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Dave blogged last fall that the SEC paid out more whistleblower awards in fiscal 2021 than in all prior years combined since the whistleblower program began in 2011. While he noted that the trend in Europe was similar, what has continued to draw criticism here in the US is the lack of transparency around the circumstances of each award, and how the process even works. This new Bloomberg article shares findings from their 5-month pursuit & review of records obtained through a FOIA request and more than a dozen interviews. Here’s an excerpt that describes the screening process:

About 12,000 tips came in the last fiscal year. They first go through an internal screening process that is supposed to select only the best for full investigations, which can last five years.

A separate group of attorneys review the records once the investigation is completed and makes a decision on which whistleblowers get paid. The agency has 13 full-time and three temporary attorneys who determine how much each claimant should get. The SEC refused to provide more detailed information on how decisions are made.

It has rejected claims because applicants hadn’t followed program rules while approving claims under similar circumstances.

For example, the law says the program can only make awards to people who provide original information that leads directly to a sanctions of $1 million or more.

But in March the commission overruled staff and awarded about $14 million to someone who SEC lawyers ruled “was not a whistleblower within the meaning of the statute” and that the claimant’s information did not lead to the success of the investigation.

It disagreed with some staff conclusions, and wrote it was in the “public interest” to waive the 30-day requirement for filing. The whistleblower waited four years.

The program’s defenders argue that the screening process considers relevant facts & circumstances – which can lead to the appearance of inconsistencies. But the reporting leaves the overall impression that when it comes to winning a whistleblower award or having a successful whistleblower practice, the old adage applies: “it’s who you know, not what you know.”

This article underscores the need for companies to have robust whistleblower programs and procedures for handling whistleblower complaints. You don’t want an employee calling up one of the lawyers named in here! Visit the transcript from our February webcast – “Whistleblowers: Best Practices in the New Regime” – for practical guidance on effective programs, the board’s role, documentation, and more. It’s available along with lots of other resources in our “Whistleblowers” Practice Area.

– Liz Dunshee