SEC Awards $27 Million to Whistleblower

The SEC awarded $27 million to a whistleblower for providing information that led to a successful enforcement action. This is the sixth-largest award in the history of the SEC’s Whistleblower Program.

According to the SEC, the whistleblower provided extensive assistance to the SEC's investigation by: (i) providing information that led to SEC staff detecting "hidden conduct," some of which took place overseas; (ii) meeting with SEC staff multiple times, in addition to offering relevant documents and investigative leads that were critical to the investigation; and (iii) assisting SEC staff in advancing specific law enforcement interests which led to action being brought regarding a particular form of misconduct.

Since issuing its first whistleblower award in 2012, the SEC has awarded approximately $425 million to 79 individuals. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.

Commentary

Not only is this, by far, the largest whistleblower award of 2020, it also means that the number of whistleblower awards in 2020 (nine) has already exceeded 2019’s total (eight). It is clear that the Whistleblower Program is continuing to be a source of valuable intel for enforcement actions.

The SEC highlighted that the whistleblower “repeatedly and strenuously” raised his/her concerns internally. So much so, in fact, that the Commission increased the whistleblower’s award from the Preliminary Determination. The preliminary determination had reduced the whistleblower's award percentage because of an unreasonable delay in reporting the suspected violations to the SEC. Normally, such a delay means that the whistleblower is allowing misconduct to continue to occur by their failure to act, but in this case the genesis of the delay was that the whistleblower repeatedly attempted to utilize the company’s internal reporting mechanisms to address the potential misconduct. This is notable. The Commission did not penalize the whistleblower for attempting to give their company the opportunity to proactively address potential misconduct. This case should serve as yet another reminder that companies need to take whistleblowers seriously and have adequate internal reporting mechanisms to elevate actionable intel.

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