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2017 Begins Where 2016 Left Off: The Sec Awards $5.5 Million To A Whistleblower

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  • Posted on: Jan 12 2017

On January 6, 2017, the SEC announced that it awarded $5.5 million to a whistleblower who came forward with information that led to a successful SEC enforcement action.  The whistleblower is the 38th relator to receive an award under the SEC whistleblower program. In total, since 2011, the SEC has paid approximately $142 million to whistleblowers who provided information resulting in the collection of monetary sanctions against violators of the securities laws. To date, the SEC has recovered $904 million from enforcement actions resulting from whistleblower tips.

According to the Order Determining Whistleblower Claim, the relator came forward “while still employed with the company … and … provided critical information that helped end an on-going fraud that preyed predominantly on a more vulnerable investor community.” The Commission agreed to make the award notwithstanding the fact that the relator failed to comply with Rule 21F-9(d), which requires tips to be in writing “if the information was first submitted to the Commission during the interim period between the enactment of the whistleblower program—i.e., July 21, 2010, when the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) was signed into law—and the effective date of the Commission’s whistleblower rules.”  The Commission found that, among other things, the relator “was already actively working with [Commission staff] before the enactment of the Dodd-Frank Act, and … it would have been counter-productive and unreasonable to require … the [relator to] revert to providing information to the Commission staff in writing.”

The SEC declined to identify the whistleblower or the wrongdoers. By law, the SEC protects the confidentiality of whistleblowers and does not release information that might directly or indirectly reveal the whistleblower’s identity.

Commenting on the award, Jane Norberg, Chief of the SEC’s Office of the Whistleblower, stated: “Whistleblowers play a key role in bringing wrongdoing to the SEC’s attention, and this whistleblower helped prevent further harm to a vulnerable investor community by boldly stepping forward while still employed at the company.”

Under the program, whistleblowers are eligible for an award if they voluntarily provide the SEC with original information that leads to a successful enforcement action that exceeds $1 million. The award can range from 10 percent to 30 percent of the money collected. All payments come from an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money is taken or withheld from harmed investors to pay whistleblower awards.

Takaway:

This Blog has repeatedly noted that the SEC’s whistleblower program is, by all accounts, a success.  In Fiscal Year 2016 (ended September 30, 2016), the SEC awarded more than $57 million to whistleblowers under the program. As the SEC rings in the new year with this award, the SEC is clearly signaling that it wants whistleblowers to continue to come forward with original information regarding alleged violations of securities laws.

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