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SEC Announces Second Largest Whistleblower Award

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  • Posted on: Jun 27 2016

What are the requirements to obtain a monetary award under the SEC Whistleblower Program?

In June, the Securities and Exchange Commission (“SEC”) announced its second largest whistleblower award of more than $17 million to a former financial services employee (the largest award of $30 million was awarded in 2014). This bounty comes after the SEC issued two awards in May. The securities watchdog continues to see a significant uptick in whistleblower claims.

“The information and assistance provided by this whistleblower enabled our enforcement staff to conserve time and resources and gather strong evidence supporting our case,” said Andrew Ceresney, Director of the Division of Enforcement.

What is the SEC Whistleblower Program?

The Securities Exchange Commission’s Whistleblower Program was created in 2010 under the Dodd-Frank Act to encourage individuals to report violations of the federal securities laws. To be eligible, a person must voluntarily provide the SEC with original information about a possible violation that has occurred, is ongoing or is about to occur. The tip must lead to a successful enforcement action by the SEC that results in monetary sanctions exceeding $1 million, of which the whistleblower will be awarded between 10 and 30 percent.

$17 Million Award

In order to protect the whistleblower, the SEC did not identify the relator and the agency did not identify the subject of this action. However, the case reportedly involved wrongdoing at a large financial services organization. The $17 million award indicates that the enforcement action was in the range of $56 to $170 million. The order concerning the award stated that the whistleblower provided the SEC with original, detailed and new information.

The SEC believes the whistleblower program has been effective since it was launched in 2011. In fact, more than $84 million has been awarded to 32 whistleblowers during this time, of which $26 million was awarded to five whistleblowers in the last month alone. The SEC attributes this recent uptick  in awards to growing public awareness of the program.

“We hope these substantial awards encourage other individuals with knowledge of potential federal securities law violations to make the right choice to come forward and report the wrongdoing to the SEC,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower.

In the end, this case illustrates how crucial it is for financial firms to establish and implement compliance programs to prevent, detect and respond to potential securities violations. If you have vital information that you believe makes you eligible for a whistleblower award, or need assistance with an SEC investigation, you should engage the services of an attorney with experience in securities law.

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