Enforcement actions over whistleblower protection rule breaches in the US double in FY 2024: report

Actions have also focused on off-channel communications

Enforcement actions over whistleblower protection rule breaches in the US double in FY 2024: report

In FY 2024, the US Securities and Exchange Commission has brought more than twice the number of enforcement actions over breaches of the whistleblower protection rule compared to the previous financial year.

According to the SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2024 Update report, just three actions were brought in FY 2023; this financial year, the number went up to seven.

“The SEC’s FY 2024 enforcement actions reveal a focus on trends like off-channel communications and whistleblower protection,” said Stephen Choi, report coauthor and the Bernard Petrie professor of law and business at New York University School of Law and co-director of the NYU Pollack Center for Law & Business, in a statement published by Cornerstone Research.

Twenty two actions were brought over companies using off-channel communications in a sweep of recordkeeping failures. This drove an uptick in actions involving Broker Dealer allegations; these actions comprised 29 percent of all FY 2024 actions, up from 19 percent in FY 2023.

Overall, 80 enforcement actions were brought against public companies and subsidiaries in FY 2024. This marked a drop of 12 percent compared to the previous financial year, although it was still an increase of almost 5 percent in comparison to the nine-year historical average.

“We also saw a focus on cooperation and non-monetary settlements, as the agency prioritized efficiency and cooperation in its enforcement approach,” Choi added.

Total monetary settlements ticked up to US$1.5 billion in FY 2024 compared to US$1.3 billion in FY 2023; nonetheless, this is still lower than the average of US$1.8 billion obtained over the FY 2015-FY 2023 period. The average monetary settlement for defendants hit US$19.8 million in FY 2024 – an increase compared to the US$15 million average in FY 2023 but still down from the average of US$24.7 million reached during the FY 2015-FY 2023 period.

The SEC also noted cooperation in 75 percent of public company and subsidiary defendants in settled actions, with 34 recording admissions of guilt. Of this 75 percent, 5 percent cooperated but did not pay a monetary settlement.

“SEC officials have emphasized that admissions of guilt are a powerful accountability measure. Former Director of the SEC’s Division of Enforcement Gurbir Grewal indicated that the SEC brought more cases involving admissions of guilt than in prior years to enhance accountability. Our report’s findings underscore these comments,” said Sara Gilley, report coauthor and co-head of the securities litigation practice at Cornerstone Research.

The SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2024 Update report was released jointly by Cornerstone Research and the NYU Pollack Center for Law & Business. The report findings are based on data from the Securities Enforcement Empirical Database.