SEC Announces Rare Reward to Internal Compliance Whistleblower

In a rare move, the Securities and Exchange Commission has awarded a corporate compliance official nearly half a million dollars for reporting irregularities within his or her own company.

The whistleblower reported the irregularities internally, then alerted the SEC when the company didn’t take action, the SEC announced yesterday. The whistleblower was awarded $450,000 for providing information that led to successful enforcement. The SEC’s Office of the Whistleblower said the awardee “made reasonable efforts to work within the company’s compliance structure” and “suffered unique hardships as a result.”

This is only the third award to a compliance or auditing officer in the program’s history. Compliance officers are ineligible for whistleblower awards under the SEC’s whistleblower program unless disclosure to the agency is necessary to prevent the company from causing substantial financial injury; the company is impeding an investigation of the misconduct, or 120 days have elapsed since the company received the information. The whistleblower, in this case, reported the case 120 days after reporting internally, the SEC said.

Compliance officers’ coverage under whistleblower laws is a long-fought battle. Publicly traded companies and their proxies, like the Chamber of Commerce, fought such protections in the past by attempting to convince the courts that only whistleblowers who made disclosures to government agencies were protected from retaliation.

The U.S. Supreme Court backed these forces in a 2018 ruling that held employees who report internally should not be protected from retaliation under the Dodd-Frank Act. Whistleblower advocates protested, however, and Congress introduced legislation to protect employees who report internally. The law has passed the House of Representatives and is awaiting consideration by the Senate.

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