On January 7, the U.S. Securities and Exchange Commission (SEC) issued over $1.1 million in whistleblower awards to five individuals. The awards were issued through three separate final orders. Each of the five whistleblowers provided the SEC with high-quality information that led to a successful enforcement action. Less than four months into the fiscal year, the SEC Whistleblower Program is within $1 million of the record for the most money awarded to whistleblowers in a single fiscal year.
In the first order, the SEC awarded almost $500,000 to three whistleblowers in connection with two related enforcement actions. All three whistleblowers voluntarily provided original information as well as additional assistance to the SEC. Two of the whistleblowers received approximately $240,000 each while the third received approximately $10,000. In deciding these award amounts, the SEC determined that the third whistleblower did not provide information relevant to the first of the two enforcement actions and that the information provided which was relevant to the second action was mostly duplicative of information already known by the investigators.
In the second order, the SEC issued a nearly $600,000 award to a whistleblower whose information led to the opening of an investigation. In addition to making a disclosure, the whistleblower “met in-person with the Enforcement staff and provided significant documents and information and identified key witnesses, which helped conserve Commission time and resources,” according to the SEC.
In the third order, the SEC awarded more than $100,000 to a whistleblower who provided independent analysis of publicly available documents which led to a successful enforcement action. Among other things, the whistleblower calculated an estimate of an important metric for a company and showed that the company’s disclosures related to this metric were implausible. All in all, the whistleblower’s analysis “revealed important new information to the Commission that was not apparent from the face of the publicly available materials,” according to the SEC. This award for independent analysis is notable because in September, the SEC approved new guidance concerning the issuance of such awards. At the time, a group of U.S. Senators denounced the guidance claiming that it “would permit the SEC to create an insurmountable hurdle for a whistleblower to establish original information based on ‘independent analysis.’”
In addition to the guidance on independent analysis, another new rule played a part in the SEC’s determination of this final whistleblower award. Rule 21F-6(c) establishes a presumption of a statutory maximum award in cases where the award would be $5 million or less and where there are none of the negative award factors outlined in Rule 21F-6(b), such as culpability or unreasonable reporting delay. The SEC claims that this presumption of the maximum award applied in this case but that they utilized their discretion to override the presumption and lower the award. According to the SEC, “although Claimant’s information caused the investigation that gave rise to the Covered Action to be opened, the charges did not have a strong nexus with Claimant’s tip, and were largely based on evidence developed through the efforts of Enforcement staff in reviewing certain documents and not through any assistance Claimant provided.”
“These awards underscore the breadth of ways that company insiders, as well as whistleblowers not affiliated with a company, can positively impact SEC investigations,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “Whistleblowers who provide high-quality information or analysis may be eligible for an award where their information causes staff to open an investigation or meaningfully advances an existing investigation.”
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 funds recouped by the government. Whistleblower award payments are made out of a fund entirely financed through monetary sanctions paid to the SEC by securities law violators.
The 2021 fiscal year is shaping up to be a record year for the SEC Whistleblower Program. Since the fiscal year began on October 1, the SEC has awarded approximately $174.75 million to 27 individuals. In the 2020 fiscal year, the SEC set records by awarding approximately $175 million to 39 individuals — both the highest dollar amount and the highest number of individuals awarded. Since issuing its first award in 2012, the SEC has awarded approximately $737 million to 133 individuals.
In addition to whistleblower awards, the SEC Whistleblower Program provides anti-retaliation protections to whistleblowers. These include confidentiality. Thus, the SEC does not disclose any information that may reveal a whistleblower’s identity.