On May 17, the U.S. Securities and Exchange Commission announced whistleblower awards totaling more than $31 million issued to four individuals. The awards stem from two separate enforcement actions.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the SEC with original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government.
In connection with the first of the two enforcement actions, the SEC jointly awarded $27 million to two whistleblowers. The whistleblowers provided the SEC with information and assistance that aided in an already existing investigation. According to the SEC, the whistleblowers’ “information and cooperation helped the Commission bring the enforcement action, which resulted in the return of millions of dollars to harmed investors.”
“While [the whistleblowers] provided new but limited information years after the investigation had opened, [the whistleblowers] also provided additional assistance and cooperation to the Enforcement staff, by, for example, meeting with them in-person on three separate days,” the award order states.
One of the awarded whistleblowers was represented by SEC whistleblower firm Kohn, Kohn & Colapinto. “We congratulate our client for his or her courage, perseverance, and determination in holding fraudsters accountable,” said Stephen M. Kohn, the anonymous whistleblower’s attorney.
“These awards further demonstrate that the Dodd-Frank Act (DFA) whistleblower laws covering securities frauds and foreign bribery deter crime, put fraudsters in jail, help recover billions for investors, and protect the integrity of the markets,” Kohn added. “The confidentiality and anonymity provisions of the DFA make it possible for high-level executives and others to report fraud without risking their careers and livelihoods.”
In connection with the second enforcement action, the SEC awarded one whistleblower approximately $3.75 million and another whistleblower approximately $750,000. Unlike the whistleblowers who were awarded jointly, these two whistleblowers did not make their disclosures in tandem. The SEC’s press release explains: “While both whistleblowers independently provided information that assisted SEC staff in an ongoing investigation, the whistleblower who received the larger award provided information and assistance that was more important to the resolution of the overall case.”
According to the award order, the SEC initially denied the award application of the individual who was eventually awarded $3.75 million. The original denial of the award application was made on the grounds that the whistleblower did not “voluntarily” provide the information to the SEC, as mandated by the DFA. The SEC states that, at the time of the Preliminary Decision, the record showed that SEC Enforcement staff had requested information from the individual prior to the whistleblower disclosure. The whistleblower contested the SEC’s Preliminary Decision, however, and provided new evidence proving that they did indeed voluntarily provide the information prior to the SEC’s request.
“Whistleblowers play a critical role in an investigation, whether at the outset or during the course of an investigation,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower. “Today’s awards demonstrate that whistleblowers with specific, credible information who significantly contribute to the success of an existing investigation may be eligible for an award.”
Pasquinelli took over as Acting Chief following the departure of longtime Chief Jane Norberg in April. That same month, Gary Gensler was confirmed as the new Chair of the SEC. Prior to his confirmation, Gensler pledged his support for the SEC Whistleblower Program.
Gensler and Pasquinelli have stepped into their leadership roles in the midst of a record fiscal year for the whistleblower program. Since the fiscal year began on October 1, 2020, the SEC has awarded approximately $311 million to 52 individuals – both fiscal year records.
Overall, the SEC has awarded approximately $873 million to 162 individuals since issuing its first award in 2012. In addition to monetary awards, the SEC Whistleblower Program offers anti-retaliation protections to whistleblowers. These include confidentiality, and thus, the SEC does not disclose any identifying information about award recipients.