Image of SEC Enforcement Report Underscores the Role of Whistleblowers in Detecting Wrongdoing and Protecting Investors

SEC Enforcement Report Underscores the Role of Whistleblowers in Detecting Wrongdoing and Protecting Investors

Today the SEC Division of Enforcement issued its annual report for FY 2020.  Although the number of cases that the SEC filed declined as compared to FY 2019, the financial remedies ordered set a new high.  The SEC obtained judgments and orders totaling approximately $4.68 billion in disgorgement and penalties and returned more than $600 million to harmed investors.

The SEC brought a diverse mix of 715 enforcement actions, including 405 standalone actions, addressing a broad range of significant issues, including:

  • issuer disclosure and accounting violations;
  • foreign bribery;
  • investment advisory issues;
  • securities offerings;
  • market manipulation;
  • insider trading; and
  • broker-dealer misconduct.

The SEC has also accelerated the pace of its investigations. In FY 2020, the median time to file an enforcement action was 21.6 months – a five-year best. In addition, the SEC obtained more than 475 bars or suspensions against market participants and suspended trading in the securities of 196 issuers.

The report notes the important contributions of whistleblower in advancing the SEC’s mandate to protect investors and maintain fair, orderly, and efficient markets:

Over the past ten years, the whistleblower program has been a critical component of the Commission’s efforts to detect wrongdoing and protect investors in the marketplace, particularly where fraud is concealed or difficult to detect. Enforcement actions from whistleblower tips have resulted in more than $2.5 billion in ordered financial remedies, including more than $1.4 billion in disgorgement of which almost $750 million has been, or is scheduled to be, returned to harmed investors. Recognizing the importance of rewarding meritorious whistleblowers in a timely manner, we have made efforts to streamline and substantially accelerate the evaluation of claims for whistleblower awards. These efforts paid off. Fiscal Year 2020 was a record-breaking year for the whistleblower program. The Commission issued awards totaling approximately $175 million to 39 individuals, both greater than any other year in the program’s history.

Due in part to fraud related to the pandemic, the SEC experienced a significant increase in tips, complaints, and referrals (TCRs), some of which are submitted to the SEC Office of the Whistleblower.  In FY 2020, the SEC over 23,650 TCRs, a substantial increase over the approximately 16,850 TCRs received in FY 2019.  In addition, the SEC increased the number of new inquiries and investigations, opening 1,181 new inquiries and investigations in FY  2020, compared to 1,082 in FY 2019.

FY 2020 has been an active year for the SEC whistleblower program, including the SEC’s adoption of amendments to its whistleblower rules. The following resources summarize recent key developments for SEC whistleblowers:

 

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2015 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He represents whistleblowers around the world in SEC, CFTC and IRS whistleblower claims. He is also a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor.