the SEC’s press release, the amendments “are intended to provide greater transparency, efficiency and clarity, and to strengthen and bolster the program in several ways.… Among other enhancements, the amendments provide a mechanism for whistleblowers with potential awards of less than $5 million (which historically have represented nearly 75 percent of all whistleblower awards), subject to certain criteria, to qualify for a presumption that they will receive the maximum statutory award amount.”

As proposed, the amendments included a controversial idea giving the SEC discretion to cap whistleblower awards in the biggest cases, those in which the SEC collects penalties of $100 million or more, at a level deemed “reasonably necessary to reward the whistleblower and to incentivize other similarly situated whistleblowers.” However, the final amendments affirm that “there is not a separate (post application of the award factors) assessment of whether award amounts are too small or too large.”

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