Josh Ballard

On Monday, the SEC announced that it had granted its 100th whistleblower award. The recipient, a company outsider, received US$1.8 million for providing significant information related to an ongoing securities law violation which resulted in enforcement action.

Commenting on the landmark, SEC Chairman Jay Clayton said: “Today’s award marks a milestone for the whistleblower program. This whistleblower is the 100th individual to receive an award under the program since its inception, and the 33rd individual awarded so far this year.”

Since coming into effect in 2010, the SEC whistleblower program has resulted in the following:

  • Paid $527 million to whistleblowers
  • Collected $2.5 billion in monetary penalties
  • Returned $750 million to harmed investors

With the program becoming more efficient than ever, what does this mean for compliance teams?

1. Implications of Increasing Frequency of Awards

The first thing to note here is the increasing frequency of successful whistleblowing cases. Although the program has been operating for around a decade, roughly a third of all awards have been made in 2020. With whistleblowers receiving between 10 to 30% of the money collected, there is significant financial incentive for tipsters to get in touch with the SEC.

Traditionally, compliance teams protect firms against the prying eyes of regulators. And, while that is still very much the case, compliance teams should be particularly wary of compliance breaches being exposed from within. 

The willingness of whistleblowers to step forward is on the rise and that means the window of opportunity for resolving occurrences of misconduct is reduced. Compliance teams need to be able to find bad actors quickly and accurately – before a whistleblower beats them to the punch, the regulator issues a huge penalty, and irreparable damage is done to the brand. 

The most effective way of doing that is leveraging technology that finds risk efficiently, allowing the compliance team to be the first line of defence against misconduct, rather than leaving it to the whistleblowers.

2. The Rise of External Whistleblowers

In this most recent case, the information used by the SEC originated from a company outsider. This may have been a client, vendor, partner, or anyone with access to sensitive information that is incriminating enough for the regulator to pursue enforcement action. 

Jane Norberg, Chief of the SEC’s Office of the Whistleblower said: “While many of our whistleblowers have been insiders, the agency also receives critical intelligence from company outsiders, like today’s whistleblower, whose swift reporting alerted staff to the violations that resulted in the success of this enforcement action.” 

When we think of whistleblowers, we don’t tend to think of people providing information from outside of an organization. While compliance teams may have an excellent line of sight of their own people, their view externally may be less clear. Behavox Compliance provides a window into all corporate communications, even between internal and external parties, flagging any content that may indicate misconduct taking place.