On November 2, the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement issued its annual report for fiscal year 2020 (FY 2020). The report provides a comprehensive overview of the SEC’s enforcement efforts of the past year, which includes the successes of its whistleblower program. FY 2020 was a record-setting year for the SEC’s Division of Enforcement and specifically the SEC Whistleblower Program.
“The annual SEC reports continue to show how the effective use of whistleblower programs can deter fraudsters and recover millions every year for the American taxpayer,” said whistleblower attorney Stephen M. Kohn, partner at Kohn, Kohn, & Colapinto and Chairman of the Board of the National Whistleblower Center. “This record-year is a sign of the increasing number of whistleblowers coming forward with reliable, critical, and timely information of financial crimes.”
In a press release, SEC Chairman Jay Clayton said that the report “illustrates our strong commitment to the Commission’s whistleblower program, as we devoted additional resources, achieved significant milestones in the total amount awarded and number of individuals awarded, implemented process improvements and adopted Commission rules designed to improve transparency, clarity and efficiency for whistleblowers.”
The report states that in FY 2020, the SEC brought 715 enforcement actions, including 405 standalone actions. According to the report, “through these actions, the SEC obtained judgments and orders totaling approximately $4.68 billion in disgorgement and penalties – a record amount for the Commission – and returned more than $600 million to harmed investors.” As the report notes, since it was established in 2010, the whistleblower program has been a critical component in the SEC’s enforcement efforts.
FY 2020 was a record-setting year for the SEC Whistleblower Program. The SEC issued whistleblower awards totaling approximately $175 million to 39 individuals. Both of these totals are greater than those of any other year in program history. Additionally, the 39 awarded individuals is a 200% increase over the next-highest number of individuals who received awards in a single year.
In FY 2020, the SEC also issued a record number of preliminary determinations and final orders concerning whistleblower award applications. According to the report, “the Division issued 315 preliminary determinations, a more than 95% increase over the next highest year, and the Commission issued 197 final orders, an approximately 19% increase over the next highest year.”
Lastly, the report notes that during FY 2020, the SEC approved amendments to the rules governing the whistleblower program. The report states that these changes “were designed to provide greater clarity to whistleblowers and increase the program’s transparency and efficiency, including around the review and processing of whistleblower award claims.” Whistleblower advocates have claimed that some aspects of the SEC whistleblower program rule changes are positive for whistleblowers, while other changes could have negative consequences. Overall, however, the changes are seen as a win for whistleblowers.
In addition to the Division of Enforcement’s Annual Report, the SEC Whistleblower Program releases its own annual report. The report on FY 2020 has yet to be released as of November 2. However, the CFTC Whistleblower Program has issued their annual report for FY 2020.