Skip to content


Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Why does the SEC whistleblower reward program have so many secrets?

The SEC has awarded 123 whistleblowers an astounding $731 million since the first payout in 2012. But what do we really know about the whistleblower program? The SEC’s Office of the Whistleblower recently released its 2020 Annual Report to Congress, and it raises more questions than it answers.

Why are whistleblowers anonymous? Who are they? Do they have any relationships that might create conflicts of interests for them or anyone else involved in the SEC whistleblower process? The Dodd-Frank Act requires the “confidentiality of whistleblowers and does not disclose information that could reveal a whistleblower’s identity,” but why? If these 123 whistleblowers are the heroes they’re portrayed as, shouldn’t the public know who to thank? The United States has very well formulated and enforced whistleblower protection laws, so any retaliation from their former employer would be met with swift action from the government, right?

About possible conflicts, is there any independent body making sure they don’t happen? Is there a record of conflict reviews? Who has access to the record?

Shouldn’t the media be allowed to interact with whistleblowers, ask them questions? Where do they come from? Are bankers the savviest whistleblowers, or is it the watchful security guard? Are most successful whistleblowers high-paid insiders who can afford the years-long process, hoping for a positive result? Has anyone ever been awarded twice? Three times?

Does every whistleblower need a lawyer to manage the process and claim a reward? Who are their lawyers? Are multiple whistleblowers in the same case represented by one or several firms? Do the same firms appear over and over again? (Only one whistleblower complaint out of about 400 is rewarded, so what are the odds of one law firm appearing in multiple successful proceedings?)

Why is there no public record of criteria met for specific awards? The SEC says it has received over 40,200 tips through the whistleblower program. How were the 123 individuals who’ve been paid nearly three quarters of billion dollars selected? What made them more deserving than the 40,000 unsuccessful whistleblowers? What is the basis for the SEC’s determination in those cases it didn’t pursue? What is the process to review incoming tips, and how are escalations handled? Is there an independent board that reviews documents provided by whistleblowers? Who determines the authenticity and chain of custody of the documents? If no one outside the SEC is involved in the process, can there be any meaningful appeals process for whistleblowers whose claims are denied?

Why is the underlying enforcement action kept secret? The SEC doesn’t disclose what successful enforcement action a whistleblower is being rewarded for. Why not? Wouldn’t that serve as a powerful deterrence for other companies and an encouragement for future whistleblowers? Does the SEC use whistleblower tips to target specific industries? Do certain geographic areas rate higher whistleblower awards? How long is the process, anyway?

The SEC is very clear that no taxpayer money is used to pay whistleblowers. Awards are paid from money the SEC recovers from wrongdoers. Still, that recovered money belongs not to the SEC but to the U.S. Treasury, doesn’t it? And anyway, aren’t taxpayers paying all federal salaries?

Here’s a typical redacted whistleblower award order published by the SEC. This one is for a $28 million payout. Notice how sparse the remaining text is, and how little substantive information is disclosed.

The public learns nothing about the basis for the action, why it was necessary, and how the award amount was reached.

Incidentally, where does a $28 million award rank among all awards? Here are top ten SEC whistleblower awards, as of this writing:

1. $114 million – October 22, 2020

2. $50 million – March 19, 2018

3. $50 million – June 4, 2020

4. $39 million – September 6, 2018

5. $37 million – March 26, 2019

6. $33 million – March 19, 2018

7. $30 million – September 22, 2014

8. $28 million – November 3, 2020

9. $27 million – April 16, 2020

10. $22 million – September 30, 2020

To recap: The U.S. federal government pays unidentified private citizens (of any nationality) enormous amounts of money with no public accountability or open and reviewable administrative or judicial process.

This is, even with the best intentions, an odd arrangement. If anyone encountered this same scenario in another country — say, Russia, Angola, or Belize — wouldn’t they be highly skeptical? And wouldn’t the scenario trigger serious scrutiny from the press, international organizations, and watchdog NGOs? 

I’m not accusing anyone of anything untoward. But I’m questioning an award program that seems entirely out of step with our normal standards of transparency and accountability. It brings to mind Robert Klitgaard’s famous equation: Corruption = Monopoly Power + Discretion – Accountability/Transparency.

Share this post


1 Comment

  1. Great insight and yes, we must question this and seek answers. While recognizing that whistleblowers put themselves in difficult and sometimes dangerous spots, these awards appear excessive. Law firms may take the cases just on the gamble that they will get these rewards at the end of the process as payment, but then how is the money accounted for and reported? Is it income, is it taxable for either the whistleblower or the law firm (doesn’t seem to meet the criteria)? Does it end up in offshore accounts? If the funds come from civil penalties assessed on wrongdoers, shouldn’t we be asking if at least some should be put to a better use?

Comments are closed for this article!