On August 2, the U.S. Securities and Exchange Commission (SEC) announced whistleblower awards totaling more than $4 million issued to four individuals who provided the agency with information and assistance about securities violations. The awards stem from two separate enforcement actions and continue a record year for the SEC Whistleblower Program.
Through the SEC Whistleblower Program, qualified whistleblowers are entitled to a monetary award of 10-30% of funds recovered by the government. In addition to monetary awards, the SEC Whistleblower Program offers anti-retaliation protections to whistleblowers. One of these protections is confidentiality; thus, the SEC does not disclose any identifying information about award recipients.
“Today’s awards underscore the important role that whistleblowers play in detecting and halting securities laws violations,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower. “Each of the whistleblowers provided high-quality information that made an important contribution to the success of the underlying enforcement action.”
In connection with the first enforcement action, the SEC awarded more than $2 million to a whistleblower and more than $150,000 to another whistleblower. The first whistleblower received a larger award for a number of reasons that the SEC listed in the award order. The information provided by the first whistleblower was “significant” and led to the opening of the investigation which resulted in the enforcement action. The first whistleblower also provided the SEC with ongoing assistance throughout the investigation and had internally raised concerns about the violations multiple times.
In contrast, according to the award order, the second whistleblower’s information “was much more limited as compared to the information and assistance provided by [the first whistleblower] (whose information opened the investigation).” However, the second whistleblower’s information did lead to the SEC to expand its investigation to cover other types of misconduct.
In the connection with the second enforcement action, the SEC awarded more than $1.1 million to a whistleblower who, after reporting concerns internally, provided the SEC with significant information which led to the opening of an investigation. The SEC also awarded more than $500,000 to a second whistleblower. According to the SEC, “[w]hile the second whistleblower’s information was important, the first whistleblower’s information was more significant as it was broader and more timely submitted.”
In the award order, the SEC details how it determined the award percentages. It explains that the second whistleblower unsuccessfully contested the determination. According to the award order, the second whistleblower claims to have provided significant information concerning a separate issue (Issue B) from the issue revealed by the first whistleblower (Issue A). “However,” the award order states, “the question before the Commission is how to weigh the claimants’ relative contributions to and reporting delay in connection with this Covered Action, which only involves Issue A. [The second whistleblower’s] contributions to the Other Covered Action will be considered separately.”
The second whistleblower also contested the SEC’s negative assessment of the fact that there was a significant delay in reporting the misconduct. The award order states that the whistleblower (Claimant 2) “does not dispute that Claimant 2 took no steps to remedy the misconduct during the period of delay. Rather, Claimant 2 contends that it would have been futile to raise Claimant 2’s concerns with the Company’s management during the period of delay because they were aware of the issue and had not addressed it. But this purported futility only underscores the urgency of timely reporting to the Commission if Claimant 2 believed the Company was unlikely to address the issue itself.”
It has been a record year for the SEC Whistleblower Program. Since the 2021 fiscal year began on October 1, 2020, the SEC has awarded approximately $384 million to 84 individuals – both fiscal year records. In total, the SEC has awarded approximately $946 million to 190 individuals since it issued the first award in 2012.
On July 29, SEC Chair Gary Gensler spoke at the National Whistleblower Center’s National Whistleblower Day 2021 celebration. Gensler revealed that his staff is reviewing the SEC Whistleblower Program. One potential area of improvement mentioned by Gensler is the processing time for whistleblower award claims.