In an article published in ThinkAdvisor, Phillips & Cohen attorneys Erika Kelton and Sean McKessy provided context for the Securities and Exchange Commission’s Whistleblower Office’s 2018 Annual Report to Congress. According to the report, the SEC received more reports from whistleblowers in the 2018 fiscal year than it had in any prior year. Additionally, the SEC paid whistleblowers record sums, including awarding the largest sum to date – $83 million paid out to three whistleblowers.
“The increasing number of whistleblowers and awards shows that the SEC whistleblower program continues to be very strong,” said Sean McKessy, the former head of the whistleblower office who’s now a partner at Phillips & Cohen, in a statement. “Many, if not most, of the SEC’s investigations in recent years have been launched as a result of detailed information provided by whistleblowers.”
Erika Kelton, a Phillips & Cohen partner, added that “whistleblowers should be encouraged by the SEC’s willingness to pay sizable awards when their information and assistance help stop major securities violations and result in large monetary sanctions.” Kelton has secured SEC whistleblower awards for three clients.
Kelton and McKessy attribute this increase in part to the Supreme Court decisions in Digital Realty Trust Inc v. Somers:
Kelton noted that the Supreme Court decision earlier this year in the Digital Realty case “created a race to the SEC for whistleblowers, causing the number of whistleblowers to jump.”
“In the Digital Realty case, the Supreme Court rejected the SEC’s interpretation of the law and ruled that the law protects only those employees who are fired or suffer job retaliation after they file whistleblower claims with the SEC,” [McKessy] said.
The ruling “has compelled employees who suspect SEC violations by their companies to go to the SEC first before expressing any concerns to their supervisors or internal compliance systems, so as to protect themselves,” Kelton added.