November 17, 2023

How the SEC Whistleblower Program Is Changing the Enforcement Landscape

John Joy Managing Attorney, FTI Law PLLC

Every year, citizens who have witnessed wrongdoing at work are reporting it to the United States Securities and Exchange Commission (SEC). In fact, the number of people who are reporting wrongdoing to the SEC is on the rise, and this has a lot to do with the SEC whistleblower program.

What Is the SEC Whistleblower Program?

The SEC whistleblower program was created by Section 922 of the Dodd-Frank Act, which was passed after the 2007-2008 financial crisis. It was designed to encourage people to report legal violations to U.S. regulators by offering a financial incentive, as well as protections against retaliation.

Prior to the 2007 financial crisis, regulators had to work relatively hard to uncover securities laws violations, relying on companies to self-report and even random audits. As financial markets developed and securities became more complex, regulators were left struggling to understand the complex financial instruments that were being used to hide fraud and securities laws violations. What they needed were whistleblowers and that’s precisely what the SEC whistleblower program delivered.

Most whistleblowers are reluctant to raise concerns given the risk it poses to their career. By offering whistleblowers anonymity, protection from retaliation and a financial reward, the SEC addressed the key concerns that most whistleblowers had. In just over ten years since it launched, the program has been directly responsible for the SEC collecting over $6 billion in fines, of which more than $1.5 billion will be returned to harmed investors.

Under the program, an individual who voluntarily reports original information that leads to a successful enforcement action by the SEC and a fine of over $1 million may be entitled to 10-30% of the fine as an award. The program has paid out just under $2 billion to whistleblowers already. Reporting a violation can result in a large whistleblower award. The average award is about $5 million, and the largest award so far, paid this year, was nearly $279 million.

Importantly, the awards paid by the SEC come directly from the sanctions collected from violators. Section 922 of Dodd-Frank established an Investor Protection Fund, ensuring that no money would be taken or withheld from harmed investors to pay whistleblower awards. As a result, the whistleblower program is ‘free’ to the taxpayer. One drawback of this approach is that, on rare occasions, if a whistleblower’s tip leads to a fine, but the company cannot pay the fine (for example, because the company is bankrupt), the whistleblower will not be paid their award.

Who May Participate in the Program?

Almost anyone is eligible to participate in the whistleblower program. It is difficult, but still possible, for an attorney working for a company to qualify for a whistleblower award. However, typically an attorney would only qualify in extreme circumstances, such as where the attorney was needed to blow the whistle to stop a fraud being perpetrated against the Commission. This could arise if an attorney found out their client was illegally destroying evidence in an effort to scupper an SEC investigation.

The rules for non-attorneys who work in the compliance or audit department are more relaxed. This is a result of the SEC’s attempt to strike a balance between the need to stop fraud quickly and the need to allow a company to use its own system for self-reporting violations. For example, the program rules allow non-attorneys to participate in the whistleblower program if the disclosure of their information is necessary to stop imminent harm to investors, or if they have already reported their concerns internally. This ensures that non-attorneys working in compliance or audit are not incentivized to report to the Commission until the company has had a chance to deal with the issue, unless there is a threat of imminent harm to investors.

The SEC also allows people who were involved in the wrongdoing to participate in the program and claim awards. A person who participated in the wrongdoing will have the size of their award reduced, but is not disqualified from claiming an award unless they are criminally convicted as a result of their involvement.

The SEC also provides awards to whistleblowers who report concerns within their company, but only if they report to the SEC within 120 days of reporting to their company. This means that an individual who has already reported the wrongdoing within their company can still participate in the program provided they act quickly. This 120-day rule demonstrates that while the SEC wants whistleblowers to come forward, the Commission also wants to incentivize companies to develop good internal whistleblower channels by providing them with this 120-day window to self-report and potentially obtain a declination for doing so. Statistics show that most whistleblowers report their concerns in their place of work before reporting to the SEC. As a result, lawyers representing companies who could be fined by the SEC should ensure that their clients have good internal whistleblower channels to address internal complaints and self-report violations quickly.

The whistleblower program also provides an opportunity for honest companies who see competitors breaking the law. If a company discovers that a competitor has paid a bribe, or lied to investors, they should explore reporting the violation to the SEC. Not only might this put an end to the misconduct, it could also result in a whistleblower award. While the SEC won’t pay an award to a corporate entity, there is nothing to stop individuals from reporting on behalf of a company.

What Protections are Provided to Whistleblowers?

Whistleblowers who report potential securities laws violations to the SEC are protected against retaliation under both Sarbanes-Oxley (SOX) and Dodd-Frank. Both laws protect whistleblowers from all forms of retaliation, including termination, demotion, harassment, or other adverse actions. However, the laws have different scopes of application. For example, whistleblowers under SOX are protected if they report to their supervisor or the federal government. On the other hand, whistleblowers under Dodd-Frank are only protected if they report to the federal government. Similarly, before going to court, whistleblowers under SOX must first file a complaint with the Occupational Safety and Health Administration within 180 days of the alleged retaliation. Whistleblowers under Dodd-Frank have no such obligation and can bring direct legal action.

The SEC whistleblower program also recognizes that a whistleblower’s best form of protection against retaliation is anonymity. As a result, the SEC allows whistleblowers to report anonymously, provided they use an attorney. This allows the whistleblower to have their attorney communicate with the Commission on their behalf. This ensures that the SEC does not even have the whistleblower’s identity, and so there is no chance it could be revealed.

What Legal Violations Are of Most Interest to the SEC?

The SEC is highly interested in fraud that harms investors and Ponzi schemes. Other violations the SEC also pursues aggressively are violations of the Foreign Corrupt Practices Act (FCPA). FCPA violations typically involve companies paying a bribe to a foreign government official in exchange for a contract, license, permit or business opportunity, and such violations attract some of the largest fines issued by the SEC.


At base, the SEC whistleblower program has reshaped the enforcement landscape. Where previously the SEC needed to actively seek out violations to investigate, the SEC is now inundated with thousands of tips each year. Incentivizing individuals with valuable information to come forward and report securities violations has led to a surge in high-quality tips and information, significantly enhancing the SEC’s ability to detect and investigate financial misconduct. Whistleblowers have played a pivotal role in uncovering complex fraud schemes and corporate wrongdoings that might otherwise have gone undetected. The results of the program are not hypothetical and can be seen in the billions of dollars the SEC has collected as a result of the tips it has received. Consequently, the SEC whistleblower program has become a critical tool in the agency’s efforts to maintain the integrity of the financial markets and protect the interests of investors.


John Joy is the Managing Attorney of FTI Law PLLC, a New York law firm that specializes in representing SEC and FCPA whistleblowers. John has worked for almost a decade on financial crime and corruption cases around the globe. He is a featured expert in the field on LexisNexis and regularly acts as an expert commentator in business and legal media on corporate crime and international corruption issues.

Financial Regulation, Whistleblowers, White-Collar Crime