SEC Enforcement In FY 2021 Included Significant Actions In Traditional And Emerging Areas And Over $1 Billion In Whistleblower Awards

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On November 18, the U.S. Securities and Exchange Commission (“SEC”) announced its enforcement results for the 2021 fiscal year, which ended on September 30, 2021. The SEC reported that it filed 434 new enforcement actions in FY2021, a 7% increase over FY2020. But perhaps the most striking thing about the SEC’s enforcement results for the year was its whistleblowing statistics. The SEC has now awarded over $1 billion in whistleblower awards, and the SEC highlighted those figures in its press release—announcing that “the SEC’s whistleblower program was critical to these efforts and had a record-breaking year.”

The SEC filed a total of 697 enforcement actions in FY2021, which represent a 3% decrease from total actions filed in FY2020. The 697 enforcement actions filed include 434 new or “stand-alone” actions. Of the 434 new enforcement actions filed in FY2021, 70% involved at least one individual defendant or respondent. As always, these actions spanned a broad range of enforcement areas. However, the SEC took the opportunity to highlight in particular its enforcement actions in the cryptocurrency space and involving SPACs, emphasizing that its enforcement activities are seeking to stay ahead of emerging risks to capital markets and investors. See e.g., Shearman & Sterling LLP Need To Know Weekly, DOJ And SEC File Securities Fraud Charges Against Founder Of Company Acquired By A SPAC (August 3, 2021); Shearman & Sterling LLP Need To Know Weekly, SEC Announces Settled Enforcement Action In Connection With SPAC Business Combination (July 20, 2021). The SEC also highlighted its recent action against an alternative data provider and its action involving securities using decentralized finance (“DeFi”) technology. See Shearman & Sterling LLP Need To Know Weekly, SEC Settles “First-Of-Its-Kind” Action Over “Decentralized Finance” Technology, Alleging Fraud And Unregistered Sales Of Securities (August 19, 2021).

The SEC also filed a significant number of actions in more traditional enforcement areas, such as insider trading, FCPA violations and Ponzi schemes, but the year was another in which public company actions for accounting fraud were down.

But the most striking thing about FY2021 was almost certainly its whistleblower statistics. There is no question that at this point, ten years post-Dodd Frank, the whistleblower program has “matured.” The SEC awarded a total of $564 million to 108 whistleblowers in FY2021 alone. See e.g., Shearman & Sterling LLP Need To Know Weekly, SEC Announces Second-Largest Whistleblower Award In Program’s History (April 20, 2021). While this does not mean that nearly one in four of the SEC’s new standalone actions were the result of whistleblowers (since many of these awards were for prior-year actions, and many actions result in multiple awards), the figures are undoubtedly striking. The whistleblower program has now surpassed $1 billion in awards since the program’s inception.

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Addendum to SEC Division of Enforcement Press Release – Fiscal Year 2021

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