On August 25, the U.S. Securities and Exchange Commission (SEC) announced an $18 million whistleblower award. The agency granted the award to an individual who voluntarily provided the agency with original information that opened an investigation and contributed to the success of an enforcement action.
“Whistleblowers continue to play an essential role in assisting the agency in detecting misconduct and bringing securities law violators to justice,” said Creola Kelly, Chief of the SEC’s Office of the Whistleblower. “Today’s whistleblower refused to turn a blind eye to the wrongdoing, reporting misconduct internally and then to the Commission.”
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 the case of a whistleblower who reports internally first, as is the case here, whistleblowers have 120 days to file a TCR with the SEC in order to remain eligible for an award. In this order, a second whistleblower was denied a reward because they failed to file a TCR within the 120 day window of internal reporting, and they failed to meet the other award criteria.
The award order outlines the factors the SEC weighed in determining the exact percentage to award the whistleblower. The successful whistleblower’s award was increased because they reported internally first, and they provided additional helpful information and substantial, continuing assistance that saved Commission time and resources during the investigation.
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.”
According to data collected in whistleblower law firm Kohn, Kohn & Colapinto’s SEC Award Order Index, whistleblower rewards over $18 million represent about a fifth of total SEC whistleblower awards.
Introduced in March, the bipartisan SEC Whistleblower Reform Act of 2023 addresses a few issues currently affecting the SEC Whistleblower Program, including the lack of anti-retaliation protections for internal whistleblowers. Former Commissioner of the SEC Allison Herren Lee, who currently serves as Of Counsel for Kohn, Kohn & Colapinto, penned an article calling for the passage of the bill.
Further Reading:
SEC Awards Whistleblower More Than $18 Million
The Bipartisan SEC Whistleblower Reform Bill: Building on Success