What the Record SEC Whistleblower Award Means for Future Whistleblowers


On October 22, the U.S. Securities and Exchange Commission (SEC) announced a $114 million whistleblower award, by far the largest whistleblower award in SEC history. Notably, this award came almost one month to the day after the SEC approved a number of rule changes to its whistleblower program.

The size of this record-setting award, as well as other aspects of the award determination, offer insights into how the SEC will handle whistleblower awards under the new rules. Specifically, the award offers whistleblowers some reassurance about the SEC’s commitment to paying large awards and paying related action awards. Overall, this monumental award is not just good news for the recipient, but for all future SEC whistleblowers.

SEC’s Commitment to Large Awards

The record dollar amount of this award is extremely important because it comes at a time when there has been concern about the SEC’s commitment to paying large awards.

Through the SEC Whistleblower Program, qualified whistleblowers, or individuals who voluntarily provide original information that leads to a successful enforcement action of over $1 million, are entitled to a whistleblower award for 10-30% of funds recouped by the government. The SEC uses a number of factors, such as the timeliness of the disclosure, the importance of the information provided, and the assistance of the whistleblowers to determine the exact percentage within this 10-30% range. Notably, an award’s size has not been a factor in determining the percentage the whistleblower is awarded.

In 2018, the SEC unveiled proposed rule changes to the whistleblower program. In the two years between the proposal and the final vote last month, whistleblower advocates were outspoken and concerned that a number of the rule changes could seriously undermine the success of the program. One of the most controversial proposed changes was a “soft cap” on the largest whistleblower awards. Under this “soft cap,” if the SEC collected over $300 million in an enforcement action, any whistleblower award for the case would be automatically set based on the lowest possible percentage (10%).

 This proposed “soft cap” was denounced by whistleblower advocates including Senator Charles Grassley (R-IA), the foremost expert on whistleblowing in Congress. In his letter opposing the proposed cap, Grassley explained that “high rewards can motivate potential whistleblowers to come forward because the monetary amount may mitigate the cost of professional and social sanctions that can result.”

Whistleblower advocates specifically highlighted that large rewards are necessary to incentive well-paid high-ranking officials who may have the most information to offer the SEC. Additionally, whistleblower advocates argued that a cap on the largest awards would undermine the whistleblower program’s deterrent effect. In an article opposing the cap, whistleblower attorney Stephen M. Kohn, partner at qui tam firm Kohn, Kohn & Colapinto and Chairman of the Board of the National Whistleblower Center, explained that “ultimately, the long-term deterrent effects on crime can save investors and the public far more than is recovered from specific prosecutions.”

When the SEC finally voted on the rule changes on September 23, the “soft cap” was no longer part of the proposed rule changes. In his analysis of the rule changes, Kohn stated that the “Commission’s complete abandonment of its proposal to limit rewards in large cases was a major victory for whistleblowers.”

However, in some ways, the SEC’s vote on the rule changes opened more questions about its commitment to paying large rewards than it answered. Two of the SEC Commissioners voted no on the rule changes and raised concerns about the SEC’s ability to limit awards. In her dissent, Commissioner Lee states that “the principal reason that I find myself unable to support this rule, despite trying very hard to reach consensus, is because of the treatment given to the central issue of the Commission’s discretion to consider the dollar amount of an award in making award determinations.” According to Commissioner Lee, the reason the SEC abandoned the “soft cap” rule is that it determined that the SEC already had the ability to limit rewards based on size and that the new rule was thus not necessary. According to Kohn, however, the position that the SEC does have this authority “does not have any legal support either in the statute, the legislative history, or in the actual controlling regulations.” Despite Kohn’s stance, the proceedings were worrisome for some whistleblower advocates.

And so, last week’s $114 million award is so important because to some degree, it alleviates concerns that the SEC is not committed to paying large awards. “This is a great step forward,” said Kohn in a press release. “It is proof that the SEC understands the importance of paying large rewards to incentivize whistleblowers to step forward and deter future wrongdoing.”

The publicly released final order for the large award does not disclose the exact percentage used to calculate the award amount (this is in order to help ensure the whistleblower’s confidentiality). However, the order makes no mention of a reduction of the percentage due to the size of the award. Instead, the award lists a number of positively assessed factors, including the facts that “Claimant 1 provided substantial and ongoing assistance to the Office staff throughout the investigation” and “Claimant 1 suffered serious personal and professional hardships as a result of Claimant 1’s whistleblowing activities.”

SEC’s Commitment to Related Action Awards

One of the most controversial newly approved rule changes concerns the SEC’s commitment to paying related action awards. Under the Dodd-Frank Act, the SEC is required to pay related action awards when an SEC whistleblower’s tip leads to a successful enforcement action by another agency. These awards are also for 10-30% of the funds recovered by the other agency. The new rule radically modifies the related action provisions and grants the SEC the authority to deem what actions are and are not “related actions,” thus allowing the SEC to avoid paying related action rewards. According to Kohn, this rule was “the most detrimental anti-whistleblower rule approved by the Commission.” He does note, however, that “this new authority runs counter to the plain language of the Dodd-Frank Act and should be challenged in court if it is used to deny a whistleblower a mandatory related action award.”

Importantly for whistleblowers, the SEC did not avoid paying related action awards in the record-setting award. Instead, they paid the whistleblower related action awards, which accounted for over $62 million of the $114 million. These related action payments alone would have been enough to make the award the largest in SEC history.

The final order for the award does not disclose which other agency carried out the related actions. It does state, however, that “the record further demonstrates that Claimant 1 also voluntarily provided the original information that led to the successful enforcement of the Covered Action to the Other Agency, and that this information led to the successful enforcement of the Related Actions.”

It remains to be seen whether or not the SEC will try to deny a related action award under the newly approved rule. But last week’s historically significant award should reassure whistleblowers who are concerned that the SEC would now try and avoid paying any related action awards.


While the SEC’s September vote on rule changes to its whistleblower program was largely seen as a win for whistleblowers, it did raise some serious concerns. Specifically, it became unclear whether or not the SEC was committed to paying large whistleblower awards and related action awards. Last week’s record-setting award resoundingly alleviates some of these concerns. The SEC clearly recognizes the importance of both large and related action awards. Whistleblowers should rejoice and fraudsters should be worried.

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