On April 11, the U.S. Securities and Exchange Commission (SEC) issued a final order determining whistleblower award claims for an enforcement action carried out by the agency. The SEC awarded one claimant $1 million but denied the claim of the second.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of the funds collected by the government in the case.
According to the SEC, the awarded whistleblower’s tip “was the initial source of the underlying investigation and caused the opening of the investigation.” The agency further notes that the whistleblower “provided the Commission’s investigative staff with extensive and ongoing assistance during the course of the investigation, including identifying witnesses, and helping staff understand complex fact patterns and issues related to the matters under investigation.”
Lastly the SEC states that the whistleblower’s “information and assistance allowed the Commission to devise an investigative plan and to craft its initial document requests from the Firm and other entities,” and that the whistleblower “was an important source of specific information for the Covered Action.”
The SEC denied a second claimant because they failed to file their whistleblower award claim within ninety days of the posting of the Notice of Covered Action for the case. The SEC notes that this deadline “ensures fairness to potential claimants by giving all an equal opportunity to have their competing claims evaluated at the same time,” and “also brings finality to the claims process so that the Commission can make timely awards to meritorious whistleblowers.”
The denied claimant does not disagree with the fact they failed to file a claim within the deadline, instead they urged the SEC to use its authority to waive the requirement. According to the award order, the claimant argued that “that at the time of the submission deadline, [he/she] was not represented by counsel and that, while he/she had submitted award claims for matters for which he/she had directly provided information, [he/she] was not aware that he/she could submit an award claim based on Commission enforcement actions brought against other entities arising out of the same investigation for which he/she had not provided specific information or given direct testimony.”
The SEC explains that it only waives the filing requirement when there are extraordinary circumstances beyond the claimant’s control. “‘“[A] lack of awareness about the [whistleblower award] program does not . . . rise to the level of an extraordinary circumstance as a general matter [since] potential claimants bear the ultimate responsibility to learn about the program and to take the appropriate steps to perfect their award applications,’” the award order states.
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.”
