On February 25, the U.S. Securities and Exchange Commission (SEC) announced two separate whistleblower awards totaling more than $1.7 million. In announcing the awards, the SEC highlighted the fact that both whistleblowers complied with a new filing requirement.
The new requirement was approved in September as part of a number of rule changes to the SEC Whistleblower Program. The new rule, Securities and Exchange Act Rule 21F-9(e), requires whistleblowers to file a TCR (a formal whistleblower disclosure) with the SEC within 30 days of first contacting the SEC with the information they are disclosing or within 30 days of first learning of the requirement. Notably, this 30-day window begins when a whistleblower hires an attorney to assist them with a disclosure. If a whistleblower fails to comply with the filing requirement, they are ineligible for a monetary reward. The new rule went into effect on December 7, 2020.
The first of the two new awards is for over $900,000 and was issued to a whistleblower who provided the SEC with significant evidence connected to an ongoing investigation that enabled the SEC to stop an ongoing fraudulent scheme. In the award order, the SEC notes that the whistleblower “submitted a Form TCR within days of learning of the TCR filing requirement.”
The second award is for over $800,000 and was issued to a whistleblower who provided the SEC with important evidence of false and misleading statements made to investors. The whistleblower produced important documents and participated in an interview with SEC staff, which helped lead to the return of millions of dollars to investors. In this award order, the SEC notes that while the whistleblower did not file a TCR within 30 days of first contacting the SEC, they were able to demonstrate that they did file within 30 days of learning of the requirement.
“As these awards show, deserving whistleblowers may receive an award if they comply with the Form TCR filing requirements within 30 days of first obtaining actual or constructive notice of the filing requirement or 30 days from the date the whistleblower hires a lawyer to represent them in connection with the whistleblower’s previous submission of information to the Commission, whichever occurs first, and they otherwise meet the eligibility requirements,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “These whistleblowers earned their awards by providing high quality information that supported a pair of successful Commission enforcement actions.”
In other recent whistleblower awards, the SEC has used its discretionary authority to waive the TCR filing requirement altogether when a whistleblower otherwise qualifies for an award. These decisions have eased some fears among whistleblower advocates that the SEC would use the requirement as a means to avoid paying rewards to deserving whistleblowers.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the SEC original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government. The SEC pays awards through a fund entirely financed through monetary sanctions paid to the SEC by securities law violators. The SEC Whistleblower Program also provides anti-retaliation protections to whistleblowers, including confidentiality. Thus, the SEC does not disclose any information that may reveal a whistleblower’s identity.
Other encouraging developments for whistleblower advocates include the record number of money awarded to whistleblowers by the SEC to start this fiscal year and the selection of Allison Lee as the Acting Chair of the agency. Since the 2021 fiscal year began on October 1, 2020, the SEC has awarded approximately $192 million to 32 whistleblowers – a record for the total dollar amount awarded to whistleblowers in a fiscal year. On January 21, President Biden appointed Allison Lee as the Acting Chair of the SEC. According to whistleblower attorney Siri Nelson of Kohn, Kohn and Colapinto, Acting Chair Lee “has a strong understanding of whistleblower issues and a commitment to ensuring that whistleblowers are protected and rewarded to the fullest extent of the rules.”
SEC Issues Whistleblower Awards Totaling Over $1.7 Million
The first and second Award Orders