Dodd-Frank created the Securities and Exchange Commission’s (the “SEC” or “Commission”) whistleblower program, which allows the SEC to issue awards to eligible whistleblowers who provide original information that leads to successful enforcement actions with total monetary sanctions above $1 million.
Whistleblowers may receive awards of between 10% and 30% of the monetary sanctions collected. In determining the size of an award, the SEC considers a number of “award criteria” — such as timeliness of the whistleblower’s information and the whistleblower’s own compliance with the company’s internal compliance and reporting system. Over the last ten years, the program has led the SEC to recover approximately $2.5 billion in financial remedies, and the SEC has paid approximately $523 million in awards. Some recent awards are noteworthy, including the SEC’s June 2020 award of nearly $50 million to a single individual.
On September 23, 2020, a divided SEC issued a final rule “clarifying the Commission’s broad discretion” to reduce large whistleblower awards (the “New Rule”). The New Rule is the latest development in a long-running and hotly contested saga. In July 2018, the SEC issued a proposed rule stating that “as additional award criteria,” the SEC has discretion to adjust downward whistleblower awards in cases yielding more than $100 million in sanctions and at least a $30 million bounty (the “Proposed Rule”). The Proposed Rule stated that the SEC would formally consider placing a fixed cap on the amount of an award, such that the whistleblower award “does not exceed an amount that is reasonably necessary to reward the whistleblower and to incentivize other similarly situated whistleblowers.”
Whistleblower advocates, led by Democratic Party Senators, denounced the Proposed Rule.  In a letter urging the SEC not to adopt the Proposed Rule, the Senators wrote, “We expect the [C]ommission will not adopt a mechanism to reduce or cap awards that is contrary to the letter and spirit of the statutory provisions.” The letter further states, “[Y]ou must ensure that the final rule does not afford the commission or SEC staff undue discretion to reduce the dollar value of an award that would create uncertainty or discourage future whistleblowers.”
Ultimately, the New Rule did not adopt the rigid requirement of the Proposed Rule—i.e., that the SEC formally consider absolute dollar amount as an “award criteria.” But the New Rule does state that “The commission has had and continues to have broad discretion in applying the award factors and setting the award amount, including the discretion to consider and apply the award factors in percentage terms, dollar terms or some combination thereof.” When announcing the New Rule, SEC Chairman Jay Clayton stated that it “will enhance the commission’s ability to make awards that will provide incentives for whistleblowers to come forward.” However, the two Democratic SEC Commissioners voted against the New Rule, citing “serious concerns about the discretion to consider the dollar amount.” One of these Commissioners, Allison Herren Lee, criticized the New Rule for being more expansive than the Proposed Rule, which would have applied only to awards of at least $30 million.
What effect, if any, the New Rule will have on the size of whistleblower awards remains uncertain. But the New Rule suggests that the Commission may be taking steps to decrease (somewhat) the size of whistleblower awards by exercising its newly declared discretion to reduce awards. Whether the Commission will exercise this discretion to diminish award amounts, and whether this will discourage potential whistleblowers from reporting corporate wrongdoing also remains to be seen. The V&E Report will continue to monitor developments in whistleblower awards and provide analysis of Commission trends.
 See 15 U.S.C. § 78u-6, et seq.
 See 17 C.F.R. § 240.21F-6.
 Press Release, SEC Adds Clarity, Efficiency and Transparency to Its Successful Whistleblower Award Program, Sec. & Exch. Comm’n (Sept. 23, 2020), https://www.sec.gov/news/press-release/2020-219.
 Press Release, SEC Awards Record Payout of Nearly $50 Million to Whistleblower, Sec. & Exch. Comm’n (June 4, 2020), https://www.sec.gov/news/press-release/2020-126.
 Sec. & Exch. Comm’n, Final Rule Release No. 34-89963, Whistleblower Program Rules (Sept. 23, 2020)(17 C.F.R. §§ 240 & 249) [“New Rule”], https://www.sec.gov/rules/final/2020/34-89963.pdf.
 Whistleblower Program Rules, 83 Fed. Reg. 34,702, (proposed June 29, 2018)(to be codified at 17 C.F.R. pts. 240 & 249). https://www.federalregister.gov/documents/2018/07/20/2018-14411/whistleblower-program-rules.
 Id. at 34,704.
 Letter from Senator Sherrod Brown et al. to Sec. & Exch. Comm’n Chair Jay Clayton, 1 (Sept. 17, 2020), https://www.banking.senate.gov/imo/media/doc/Ltr_to_Chair_Clayton_WB_rule_09172020.pdf.
 Id. at 2.
 New Rule at 8 (emphasis added).
 Jay Clayton, Chair, U.S. Sec. & Exch. Comm’n, Strengthening our Whistleblower Program (Sept. 23, 2020), https://www.sec.gov/news/public-statement/clayton-whistleblower-2020-09-23.
 See C. Ryan Barber, ‘A Sleight of Hand:’ Whistleblower Lawyers Recoil at SEC’s New Rules, Law.com (Sept. 23, 2020, 3:00 PM), https://www.law.com/nationallawjournal/2020/09/23/a-sleight-of-hand-whistleblower-lawyers-recoil-at-secs-new-rules/?slreturn=20200824154108 (quoting Lee: “We claim a new discretion to consider dollar amounts—in the setting of award amounts—that is broader than the discretion we proposed to write into the [Proposed] [R]ule, because it is applicable to all awards, no matter their size.”).