On November 14, the U.S. Securities and Exchange Commission (SEC) announced its enforcement results for the 2023 Fiscal Year. In addition to detailing the agency’s enforcement successes, the SEC’s announcement revealed that the 2023 Fiscal Year was a record year for the agency’s whistleblower program.
During the 2023 Fiscal Year, the SEC Whistleblower Program issued nearly $600 million in whistleblower awards, the most ever in a fiscal year, including a $279 million award, the single largest award in program history. The whistleblower program also received a record 18,000 whistleblower tips over the course of the fiscal year.
“Year after year, the SEC Whistleblower Program continues to build on its immense success,” said whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. “The information and assistance provided by whistleblowers play an integral role in the Commission’s enforcement results.”
“It is no coincidence that as the SEC issues more and more whistleblower awards it also receives more and more whistleblower tips,” added Kohn. “These awards incentivize insiders to come forward and report misconduct, bolstering the Commission’s enforcement efforts and in turn protecting the American public from fraud.”
In FY 2023, the SEC filed 784 total enforcement actions and obtained orders for $4.949 billion in financial remedies, the second highest amount in SEC history. $930 million was distributed back to harmed investors.
“The investing public benefits from the Division of Enforcement’s work as a cop on the beat,” said SEC Chair Gary Gensler. “Last fiscal year’s results demonstrate yet again the Division’s effectiveness—working alongside colleagues throughout the agency—in following the facts and the law wherever they lead to hold wrongdoers accountable.”
The agency highlighted its increased enforcement efforts around whistleblower protection issues noting that it “took forceful action to protect whistleblowers’ rights and ability to report potential securities laws violations to the SEC.”
In the announcement, the agency further reported that the 2023 Fiscal Year “was another highly productive and impactful year for the SEC’s enforcement efforts relating to crypto asset securities” and that it “brought several enforcement actions addressing ESG issues in fiscal year 2023.”
“As the SEC continues to increase its enforcement efforts in emergent areas such as crypto and ESG, the SEC Whistleblower Program will play a key role in the success of these efforts,” said Kohn.
The SEC Whistleblower Program was established in 2010 with the passage of the Dodd-Frank Act (DFA). The program offers monetary awards and anti-retaliation protections to whistleblowers who voluntarily report violations of U.S. securities laws.
The DFA also established a whistleblower program at the U.S. Commodities Futures Trading Commission (CFTC). During the 2023 Fiscal Year, the SEC and CFTC programs surpassed $2 billion in total whistleblower awards.
Despite the immense success and continued growth of the whistleblower programs, there is legislative movement in Congress to further bolster the programs.
“While the SEC and CFTC have established highly effective whistleblower programs, further reforms are needed to ensure they can continue to operate at the highest level,” Kohn explained. “Congress needs to prioritize bipartisan legislation currently pending which would help whistleblowers recover many more billions of dollars for taxpayers and harmed investors.”
On March 15, Senators Chuck Grassley (R-IA) and Elizabeth Warren (D-MA) introduced the SEC Whistleblower Reform Act of 2023 in order to further strengthen the highly successful SEC Whistleblower Program. The bill bolsters the Dodd-Frank Act’s anti-retaliation protections and ensures that the agency processes award claims in a more timely manner.
According to Allison Herren Lee, former SEC Commissioner and currently Of Counsel at KKC, the SEC Whistleblower Reform Act of 2023 “will help ensure that the SEC Whistleblower Program remains an indispensable tool in the Commission’s efforts to police wrongdoing and protect investors.”
National Whistleblower Center (NWC) is calling for the immediate passage of the SEC Whistleblower Reform Act. NWC has set up Action Alert calling on whistleblower supports to join them in urging Congress to pass the bill and protect internal corporate whistleblowers.
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Protect Internal Corporate Whistleblowers
Further Reading:
SEC Announces Enforcement Results for Fiscal Year 2023
SEC, CFTC Pass $2 Billion Award Milestone but Reforms are Still Needed