Better Markets, a nonprofit that advocates for safer and more regulated financial markets, released a special report summarizing the results of the SEC’s 2024 whistleblower program. It says that “by any measure” the program has been “a resounding success.”

But while it applauds the SEC for its efforts, it also addresses certain areas where the agency could be doing better.

Author Benjamin Schiffrin argues that the continued support of the whistleblower program is critical to limit fraud and other misbehavior, an issue made even more salient by the threat of looming budget cuts from the Department of Government Efficiency (DOGE), led by SEC critic Elon Musk.

Schiffrin notes that the SEC is already underfunded, and that without a robust whistleblower program at the agency’s disposal, it would be impossible for it to monitor the entire securities market, which consists of tens of thousands of registered entities.

The SEC’s successful whistleblower program has led to a parallel adoption by the DOJ, and a proposed adoption by the Consumer Finance Protection Bureau (CFPB), as well as the UK’s Financial Conduct Authority (FCA).

However, adoption by the CFPB will likely be halted due to that agency’s impending reduction.

2024 enforcement breakdown

• The SEC awarded over $255m to 47 whistleblowers, making 2024’s payouts the third-highest in the program’s history.
• That included a single $98m award distributed between two recipients, of which $82m was granted to the one who initiated the tip.
• Those awards were linked to 28 successful enforcement actions, recovering over $6 billion in monetary relief for harmed consumers.
• There was an uptick in enforcement actions against firms for preemptively attempting to shut down whistleblowing channels. An action against JP Morgan for impeding clients from disclosing misconduct to the SEC netted the agency $18m, the largest whistleblower protection penalty yet.

You can read a full breakdown of the 2024 whistleblower program results in the SEC’s annual report to Congress here.

Need for transparency

Schiffrin notes a dilemma between keeping whistleblower identities secret and facilitating public understanding of the assistance they provided.

While it states that the whistleblower program would be impossible without strong privacy guarantees, The SEC’s heavily redacted whistleblower reports often lead to readers scratching their heads as to what whistleblowers actually did to earn their rewards.

That opens the door to criticism that the SEC is overpaying. This sentiment has been previously echoed by SEC Commissioners Mark Uyeda and Hester Peirce, who argued that increased transparency would serve as a necessary check on a web of incentives that might produce overvalued awards.

Need for communication

The report also recommends opening communication channels with whistleblowers, as sometimes prospective whistleblowers can be met with agency silence, with their case hanging “in limbo” for years.

It further recommended that the SEC follows up when a tip leads to an enforcement action. This is important because making an application to receive a reward must commence 90 days after an enforcement action is publicized, and some whistleblowers might not be aware that their tip led anywhere.

Cracking down on tip abuse

The report further recommends discipline for abuse of the system and filing frivolous claims. It notes that two individuals submitted 14,000 tips to the SEC last year, almost half of the total volume. It suggests the SEC could do more to limit these fraudulent claims, such as implement more bans on those who abuse the system.

Finally, the report touches on what it considers spurious criticism:  the “pernicious” market that has sprung up for attorneys representing whistleblowers, “many of whom are SEC alumni,” that end up ratcheting up the rewards compared to unrepresented whistleblowers.