On March 31, the U.S. Securities and Exchange Commission (SEC) awarded $12 million to two whistleblowers who voluntarily provided original information about the misconduct of a registered broker-dealer. Their disclosures contributed to the success of an SEC enforcement action against the company.
“Whistleblowers play a critical role in helping the SEC detect and prosecute wrongdoing and in protecting investors and the capital markets,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower. “The information and assistance provided by these two whistleblowers in helping to identify complex wrongdoing demonstrates the importance of the whistleblower program to the SEC’s enforcement efforts.”
The SEC awarded $9 million to one of the whistleblowers and $3 million to the other. According to the award order, the discrepancy in award sizes was due to the fact that “Claimant 1’s information was more important to the investigation because Claimant 1’s information was received by the Commission several years before Claimant 2’s information.”
The SEC further notes that the first whistleblower “prompted the opening of the investigation and provided information on violations that would otherwise have been difficult to detect. This whistleblower identified key witnesses, helped staff understand complex fact patterns and issues, and made persistent efforts to remedy the issues.”
According to the SEC, the second whistleblower “submitted important new information during the course of the investigation and will receive an award of more than $3 million.” However, the SEC limited the size of the second whistleblower’s award in part because of an unreasonable delay in reporting the misconduct.
Through the SEC Whistleblower Program, qualified whistleblowers are entitled to awards of 10-30% of the sanctions collected by the SEC in the case connected to their whistleblowing. To qualify for an award, an individual must voluntarily disclose original information to the SEC that contributes to the success of an enforcement action.
In Fiscal Year 2022, the SEC “awarded approximately $229 million in 103 awards, making FY 2022 the Commission’s second highest year in terms of dollar amounts and number of awards,” according to the Whistleblower Office’s Annual Report to Congress.
The report also states that “Enforcement actions brought using information from meritorious whistleblowers have resulted in orders for more than $6.3 billion in total monetary sanctions, including more than $4.0 billion in disgorgement of ill-gotten gains and interest, of which more than $1.5 billion has been, or is scheduled to be, returned to harmed investors.”
Further Reading:
SEC Awards More Than $12 Million to Two Whistleblowers
