On April 23, the U.S. Securities and Exchange Commission (SEC) announced two separate whistleblower awards totaling over $3 million. In both cases, whistleblowers provided original information to the SEC that helped lead to successful enforcement actions. The awards continue a record fiscal year for the agency’s whistleblower program.
Through the SEC Whistleblower Program, qualified whistleblowers are entitled to a monetary award of 10-30% of funds recovered by the government. The SEC pays awards through a fund entirely financed by monetary sanctions paid to the SEC by securities law violators.
The first of the two awards is for approximately $3.2 million and was issued “to a whistleblower who alerted SEC staff to violations, identified key issues for staff to focus on, and provided subject matter expertise to the staff that conserved SEC resources.”
In the award order, the SEC notes that a new rule enacted in 2020 (Rule 21F-6(c)) established a presumption that an award will be for the maximum 30% when the total amount is less than $5 million and no negative factors are present. However, the SEC claims that this presumptive maximum did not apply to this award because a negative factor was present – an “unreasonable reporting delay.” According to the SEC, the whistleblower’s information “was submitted approximately four years from the date on which Claimant first noticed [the misconduct]” and “17 months from the date [the whistleblower] first understood that there could possibly be a securities law violation occurring.” The SEC further notes that “investors continued to suffer harm during the period of delay.”
This award determination highlights the fact that in order to receive the largest reward possible and to mitigate as much harm towards investors as possible, individuals should promptly alert the SEC to any potential securities violations. In addition to an unreasonable delay being a negative factor, a prompt disclosure is one of the most common positive factors cited by the SEC, according to previous analysis of award orders.
The second award is for more than $100,000 and was issued to a whistleblower who provided the SEC with original information and helpful assistance in a case with high law enforcement interest. According to the SEC, “the whistleblower’s information and cooperation helped the SEC detect and stop an ongoing fraud preying on investors.”
“These whistleblowers provided new, important information that aided the SEC in learning about and understanding the violative conduct,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower. “The continuing assistance and cooperation offered by whistleblowers can prove critical to the successful resolution of an enforcement action.” Pasquinelli recently took over leadership of the Office of the Whistleblower following the departure of longtime Chief Jane Norberg.
The awards come during a transitional period for the SEC. In addition to the departure of Norberg, Alex Oh was recently announced as the new Director of Enforcement. Furthermore, Gary Gensler was confirmed as the new Chair of the SEC on April 14. Gensler takes over leadership of the agency in the midst of a record fiscal year for the whistleblower program. Since FY2021 began on October 1, 2020, the SEC has awarded approximately $255 million to 45 individuals – both fiscal year records.
Before being confirmed as Chair, Gensler pledged his support for the agency’s whistleblower program. In a series of written answers to questions filed by Senator Chuck Grassley (R-IA), Gensler stated: “If confirmed to lead the SEC, I will build on the work of past Chairs to ensure continued strength in the whistleblower program.”
Since issuing its first award in 2012, the SEC has awarded approximately $816 million to 153 individuals. 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.