The Securities and Exchange Commission has received a dramatic increase in the number of whistleblower tips, likely due to the circumstances created by the coronavirus pandemic, including an increase in layoff and furloughs, and many employees working from home.
According to Steven Peikin, co-director of the division of enforcement of the Securities and Exchange Commission, the agency has received more than 4,000 tips and complaints just since mid-March, compared to 5,212 that it fielded in all of fiscal 2019. “Many are COVID-19 related, but many in other traditional areas,” Peikin said in a May 12 speech.
The unusual working conditions and strain on companies brought on by COVID-19 might have created more opportunities for corruption, with employees working remotely, as well as added pressure to meet targets. Furloughs and cost-cutting might also open areas for potential abuse and anger employees, say fraud experts.
“This caused companies to do things—whether they worry about survival or failures—that often lead to people doing wrong,” Stuart Meissner, an attorney for Meissner associates in New York, told the Wall Street Journal, in a recent article. Meissner has filed five complaints to the SEC in recent weeks on behalf of his whistleblower clients.
Disgruntled Employees?
With employees working remotely, potential whistleblowers may also feel more secure in filing complaints without direct face-to-face contact with co-workers and bosses and feel more comfortable to act. Employees who have been furloughed or laid-off may have an additional incentive to file complaints, possibly contributing to the increase in whistleblower filings.
“They don’t have to go see their bosses, and they may feel a bit more emboldened to report,” Christopher Connors, a managing attorney at the Connors Law Group in Chicago told the Wall Street Journal.
Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
Increase Follows Lull in Filings
The number of tips since mid-March rose 35 percent from the same period last year, according to Peikin. Before COVID-19 the number of whistleblower tips had been leveling off.
In the fiscal year 2019, the SEC received 5,212 tips, slightly below the 5,282 tips received during the fiscal year 2018, according to the SEC’s annual report to Congress. 2019 was the first dip in the total number of tips in recent years, as the number of tips has increased by approximately 76 percent from 2012 to 2018.
The SEC has awarded a record-setting $64 million dollars to whistleblowers since the beginning of the fiscal year 2020 in October, greater than the total amount awarded in any full fiscal year excluding 2018. The total amount of whistleblower awards issued in 2019 was approximately $60 million dollars. The size of the awards and its coverage may have also increased incentives for whistleblowers to come forward. 
Stephanie Liu is assistant editor at Internal Audit 360°