On March 31, the U.S. Securities and Exchange Commission (SEC) Office of the Whistleblower posted nine new Notices of Covered Actions (NoCAs). Each NoCA relates to a specific SEC enforcement action and signals that individuals may now submit whistleblower award claims for these actions. Whistleblowers have until June 29, 2021 to apply for an award for these newly posted NoCAs by submitting a completed Form WB-APP to the Office of the Whistleblower.
These recent NoCAs cover a wide variety of corporate fraud and misconduct: they also highlight the numerous types of violations that the SEC rewards whistleblowers for exposing. One NoCA relates to a case in which China-based company Luckin Coffee Inc. agreed to pay $180 million to settle charges of accounting fraud. The SEC alleged that Luckin committed fraud by “materially misstating the company’s revenue, expenses, and net operating loss in an effort to falsely appear to achieve rapid growth and increased profitability and to meet the company’s earnings estimates.”
Another NoCA covers the SEC’s $1.8 million settlement with Winslow, Evans & Crocker, Inc., a Massachusetts-based investment adviser and broker-dealer. The SEC charged the company with breaching its fiduciary duties by charging investors unwarranted fees. A third NoCA relates to offering fraud charges filed by the SEC against a number of individuals involved in the cannabis industry. The SEC alleges that the individuals defrauded investors by falsely promising 100% annual returns on investments.
By posting an NoCA, the SEC is not making any determination that the relevant case was aided by a whistleblower tip. Rather, the SEC posts an NoCA for any enforcement action that results in monetary sanctions exceeding $1 million. However, these NoCAs do showcase the wide variety of enforcement actions which whistleblowers could receive rewards in connection with.
Recently, the SEC has signaled some specific areas it will increase its enforcement efforts in and is actively looking for whistleblowers to come forward with information about violations. The SEC is increasing its focus on climate and Environmental, Social, and Governance (ESG) issues and is targeting social media manipulation.
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. According to the SEC, “all payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.”
The SEC Whistleblower Program has had a record-setting start to the 2021 fiscal year – setting records for both total monetary amount awarded and the number of individual whistleblowers awarded. Since the fiscal year began on October 1, 2020 the SEC has issued nearly $200 million to 40 whistleblowers. The previous records ($175 million to 39 individuals) were set in the 2020 fiscal year.
Gary Gensler, President Biden’s nominee to be the next chair of the SEC, recently answered questions from Senator Chuck Grassley about how he would oversee the SEC Whistleblower Program. Gensler pledged his support for the program and stated “[i]f confirmed to lead the SEC, I will build on the work of past Chairs to ensure continued strength in the whistleblower program.”
SEC Office of the Whistleblower: Notice of Covered Actions
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