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The Sec Awards $3.5 Million To A Whistleblower

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  • Posted on: Dec 6 2016

The Securities and Exchange Commission (“SEC”) will tell anyone who listens that reporting violations of the securities laws is an important part of its anti-fraud/anti-corruption whistleblower program.  This is especially so when the violations are difficult to detect.  For this reason, among others, the SEC has encouraged company insiders with knowledge of wrongdoing to come forward with information about the violations. The carrot used to encourage such whistleblowing is the reward mechanism provided under the SEC program.

Over the year, this Blog has written about awards given to whistleblowers under the SEC and CFTC whistleblower programs – the anti-fraud/anti-corruption programs created under the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). See here, here, here, and here. Yesterday, the SEC issued another award to a whistleblower.

On December 5, 2016, the SEC announced that it awarded $3.5 million to a whistleblower who came forward with information that led to a successful SEC enforcement action.  The whistleblower is the 36th relator to receive an award under the SEC whistleblower program. In total, since 2011, the SEC has paid approximately $135 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 $874 million from enforcement actions resulting from whistleblower tips.

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 do a tremendous service to the investing public and we will continue to reward those who come forward with valuable tips that help us bring successful cases against those who violate the securities laws.”

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:

The SEC’s whistleblower program is, by all accounts, a success. Announcements like this one serve as important reminders to potential whistleblowers that they will be rewarded if they come forward and provide information that results in a successful enforcement action. This Blog hopes that whistleblowers will heed these reminders, especially since the program is under the microscope of the new administration (discussed by this Blog here).

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