On August 27, the U.S. Securities and Exchange Commission (SEC) issued whistleblower awards totaling approximately $2.6 million to five whistleblowers. The awards stemmed from three separate enforcement actions. With the awards, the SEC Whistleblower Program has now rewarded over 200 individual whistleblowers.
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.
In connection with one of the three enforcement actions, the SEC awarded approximately $1.2 million to a whistleblower who provided independent analysis “by creating and applying a complex algorithm to publicly available data,” according to the award order. The SEC notes that the whistleblower provided this information early on in an investigation and thus “saved Commission staff time and resources.”
In connection with a second action, the SEC awarded more than $350,000 to a whistleblower who likewise provided independent analysis that led to a successful enforcement action. According to the award order, the whistleblower’s information “was the product of unusual effort and expertise developed over many years.” The whistleblower identified patterns among publicly available data which helped establish connections between a company and promotional campaigns which were “suspicious in nature.”
In connection with the third action, the SEC awarded three individuals a total of over $1 million. The whistleblowers held compliance roles at the company whose misconduct they disclosed but were deemed eligible for awards because they “waited more than 120 days after reporting the potential securities violations internally before contacting the Commission,” according to the award order.
“Today’s awards demonstrate the Commission’s commitment to reward whistleblowers who provide valuable information, developed either from a whistleblower’s independent knowledge or the whistleblower’s independent analysis, which substantially contributes to a successful enforcement action,” said Emily Pasquinelli, Acting Chief of the SEC’s Office of the Whistleblower.
The awards for independent analysis are particularly notable in light of controversial guidance on independent analysis awards that the SEC approved in September 2020. The guidance, which altered the criteria for independent analysis to qualify as original information, was widely criticized by whistleblower advocates. In a letter to the SEC sent before the guidance was approved, a group of U.S. Senators stated the new criteria “would permit the SEC to create an insurmountable hurdle for a whistleblower to establish original information based on ‘independent analysis.’”
However, since the new guidance went into effect in December 2020, the SEC has issued a number of awards for independent analysis. This has eased some fears among whistleblower advocates that the SEC would use the guidance as a means to avoid rewarding deserving whistleblowers.
Alongside the guidance on independent analysis, the SEC approved a number of other rule changes in September 2020. In early August 2021, SEC Chair Gary Gensler announced that the agency is looking into revising rule changes seen as detrimental to whistleblowers. This announcement was applauded by whistleblower advocates, who subsequently suggested fixes to the rules in question.
Overall, the SEC Whistleblower Program has been highly successful. Since issuing its first award in 2012, the SEC has now awarded approximately $959 million to 203 individuals.