On January 6, the U.S. Securities and Exchange Commission (SEC) issued a $13 million whistleblower award. The award, the first issued in 2022, was granted to a whistleblower who provided the agency with original information about an ongoing fraud, allowing the SEC to obtain emergency relief to minimize investor losses.
According to the SEC, “the whistleblower promptly alerted SEC staff to an ongoing fraud and provided extensive assistance to SEC staff by meeting in person and helping the staff understand the mechanics of the fraudulent scheme.”
“Today’s whistleblower provided significant information that alerted SEC staff to ongoing fraud, which had caused and was likely to continue to cause substantial injury to the financial interests of investors,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower. “Whistleblowers who provide information swiftly can not only save SEC staff’s time and resources, but also help minimize potential investor losses.”
Through the SEC Whistleblower Program, qualified whistleblowers are entitled to a monetary award of 10-30% of funds recovered by the government when the sanctions that the government recovers exceed $1 million. The SEC considers a number of factors in determining the exact percentage of a whistleblower award. These include the significance of the whistleblower’s information, the degree of additional assistance provided by the whistleblower, the law enforcement interest in the whistleblower’s information, the timeliness with which the whistleblower made their disclosure, and whether the whistleblower was culpable in the misconduct.
In the award order, the SEC outlined the three factors it considered in the award determination: “(1) Claimant expeditiously provided significant information that alerted Commission staff to an ongoing fraud, prompting the opening of the investigation; (2) Claimant provided extensive assistance to Commission staff by meeting in person and helping the staff understand the mechanics of the fraudulent scheme and preparing a declaration to help the Commission obtain emergency relief; and (3) the law enforcement interest is very high, as Claimant’s information and assistance helped the Commission shut down an ongoing fraud and return tens of millions of dollars to harmed investors.”
The 2021 fiscal year was a record year for the SEC Whistleblower Program. The SEC awarded approximately $564 million to 108 individuals – both of which are fiscal year records. The SEC also set the record for its largest single whistleblower award with a $114 million award issued in October 2020. Overall, since issuing its first award in 2012, the SEC has awarded approximately $1.2 billion to 238 individuals.