Snitches Get Riches: The SEC Whistleblower Program

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By Kurt Valentine, Staff Writer

In 2002, Congress enacted the Sarbanes-Oxley Act (SOX) “[t]o safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation.”[1]  SOX included “the first federal enactment providing whistleblower protection for insiders with knowledge of financial fraud.”[2]

In 2010, in the aftermath of the 2008 Financial Crisis, Congress enacted the Dodd-Frank Act “[t]o promote the financial stability of the United States by improving accountability and transparency in the financial system.”[3]  A major part of the Dodd-Frank Act was its whistleblower protection provision. Unlike the SOX whistleblower provision, Dodd-Frank provided a financial incentive for employees to report security law violations to the SEC though a whistleblower award program. [4]

To qualify for a whistleblower award under Dodd-Frank, the whistleblower must provide original information to the Securities and Exchange Commission (“SEC”) that leads to a successful enforcement action that results in sanctions exceeding $1,000,000.[5][6]  If those conditions are met, the whistleblower receives 10 to 30 percent of the monetary sanctions imposed in the action.[7]  The percentage awarded is in the discretion of the SEC.[8]

The whistleblower program has “provided tremendous value to the SEC’s enforcement efforts and significant help to investors.”[9]  Since the program’s inception in 2012 through the end of September 2017, whistleblower information led to the SEC ordering wrongdoers to pay over $975 million in total monetary sanctions.[10]

The whistleblower program has also provided tremendous value to whistleblowers. On March 19, 2018, the SEC issued a press release to announce the highest awards ordered under Dodd-Frank.[11] An award of nearly $50 million was shared between two whistleblowers, and a third whistleblower received more than $33 million.[12]

Under the program, the Commission has awarded more than $262 million to 53 whistleblowers.[13]  The SEC hopes that these awards will encourage more people to report securities violations to the SEC.[14]  Records show that more people are reporting violations:  in 2017, the SEC received over 4,400 tips, an increase of nearly 50 percent since 2012.[15]

A recent Supreme Court holding limiting the coverage of Dodd-Frank’s anti-retaliatory provisions may hinder the growth of the program. The definition section of Dodd-Frank defines a “whistleblower” as “any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”[16]  The Fifth Circuit held that employees must provide information to the SEC to take advantage of Dodd-Frank’s anti-retaliation safeguard; the Second Circuit held that a whistleblower is protected even if the whistleblower did not provide information to the SEC. [17] The Supreme Court granted certiorari to resolve this conflict.[18]

In Dig. Realty Trust, Inc. v. Somers., the Vice President of Portfolio Management for a publicly-traded real-estate investment trust reported to senior management that his boss, the Senior Vice President, committed “a number of acts of serious misconduct, including hiding seven million dollars in cost overruns on one development.”[19] He was terminated shortly after he reported the violation and did not alert the SEC  prior to his termination.[20]  He sued his former employer for violating Dodd-Frank’s anti-retaliation whistleblower protections.

The Supreme Court held that the term “whistleblower,” as defined in the statute, required an employee to provide information to the SEC prior to the retaliatory action. [21]  Therefore, the respondent was not entitled to relief under the anti-retaliatory provisions of Dodd-Frank because he did not qualify as a “whistleblower” at the time of his firing.

This narrow definition of “whistleblower” deters employees from reporting security violations internally. When the SEC adopted the Whistleblower Rules under Dodd-Frank, it “recognized that whistleblower reporting through internal compliance procedures can enhance the Commission’s enforcement efforts.”[22]  When Congress enacted Dodd-Frank, it recognized that “whistleblowers often face the difficult choice between telling the truth and . . . committing ‘career suicide.’”[23]  And after this holding, that difficult choice became a lot harder.




[1] Lawson v. FMR LLC, 134 S. Ct. 1158 (U.S. 2014).

[2] Geoffrey Christopher Rapp, Mutiny by the Bounties? The Attempt to Reform Wall Street by the New Whistleblower Provisions of the Dodd-Frank Act, 2012 B.Y.U.L. Rev. 73 (2012).

[3] Pub.L. 111-203

[4]  Dig. Realty Trust, Inc. v. Somers, 2018 U.S. Lexis 1377 *10 (U.S. February 21, 2018), quoting, S. Rep. No. 111-176, pp. 111, 112 (2010).

[5]  15 U.S.C.S. § 78u-6(a)(3).

[6] Id. at (a)(1).

[7] Id. at (b)(1).

[8] Id. at (c)(1)(A).

[9] SEC 2017 Annual Report to Congress, Whistleblower Program, p. 1. (

[10] Id.

[11]  U.S. Securities and Exchange Commission. (March 19, 2018). SEC Announces Its Largest-Ever Whistleblower Awards. [Press Release]. Retrieved from

[12] Id.

[13] Id.

[14] Id.

[15] SEC 2017 Annual Report to Congress, supra note 9.

[16] 15 U.S.C.A. § 78u-6(a)(6) (West).

[17]  Dig. Realty Trust, Inc. v. Somers, 2018 U.S. Lexis 1377 *10 (U.S. February 21, 2018), quoting, S. Rep. No. 111-176, pp. 111, 112 (2010).

[18] Id.

[19] Id. Respondent’s Brief at 14.

[20] Id.

[21]  Dig. Realty Trust, Inc. v. Somers, 2018 U.S. Lexis 1377 *29 (U.S. February 21, 2018).

[22] SEC 2017 Annual Report to Congress, Whistleblower Program, p. 4. (

[23] Dig. Realty Trust, Inc. v. Somers, 2018 U.S. Lexis 1377 *24 (U.S. February 21, 2018).

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