SEC Awards $450,000 to Whistleblower
The SEC awarded $450,000 to a whistleblower for providing information that led to a successful enforcement action.
The SEC reported that the whistleblower provided extensive assistance in the SEC's investigation by (i) offering significant information that refocused the investigation on certain securities laws violations and (ii) meeting with SEC staff early in the investigation process. As a result of the internal reporting, the SEC also found that the whistleblower "suffered unique hardships."
The SEC noted that, in this case, the whistleblower had compliance-related responsibilities, reported the potential securities law violations to his firm's internal audit review committee, and then, after no action was taken, reported the potential violations to the SEC.
Since issuing its first whistleblower award in 2012, the SEC has awarded over $396 million to 77 individuals. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
Commentary
This is only the third time in eight years that the SEC has given a whistleblower award to an individual who had compliance or internal audit responsibilities. Normally, information learned by employees in compliance-related roles does not satisfy the original information requirement. However, an exception exists that allows compliance personnel to report the information to the SEC if they first report it to the company's audit committee or chief legal officer (or the equivalent), and then wait 120 days before reporting it to the SEC.
This award serves as a strong reminder to companies to ensure that internal reporting mechanisms are in place and information is directed via the proper channels so the company can decide whether to possibly self-disclose to regulators before it is then reported by the same whistleblower. Additionally, the whistleblower in this case suffered some form of retaliation, which should be a key focus of any company's whistleblower policies as that alone can be the basis of an enforcement action.