SEC Awards $10 Million to Whistleblower
The SEC awarded $10 million to a whistleblower for providing original information that led to a successful enforcement action.
According to the SEC Order, the whistleblower (i) led the SEC directly to almost every factual finding against the violator, (ii) helped to decipher communications and distill complex issues, saving the SEC time and resources, and (iii) raised concerns internally before reporting to the SEC.
The SEC has awarded approximately $687 million to 109 individuals since issuing its first award in 2012. Whistleblower awards can range from 10-30% of the money collected when the monetary sanctions exceed $1 million.
Commentary
This award, coupled with last week's 14 million whistleblower award - the largest in SEC history - continue to demonstrate the importance of whistleblowers to many SEC actions. In this instance, the whistleblower reported the conduct internally but "after determining the Company would not remedy the problem" reported his concerns to the Commission. This means that the company had ample opportunity to 1) investigate the allegations and 2) make a decision about whether to self-report to the SEC or take other action. It is unclear whether it was simple indifference by the company, or a failure in its compliance structure, that prevented it from addressing these claims before they were brought to the SEC. Either way, it is yet another wake-up call for companies to take whistleblower claims seriously, implement proper methods for reporting misconduct internally, and design mechanisms for investigating and remediating problematic behavior.