SEC Whistleblower Awards Drop as Regulators Tighten Review of Fraud Claims

Financial misconduct can take a heavy toll on innocent parties. It also can be very hard to detect. Not surprisingly, the Securities and Exchange Commission has a whistleblower program that offers honest individuals the opportunity to receive payment if they provide information that triggers a successful enforcement case. While SEC whistleblowers have received millions of dollars, recent activity indicates that reviewers are rejecting more claims than in previous years. 

Observers say that the record rate of denials is a sign of stricter rule enforcement and closer scrutiny of misconduct reports. A Bloomberg Law article says that the SEC rejected awards in 31 consecutive orders between April 21 and July 15, covering at least 55 tipsters. That represents the longest timeframe without a whistleblower payment since Dodd-Frank created the program in 2010. The Commission also issued two orders sharply rebuking a prior award to activist investor Carson Block, underscoring the agency’s narrow view of eligibility terms.

According to data reviewed by Bloomberg, approval rates have fallen to about 13 percent of claims, down from roughly 37 percent through the end of July last year. This has translated to a drop of about $40 million in the aggregate award amount versus 2024.  

While the SEC’s orders are highly fact-specific, it seems more important than ever for whistleblowers to consult with counsel in order to avoid having their claim denied for failure to meet program requirements. Tips must be original and voluntary. Reports cannot be based on generally available information, but have to provide independent knowledge or analysis. To collect an award, your tip must lead to a successful enforcement action with more than $1 million in sanctions. 

A skillful attorney can help you avoid problems that frequently result in denials, such as: 

  • Late submissions

  • Failure to use required forms or to follow procedural rules

  • Absence of a significant contribution to the resulting enforcement action

  • Lack of otherwise unavailable information

  • Evidence of wrongdoing or involuntariness on the whistleblower’s part

Even in the challenging current environment for SEC whistleblowers, Kardell Law Group has the experience to maximize the likelihood of a successful resolution. We understand the complex rules associated with these cases and can advise you effectively at every step of the claim process.