On April 15, the U.S. Securities and Exchange Commission (SEC) announced it awarded over $50 million to joint whistleblowers who provided information that “alerted SEC staff to violations that involved highly complex transactions and would have been difficult to detect without their information.” The award is the second-largest in the history of the SEC Whistleblower Program and continues a record-setting fiscal year for the program.
The joint whistleblowers “provided exemplary assistance to the SEC staff during the investigation,” which included “meeting with staff numerous times and providing voluminous detailed documents,” the press release states. According to the SEC’s award order, the whistleblowers’ information “resulted in the return of tens of millions of dollars to harmed investors.”
“Today’s award is the second largest in the history of the program, reflecting the tremendous contribution of these joint whistleblowers to our ability to recover funds for harmed investors,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.
Norberg, who will be stepping down from her position sometime this month, highlighted the record-setting year the SEC Office of the Whistleblower is having. “The SEC has now awarded over a quarter of a billion dollars to whistleblowers in the first seven months of this fiscal year alone, demonstrating the tremendous value of whistleblowers to our enforcement program,” Norberg said in the press release.
Since the 2021 fiscal year began on October 1, 2020, the SEC has awarded approximately $252 million to 43 individuals. The previous records for total amount awarded and number of individuals awarded were both set in the 2020 fiscal year, when the SEC awarded approximately $175 million to 39 whistleblowers.
In addition to covering the $50 million award for the joint whistleblowers, the SEC’s final order outlines an award denial for a claimant who applied for the same Covered Action. In response to a preliminary denial by the SEC, the claimant argued that they “submitted information to various federal agencies and other authorities which the Commission received” and that if the SEC investigative staff did not receive the information “it must have been lost, in violation of agency policies”
The agency upheld its denial, however, and outlined several reasons for doing so. According to the final order, SEC “Enforcement staff opened the Covered Action investigation based on the information provided by [the awarded whistleblowers], and not [the denied claimant].” Furthermore, SEC “Enforcement staff responsible for the Covered Action investigation confirmed that they did not receive or otherwise learn of any information that [the denied claimant] may have provided to other federal agencies or authorities. This reasoning highlights that under 2020 rule amendments, whistleblowers must make disclosures directly to the SEC through a formal TCR filing in order to be eligible for awards. A whistleblower cannot assume that disclosures made informally to the SEC or formally to other agencies will qualify them for awards.
The SEC issued its first award in 2012 and since then, it has awarded approximately $812 million to 151 individuals. 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. The SEC pays awards through a fund entirely financed through monetary sanctions paid to the SEC by securities law violators.
The success of the SEC Whistleblower Program is poised to continue moving forward. Former Commodities Futures Trading Commission Chairman Gary Gensler was confirmed to serve as the Chair of the SEC on April 14. Before his confirmation, Gensler responded to a series of questions filed by Senator Chuck Grassley (R-IA) about the SEC’s whistleblower program. In his written responses, Gensler committed to strongly supporting whistleblowers who file cases under the Dodd-Frank Act’s whistleblower reward law.
“If confirmed to lead the SEC, I will build on the work of past Chairs to ensure continued strength in the whistleblower program,” Gensler answered. Additionally, he “committed to working with SEC Commissioners and staff, whistleblower advocates, and Congress to ‘reduce processing times in SEC whistleblower award determinations,’” according to previous WNN reporting. The new Chair of the SEC seems intent on strengthening the already impressive SEC whistleblower program, something that whistleblowers and whistleblower advocates can look forward to.