On December 14, the U.S. Securities and Exchange Commission (SEC) announced a whistleblower award of more than $300,000 issued to an individual “whose high-quality information and continuing assistance significantly contributed to a successful enforcement action.”
The whistleblower learned of the potential securities violations in connection with audit-related responsibilities. Under Exchange Act Rule 21F-4(b)(4)(iii)(B), individuals whose principal work duties involve compliance or internal audit responsibilities are ineligible for whistleblower rewards. However, such individuals are eligible for awards if they have “a reasonable basis to believe that the relevant entity is engaging in conduct that will impede an investigation of the misconduct.” In this case, the SEC determined that the whistleblower had reasonable basis to believe that the entity would impede the investigation and thus exempted the whistleblower from the rule. According to the SEC, this is the fourth time they have awarded a whistleblower with internal audit or compliance related responsibilities.
“This award is an example of the important role that audit and compliance professionals can play in assisting the Commission’s enforcement efforts, especially when the entity is attempting to thwart an investigation,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “The whistleblower attempted to remedy the conduct and provided exceptional assistance to the enforcement staff.”
Through the SEC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide the SEC original information that leads to a successful enforcement action, are entitled to a monetary award of 10-30% of funds recovered by the government. According to the SEC, “all payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.”
The SEC Whistleblower Program had a record-setting 2020 fiscal year and is off to a record-setting start to the 2021 fiscal year. In the 2020 fiscal year, the SEC issued whistleblower awards totaling approximately $175 million, the most in program history. Since the 2021 fiscal year began on October 1, the SEC has awarded approximately $170 million to 18 individuals.
Since issuing its first award in 2012, the SEC has awarded more than $731 million to 124 individuals. In addition to whistleblower awards, the SEC Whistleblower Program provides whistleblowers with anti-retaliation provisions. These include confidentiality. Thus, the SEC does not disclose any information that may reveal a whistleblower’s identity.
SEC Awards More Than $300,000 to Whistleblower with Audit Responsibilities