SEC Whistleblower Reports Spiked Last Year

Chris Gaetano
Published Date:
Jan 12, 2021
The number of whistleblower complaints to the Securities and Exchange Commission saw a sudden and dramatic spike in 2020, which some lawyers and academics are attributing to the larger numbers of people working from home, according to Bloomberg. The agency, as of the end of September, had received 6,900 tips, compared to 5,200 in 2019 and 5,300 in 2018, the previous record. The SEC gave out about $330 million to tipsters (with a single person accounting for about a third of this total), meaning that this year's rewards make up almost half of the total $737 million that the agency has awarded since the program first launched in 2012 as part of the Dodd-Frank Act.

One of the reasons behind the spike, lawyers and professors theorize, is the large increase in people working from home. For one, people at home aren't feeling as connected to their companies and so are more likely to file a complaint if they think that they're not getting the support they need. Further, it has become a lot easier to file a complaint because workers aren't being directly observed by their supervisors and so it's not that big a deal to, say, record a meeting or hold on to some documents.

Bloomberg quoted Jordan Thomas, an attorney at Labaton Sucharow and former SEC official, who said, “You’re not being observed at the photocopy machine when you’re working from home. ... It’s never been easier to record a meeting when you can do it from your dining room table."

Another factor is that the SEC has streamlined the process since the program launched and generally has made it easier for whistleblowers to submit complaints.

One might also wish to consider that the program awards whistleblowers between 10 to 30 percent of money collected from a successful enforcement action derived from the tip, provided that the sanctions exceed $1 million. Bloomberg quoted Joseph Grundfest, a law professor at Stanford University and former SEC commissioner, who said, “You pay whistleblowers more than $100 million, you’re going to get more whistleblowers.” Considering the financial stresses many Americans have been experiencing since the pandemic's start, the prospect of a cash payout is likely to have increased the chance that workers would blow the whistle on their employers.

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