On September 23, 2020, the US Securities and Exchange Commission (SEC) adopted a Final Rule, effective 30 days after publication in the Federal Register, regarding various aspects of its whistleblower program (the Program). Two points are particularly noteworthy. First, the SEC “clarified” that it has the authority and discretion to adjust large awards. Second, there is now a presumption that the majority of awards (awards under US$5 million) will be paid at the maximum-allowed percentage of the relevant penalty.

The whistleblower program

Since the Program’s inception in 2011, the SEC has paid out over US$520 million in awards to whistleblowers whose tips have helped the SEC obtain over US$2.5 billion in financial remedies. Broadly speaking, the Program is available to those who voluntarily provide original information that leads to a successful enforcement action with monetary sanctions over US$1 million. Whistleblowers who meet these criteria are potentially eligible for awards of 10-to 30-percent of collected sanctions, depending on seven statutorily defined “Award Factors.”

The SEC has discretion to adjust large awards

In this Final Rule, the SEC rejected a proposal to develop a formal mechanism for reviewing and adjusting large awards (greater than US$30 million), and instead asserted that it already has the authority to, at its discretion, consider both the percentage and dollar amount of an award when applying the seven Award Factors. Some commenters have argued that the Program’s statutory language only allows the SEC to consider the percentage of an award, not its dollar amount. They worry that being able to reduce large awards opens the door for disparate treatment in large cases. For example, the SEC may now lower the percentage of an award in a US$500 million penalty case but not in a US$5 million penalty case, even if all Award Factors are equal, simply because the Commissioners feel that the dollar amount of the award in the larger case is too high.

Some commenters also expressed concern that this rule will operate as a cap on large awards, functionally limiting recovery to 10-percent and chilling participation in the whistleblower program. Indeed, two Commissioners dissented on this point, arguing that vesting such discretion within the Commission would result in a lack of transparency and accountability. It is worth noting, though, that this rule change would not affect the vast majority of whistleblower awards; to date, the SEC has only paid out six awards over US$30 million.

Awards under US$5 million

The Final Rule also institutes a presumption that a whistleblower will receive the statutory maximum award of 30-percent of collected monetary sanctions, so long as the total award amounts to US$5 million or less and there are no negative Award Factors present (which are defined in the statute). The SEC implemented this rule in an effort to streamline and make the award determination process more efficient, as almost 75-percent of all award claims fall into this category. As a result, this change is also likely to have the greatest day-to-day effect on the whistleblower program, as it creates a greater incentive for the majority of would-be whistleblowers to come forward.


The SEC’s self-professed authority and discretion to adjust large whistleblower awards may spawn future litigation, but its practical impact is probably limited as such large awards are few and far between. To the extent the Final Rule may impact a potential whistleblower’s decision to report information to the SEC, the presumption of a 30-percent award in most whistleblower cases is more likely to increase Program participation.