On June 2, the U.S. Securities and Exchange Commission (SEC) announced whistleblower awards totaling $23 million issued to two individuals. The whistleblowers provided information and assistance that led to a successful enforcement action by the SEC as well as a related action by another federal agency.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government.
Under the “related action” provisions of the Dodd-Frank Act, the SEC also pays whistleblower awards when other government agencies carry out enforcement actions based on information originally provided to the SEC. These awards are likewise for 10-30% of the funds collected in the action.
The awarded whistleblowers made separate disclosures to the SEC. One of the whistleblower’s tips led to the opening of investigations by the SEC and the other federal agency — the second whistleblower’s tip included information which significantly contributed to the success of the investigations. According to the award order, the whistleblowers provided additional assistance to the SEC “by, among other things, submitting information and documents, participating in interviews, and identifying key individuals and systems involved in the investigations.”
“The whistleblowers’ information and assistance led to multiple successful enforcement actions related to a complex and fraudulent scheme involving multiple individuals and tens of millions of dollars in ill-gotten gains,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower. “Today’s awards demonstrate the SEC’s continuing commitment to making awards to individuals who provide high-quality information that assists the SEC and other government agencies in bringing successful enforcement actions.”
The whistleblowers received $13 million and $10 million awards respectively. The SEC determined the second whistleblower should receive a smaller award because they “unreasonably delayed by waiting several years to report the conduct to the Commission, during which time the conduct continued.” The promptness of a whistleblower disclosure is one of the most commonly cited factors by the SEC in award determinations.
However, in a sign of their commitment to awarding deserving whistleblowers, the SEC did use its authority to discretionary waive a strict filing requirement which would have disqualified the second whistleblower from receiving an award. Individuals must file an official whistleblower award claim with the SEC within 90 days of the SEC posting a Notice of Covered Action for the relevant case. The second whistleblower filed their claim 18 days after the 90-day deadline had passed. The SEC waived the requirement, however, because “[s]trict application of the deadline would result in undue hardship to [the whistleblower], particularly in light of [the whistleblower’s] significant contributions to the successful enforcement of the Covered Action.”
The SEC’s commitment to awarding whistleblowers is also exemplified by the record rate at which they have issued awards this fiscal year. Since the fiscal year began on October 1, 2020, the SEC has awarded approximately $366 million to 60 individuals – both fiscal year records. Overall, the SEC has awarded more than $928 million to 166 individuals since issuing its first award in 2012.
In April, Gary Gensler was confirmed as the Chair of the SEC. Before his confirmation, he pledged his strong support for the SEC Whistleblower Program.