On January 24, the U.S. Securities and Exchange Commission (SEC) issued a $28 million award to four whistleblowers who jointly submitted original information to the SEC that contributed to the success of an enforcement action. The whistleblowers’ disclosure helped the agency return millions of dollars to harmed investors.
“Whistleblowers play an instrumental 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. “Whistleblowers perform an incredible public service, as reflected by today’s award.”
According to the SEC’s award order, the joint whistleblowers’ “information and assistance was critical to staff’s ability to identify and investigate the unlawful securities violations and resulting Covered Action and there is a close nexus between their information and the Commission’s charges.”
The SEC further notes that the whistleblowers’ initial disclosure led to the opening of the SEC’s investigation and that the whistleblowers “met with Commission staff on several occasions and provided substantial ongoing assistance throughout the investigation.”
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.
The SEC’s award order for the joint whistleblowers also outlines an award denial for an individual who submitted a whistleblower award claim for the same enforcement action. The SEC determined that this individual did not qualify for an award because their disclosure to the SEC was not voluntary.
While the denied claimant reported concerns internally, they did not contact the SEC, despite being aware that an investigation was ongoing. Instead, the SEC learned about the claimant’s allegations and contacted the claimant. “Thus, Enforcement staff initiated contact with Claimant 2 before he/she provided his/her information to the Commission or to any other regulator,” the award order explains. “As such, the information he/she thereafter provided to the Commission was not provided voluntarily.”
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 Issues $28 Million Award to Joint Whistleblowers