On March 19, 2018, the SEC announced three multi-million dollar awards to whistleblowers in connection with reports of misconduct. SEC Press Release, SEC Announces Its Largest-Ever Whistleblower Awards, No. 2018-44 (Mar. 19, 2018). One whistleblower received $33 million, which represents the largest SEC whistleblower award in history; the two other whistleblowers will split a $50 million award. These significant awards continue a trend of rising awards by the SEC, which continues to focus on publicly incentivizing and protecting whistleblowers.

In response to the recent record-breaking awards, Jan Norberg, Chief of the SEC’s Office of the Whistleblower, commented that, “We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.” Indeed, since 2012, the SEC has awarded over $262 million to 53 whistleblowers, with an average award of approximately $5 million.

The SEC’s promise of substantial awards for whistleblowers is bolstered by its active pursuit of rules and enforcement actions against companies that retaliate against whistleblowers or take any steps that could be construed as impeding reporting in violation of the Dodd-Frank Act and Sarbanes-Oxley. Since 2014, the SEC has brought enforcement actions against two companies for alleged retaliation against whistleblowers, eight for allegedly impeding whistleblowers from reporting misconduct, and one for both, resulting in a total of $19 million in penalties. While some of these actions have not necessarily resulted in significant fines considering the large size of their corporate targets, the threat of private litigation also looms in retaliation cases, which can significantly increase the financial risk to companies that retaliate against whistleblowers. For example, as we previously reported, in 2017 a jury found that Bio-Rad violated the Sarbanes-Oxley and Dodd-Frank whistleblower provisions when it fired its General Counsel, who reported suspected violations of the Foreign Corrupt Practices Act to the company’s audit committee. The GC was subsequently awarded over $8 million in lost wages and punitive damages, as well as $3.5 million in litigation costs by the court. Shearman & Sterling LLP, California Jury Finds that Bio-Rad Violated the Whistleblower Protections of the Sarbanes-Oxley Act by Terminating Its General Counsel (Feb. 14, 2017); Law360, GC Whistleblowing and Other Implications from Bio-Rad (Feb. 28, 2017).

The potential for a multi-million dollar award and the option to sue for damages and penalties if subjected to retaliation combine to create a fairly enticing prospect for possible whistleblowers to report to the SEC. Indeed, particularly given the Supreme Court’s recent decision in Digital Realty Trust, Inc. v. Somers, the incentives to report directly to the SEC are particularly pronounced, as the Court held that the protections of Dodd-Frank only apply to whistleblowers who report to the SEC, and therefore whistleblowers who only report their concerns internally are not protected. Shearman & Sterling LLP:  Government/Regulatory Enforcement, Supreme Court Finds Dodd-Frank Does Not Protect Internal Whistleblowers (Feb. 27, 2018).  Every headline-grabbing award such as those announced last week will surely prompt more potential whistleblowers to take notice.

SEC Press Release, SEC Announces Its Largest-Ever Whistleblower Awards 

Law 360, GC Whistleblowing 

Supreme Court Finds Dodd-Frank Does Not Protect Internal Whistleblowers 

California Jury Finds That Bio-Rad Violated The Whistleblower Protections