Reform the SEC Whistleblower Program

Published on November 02, 2023

Please, share this page

#1 – Protect Internal Whistleblowers

In many ways, the SEC Whistleblower Program is the gold standard for whistleblower award programs worldwide. But even a program as successful as it has been is not without its flaws. Most notably, a devastating 2018 Supreme Court ruling stripped the program’s anti-retaliation protections from covering internal whistleblowers. The bipartisan SEC Whistleblower Reform Act would reverse the consequences of this ruling and make other small reforms to further strengthen the SEC Whistleblower Program.


The SEC Whistleblower Program’s mandatory whistleblower awards and strong anti-retaliation protections have proven to be immensely successful in incentivizing whistleblowers with high-quality information about fraud and misconduct to come forward and cooperate with U.S. authorities. Since it was established in 2010, the program has recovered over $6.3 billion in sanctions from fraudsters, allowing over $1.5 billion to be returned to harmed investors.


In 2018, however, the Supreme Court severely weakened the program and put countless whistleblowers at risk of retaliation in its ruling in Digital Realty Trust v. Somers. The Court ruled that the SEC’s anti-retaliation protections do not apply to whistleblowers who report to internal compliance programs and not directly to the SEC. This has been immensely consequential since a majority of whistleblowers first go to internal reporting channels.


The bipartisan SEC Whistleblower Reform Act reinstitutes anti-retaliation protections for internal whistleblowers. It also further strengthens the program by addressing the long delays that have bogged down the program and making sure that nondisclosure agreements do not silence whistleblowers.


Former SEC Commissioner Allison Herren Lee, who now serves as Of Counsel at the whistleblower defense firm Kohn, Kohn & Colapinto, wrote an article calling for the passage of the bill.


The SEC Whistleblower Reform Act reflects a bipartisan consensus that a strong whistleblower program benefits investors, companies and the public.  The program has helped uncover — and remediate –serious and costly frauds that might never have otherwise come to light. Having worked in law enforcement for over a decade, and then as an SEC Commissioner helping to oversee the SEC’s Office of the Whistleblower, I know firsthand the value of continued investment in this highly successful program.  I hope Congress will act quickly to pass this important legislation.”


#2: Broaden criteria for voluntary whistleblower

Under the Dodd-Frank Act, a whistleblower who exposes fraud can receive a monetary award and anti-retaliation protections through the U.S. Securities and Exchange Commission (SEC) Whistleblower Program – as long as they blow the whistle voluntarily.

A definition of “voluntary” may seem simple enough. However, the SEC’s rules governing the Dodd-Frank whistleblower law unnecessarily complicate the definition of a voluntary whistleblower. Some Dodd-Frank whistleblowers who, acting of their own free will and without legal obligation, report fraud are considered “involuntary” simply because they reported to the media, other government agencies, foreign law enforcement, or a U.S. embassy. According to § 240.21F-4, a Dodd-Frank whistleblower is no longer considered voluntary if the SEC contacts them before they file a report with the SEC. A whistleblower can also be disqualified if they partake in a Congressional investigation before filing with the SEC.

This definition undermines the purpose of whistleblower laws and ignores the realities of whistleblowing – especially as it pertains to international whistleblowers reporting through transnational U.S. whistleblower laws.

The regulations approved by the SEC 12 years ago continue to violate the statutory rights granted whistleblowers under the Dodd-Frank Act and strip otherwise qualified whistleblowers of their rights. We know, for instance, that 20% of FCPA prosecutions by the DOJ stem from tips by the media and another 20% stem from foreign law enforcement. Yet, the regulations by the SEC have cut whistleblowers who first report to these other sources off from U.S. whistleblower qualifications, even when they cooperate with U.S. law enforcement. This undermines the the anti-corruption Strategy outlined by the White House, which advocates for standing in solidarity with whistleblowers and journalists, as well as promoting inter-agency cooperation.

Congress must tell the SEC not to exclude whistleblowers who have informed the media or other Federal agencies first from their definition of whistleblowers with “original information.”

Further Reading

Take Action

Report Fraud Now