On November 15, 2016, the Securities and Exchange Commission (SEC) released its Annual Report on the Dodd-Frank Whistleblower Program. The Whistleblower Program was established by Section 21F of the Dodd-Frank Act, which directed the SEC to make monetary awards to individuals who submit original information that leads to enforcement actions for securities violations that result in monetary penalties of over $1 million. Successful whistleblowers are entitled to receive 10-30 percent of the total penalty as an award.

The Dodd-Frank Act requires the SEC to issue the Annual Report each year regarding whistleblower complaints received and the SEC’s response to the complaints. The 2016 Annual Report covers the 2016 fiscal year that ended on September 30, 2016.

The past year was a record year for the Whistleblower Program, with dramatic expansion in the number of whistleblower claims submitted, awards granted and the level of enforcement activity. For FY 2016, the SEC issued awards that totaled over $57 million, which was higher than all awards issued in previous years combined. In addition, six of the top ten largest whistleblower awards were issued in FY 2016. The total awards issued since the program’s inception in 2011 have now surpassed $100 million. Consistent with this level of activity, the SEC reported that it received over 4,200 tips from individuals, which is the largest in the program’s history. The most common complaint categories reported by whistleblowers were Corporate Disclosures and Financials (22 percent), Offering Fraud (15 percent) and Manipulation (11 percent). The SEC received whistleblower complaints from individuals in 48 states, the District of Columbia, Puerto Rico and 67 foreign countries.

The Annual Report also contained information about the individuals who submit whistleblower complaints. To date, almost 65 percent of the award recipients were current or former employees of the company. Of the award recipients who were insiders, an overwhelming majority (approximately 80 percent) raised their concerns internally before making a whistleblower complaint. However, there is no requirement that a whistleblower make an internal report before proceeding to the SEC. This suggests that companies with robust compliance programs have an opportunity to address most of the successful whistleblower complaints before the SEC is ever involved.

In addition to the high level of activity by whistleblowers, the SEC has increased its own enforcement activity. The Annual Report also focused on the SEC’s work to ensure that employers are not using confidentiality or severance agreements to stop individuals from reporting to the SEC. The basis for this enforcement activity is Exchange Act Rule 21F-17(a), which prohibits any person from taking action “to impede an individual from communicating directly with the [SEC] staff about a possible securities law violation,” including threatening to enforce a confidentiality agreement regarding those communications. Relying on Rule 21F-17(a), the SEC took action against a number of public companies that used severance agreements that required departing employees to waive their rights to monetary recovery from the whistleblower program.

The Annual Report also focused on the SEC’s first “stand-alone” retaliation case under Section 21F. In that case, the SEC brought an enforcement action against a company that terminated an employee after the employee raised concerns that the company’s publicly reported financials were distorted. The company paid a $500,000 civil penalty to settle the charges.

The Annual Report highlights the increasing level of whistleblower activity, both among whistleblowers themselves and the SEC’s own enforcement action. We do not expect this level of activity to decrease in the near future. A robust compliance program remains the best way to address and resolve whistleblower complaints. Although President-elect Trump has threatened to repeal the Dodd-Frank Act, it remains to be seen whether he would seek to repeal the entire law or whether he would merely seek to change certain portions of it. In light of the Whistleblower Program’s popularity with the public and the President-elect’s stated intention to focus on corruption on Wall Street, there is a very good chance that it will survive and continue to flourish.