The SEC Whistleblower Program: How It Works, What You Can Earn, and What Qualifies

In August 2023, the SEC paid a single whistleblower $279 million. The largest award in the program’s history. The total paid to whistleblowers since the program launched in 2012 has crossed $1.3 billion. More than 300 individuals have received awards. The enforcement actions those tips triggered have produced more than $6 billion in sanctions against wrongdoers.

These aren’t edge cases. The SEC whistleblower program is one of the most productive fraud detection tools in American financial regulation, and it operates almost entirely through people who knew something and decided to report it.

This is a guide to how that program works.

The Legal Foundation: Dodd-Frank Section 922

The program was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed by President Obama in July 2010. Section 922 added a new provision to the Securities Exchange Act of 1934 establishing:

• A mandatory award to whistleblowers of 10-30% of monetary sanctions collected in cases involving $1 million or more in sanctions
• Anti-retaliation protections for employees who report to the SEC
• Confidentiality protections for the whistleblower’s identity
• A dedicated fund, the Securities and Exchange Commission Investor Protection Fund, to pay awards, funded by civil penalties and not from money returned to victims

The 2010 law replaced a much weaker earlier program under the Sarbanes-Oxley Act, which gave the SEC discretion about whether to pay anything at all. The mandatory floor (10%) changed the calculus for potential whistleblowers significantly.

What Qualifies as a Tip

The SEC accepts tips about potential violations of federal securities laws. The most common categories that lead to awards:

Investment fraud and Ponzi schemes. When someone inside an operation, a bookkeeper, a compliance officer, a fund administrator, sees evidence that returns are being fabricated or investor funds are being misused, that information is exactly what the program was designed to capture. Dennis Herula’s $40 million fraud and cases like the Oppenheimer municipal bond violations both involved patterns that insiders were positioned to observe and document.

Insider trading. Trading on material non-public information is illegal, and the people most likely to observe it are colleagues, administrative staff, and IT personnel who see patterns in trading that track non-public events. The SEC’s Market Abuse Unit runs sophisticated surveillance that catches some insider trading patterns automatically, but tips from people with direct knowledge accelerate investigations significantly.

Accounting fraud. Falsification of financial statements, improper revenue recognition, concealment of liabilities. Auditors and accountants working at companies or their external audit firms sometimes see discrepancies that management won’t explain. The SEC wants to hear from them.

Offering fraud. False or misleading statements in securities offerings, including private placements that aren’t registered with the SEC.

FCPA violations. The Foreign Corrupt Practices Act prohibits American companies from bribing foreign officials. Employees who witness improper payments made through subsidiaries, third-party agents, or joint ventures can report those violations to the SEC.

Market manipulation. Wash trading, spoofing, coordinated activity to create misleading price or volume data.

The “Original Information” Requirement

To qualify for an award, you need to provide “original information”, defined as information derived from your independent knowledge or independent analysis that is not already known to the SEC.

“Independent knowledge” means factual information not derived from public sources, something you observed directly, documents you reviewed in your work, conversations you were part of.

“Independent analysis” means your own evaluation of publicly available information that reveals something that isn’t obvious. Not just summarizing news reports, but connecting publicly available data in a way that identifies a pattern the SEC wouldn’t otherwise see.

A few things that don’t qualify as original information:

• Information learned exclusively from an attorney-client communication (though there are exceptions where the attorney also observes fraud)
• Information that was obtained by violating attorney-client privilege
• Tips about conduct you learned about in a way that’s subject to confidentiality requirements (accountants and auditors face specific rules here)
• Allegations that are already the subject of a current SEC investigation

The last point is important. If the SEC is already investigating the company or conduct you’re tipping about, your tip can still contribute to the case, but the timing matters for calculating the award.

How the Award Amount Is Determined

The 10-30% range isn’t arbitrary. The SEC evaluates each case using factors that can push the percentage up or down within that range.

Factors that increase an award:

• The significance of the information you provided to the successful outcome
• The assistance you provided to investigators during the case
• The extent of the law enforcement interest served (larger, more complex cases get more weight)
• Whether you reported to your employer’s internal compliance program first before reporting to the SEC

Factors that decrease an award:

• Delay in reporting that impeded the investigation or allowed harm to continue
• Culpability for the underlying violation (if you participated in the fraud, your award can be reduced, though you can still receive an award if your culpability is limited)
• Interference with the company’s internal compliance system

The SEC publishes an annual report on the whistleblower program with detailed statistics on tips received, cases resulting in awards, and award amounts. The 2022 report showed 12,322 tips received, a record, with the most tips coming from the United States, followed by the United Kingdom, Australia, and Canada.

Submitting a Tip: The TCR Process

Tips are submitted through the SEC’s Tips, Complaints, and Referrals system, accessible at sec.gov/tcr. The form asks for:

• The nature of the alleged violation
• Relevant individuals and entities
• Approximate date the conduct occurred or is occurring
• Names and contact information for potential witnesses
• Whether there are any documents supporting the tip

You don’t need a lawyer to submit a tip, but it’s worth considering one. An attorney can submit on your behalf without disclosing your identity (the SEC maintains confidentiality of the attorney’s client), can help you evaluate whether your information qualifies, and can advise you on how to submit in a way that maximizes your potential award.

If you want to submit anonymously, you can, but to eventually collect an award, you’ll need to reveal your identity through the TCR process. Anonymous submissions are tracked internally and can be linked to a named individual when you later come forward. If you submit anonymously and a large case results, you have 90 days after the SEC notifies you of a potential award to provide your identity.

The Timeline

SEC whistleblower cases move slowly. From initial tip to final award often takes three to five years or longer. The investigation phase alone can stretch years. Criminal referrals to the Justice Department, which happen in many significant cases, add their own timeline. And the SEC processes award claims after the enforcement action is final.

Some high-profile cases have taken even longer. If you’re relying on a whistleblower award for income in the near term, that’s not a reliable plan. But for people who simply want to report what they’ve observed, and would welcome a significant payment if and when it materializes, the program works.

The SEC tracks tips carefully and has paid awards in cases where the initial tip was filed years earlier. There’s no statute of limitations on submitting, and tips that sit for a while before triggering an investigation can still generate awards.

Retaliation Protections

Dodd-Frank Section 922 prohibits employers from retaliating against employees who:

• Provide information to the SEC
• Assist in an SEC investigation or proceeding
• Refuse to participate in conduct that would violate securities laws

“Retaliation” includes termination, suspension, demotion, harassment, blacklisting, or any other adverse employment action. The law covers employees of companies regulated by the SEC and employees of companies that have SEC-regulated subsidiaries.

If you experience retaliation, you have two options:

• File a complaint with OSHA within 180 days of the retaliatory action
• File a lawsuit directly in federal court within three years of the retaliation

If you win, you’re entitled to reinstatement, back pay with interest, and attorney fees. The law also prohibits confidentiality agreements that would prevent you from reporting to the SEC. An employer can’t contract around this protection.

There are practical limits on these protections worth acknowledging. Retaliation is difficult to prove, and even legitimate whistleblowers sometimes find themselves in years of litigation before resolution. If you’re employed in a senior position and reporting your own employer, consult an attorney before you report, understanding your practical situation is different from understanding the legal rules.

How the Investor Protection Fund Works

The fund that pays whistleblower awards was established specifically for this purpose and operates separately from the SEC’s general enforcement collections and separate from victim recovery accounts.

When the SEC collects sanctions in an enforcement action, money flows first into the general fund. When a whistleblower award is owed, it’s paid from the Investor Protection Fund. This means whistleblower awards don’t reduce the amount available for victim recovery. The two pools don’t compete.

The Investor Protection Fund is also used to fund the operations of the SEC Office of Inspector General and the Investor Advocate. It’s self-replenishing from enforcement actions.

FINRA vs. SEC: Different Programs

A note on a common confusion: FINRA, the Financial Industry Regulatory Authority, is not the same as the SEC and has its own reporting mechanisms. FINRA regulates broker-dealers and their representatives and handles investor complaints about brokers specifically.

The SEC handles the full range of securities law violations. In cases involving a broker-dealer who has committed fraud, you can report to both, and should, because the investigations are separate. FINRA doesn’t have a comparable whistleblower award program, but reporting to FINRA can trigger examinations that feed into SEC referrals.

Cases on ConFraud that involved SEC action against broker-dealers, like the Oppenheimer case, often run through both agencies simultaneously. The sequence of enforcement actions in those cases can be confusing to follow, but both agencies are relevant.

Landmark Awards

The SEC publishes summaries of significant awards (without identifying the whistleblowers, per confidentiality requirements). Some notable ones:

$279 million (2023): The largest single award in program history. The SEC didn’t disclose the nature of the case, but the size of the award suggests it related to a very large enforcement action.

$114 million (2020): Combined awards to two whistleblowers who reported an “ongoing investment scheme.”

$50 million (2020): A single award in an enforcement action that the SEC described as an “insider trading tip.”

$39 million (2018): For a tip in an undisclosed case.

The published summaries are intentionally vague to protect confidentiality, but the award sizes give you a sense of the scale of the underlying cases.

Award Denials

The SEC can deny an award if the information provided doesn’t meet the original information requirement, if the tipster unreasonably delayed reporting, if the information was already known, or if the tipster interfered with the investigation.

The SEC publishes all award denial orders (also without identifying the claimant). The most common denial reason is that the information wasn’t “original”, either it was already known to the SEC or it was derived from public sources.

There’s also a requirement that you report through the SEC’s formal process to receive an award. If you reported through OSHA, or through the company’s internal hotline, or through a congressional contact, or through the news media, without also filing a formal TCR, you may not qualify. The SEC has interpreted the program’s requirements strictly.

Resources

• SEC Whistleblower Office: sec.gov/whistleblower
• TCR submission: sec.gov/tcr
• FINRA BrokerCheck: finra.org/brokercheck
• FBI tips: tips.fbi.gov
• FTC fraud reporting: reportfraud.ftc.gov

If you’re considering reporting, the SEC’s Whistleblower Office publishes extensive guidance and will answer procedural questions without requiring you to identify yourself. An attorney specializing in securities whistleblower cases can give you a realistic assessment of whether your information is likely to qualify and what the process looks like from the inside.