On May 12, the U.S. Securities and Exchange Commission (SEC) issued an approximately $3.6 million whistleblower award to an individual whose disclosure led to a successful enforcement action.
According to the SEC’s award order, the whistleblower “provided new information to the [SEC] staff that caused the staff to open a new investigation,” and “provided ongoing assistance to the staff during the course of its investigation.”
“The whistleblower brought valuable information to the attention of the SEC, causing it to open a new investigation into wrongdoing,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower. “The whistleblower further assisted the SEC by providing ongoing assistance as the Commission’s investigation progressed. This award shows the significant help a whistleblower can provide by sharing information of potential violations of the federal securities laws with the Commission.”
The award order also outlined an award denial for an individual who submitted a whistleblower award claim for the same Covered Action. The SEC posts Notices of Covered Actions for successful enforcement actions; after the Notices are posted, individuals then have 90 days to submit award claims for those cases.
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the SEC with original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government. In this case, the SEC ruled that the information provided by the denied claimant did not contribute to the success of the covered enforcement action. Under Section 21F of the Exchange Act, there are a few ways a whistleblower’s information can qualify them for a reward. If a whistleblower’s information leads the SEC to open an investigation or investigate different misconduct as part of an ongoing investigation, the whistleblower is entitled to an award for any Covered Action which arises from those investigations.
Furthermore, a whistleblower is entitled to an award if their information “significantly contributed” to a successful enforcement action. In the award order for this case, the SEC explains: “we consider factors such as whether the information allowed us to bring the action in significantly less time or with significantly fewer resources, additional successful claims, or successful claims against additional individuals or entities.”
The SEC determined that the denied claimant’s information did not satisfy any of the possible qualifications. According to the SEC, the investigation was launched based on the information provided by the awarded whistleblower, not the denied claimant. Additionally, the denied claimant’s information did contribute to the success of the investigation because it concerned violations and misconduct outside the scope of the investigation and subsequent enforcement action.
The 2021 fiscal year has been a record year for the SEC Whistleblower Program. Since the fiscal year began on October 1, 2020, the SEC has awarded approximately $280 million to 48 individuals – both fiscal year records.
Overall, the SEC has awarded approximately $842 million to 157 individuals since issuing its first award in 2012. 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.