SEC Announces $3 Million Whistleblower Award, Waives “Voluntary” Requirement

On June 3, the Securities and Exchange Commission (SEC) announced a combined award of $3 million given to three whistleblowers, who reported securities fraud related to retail investors. The whistleblowers, who submitted their tip jointly, did not provide their reports voluntarily. Instead, they provided information in response to a request to their employer made by another agency.

Due to the way the information was submitted, the SEC found that the whistleblowers’ tip was not provided voluntarily, as required by the law.  However, the SEC determined that it was in the “public interest” to exercise its discretionary authority due to the “great tenacity” the whistleblowers showed in exposing the fraud their employer committed on retail investors led the SEC to grant a waiver of this requirement. The SEC granted the waiver because:

• The whistleblowers were not informed of the information request issued by the other enforcement authority at the time they reported the information to the SEC;
• The whistleblowers did not learn about the other agency’s investigation until several months after reporting their information to the SEC;
• Although the SEC order redacts much of this reason, the non-redacted text reveals that the whistleblowers “candid discussions” led to the opening of the investigation by the other agency; and
• The SEC determined that if it did not waive the voluntary requirement, undue hardship and unfairness would result. 

The SEC whistleblower reward program, established in 2010 under the Dodd-Frank Act, pays whistleblower awards to eligible individuals who voluntarily provide the SEC with original information on violations of the Commodity Exchange Act that leads to a successful enforcement action resulting in monetary sanctions exceeding $1,000,000. These whistleblowers awards range between 10 and 30 percent of the money collected.

Individuals considering reporting securities fraud should report directly to the SEC. On February 21, 2018, the U.S. Supreme Court ruled, in Digital Realty Trust, Inc. v. Somers, that employees who report corporate fraud to their supervisors, via compliance programs and even to a corporate audit committee could be fired at will and have no protection whatsoever under the Dodd-Frank Act’s anti-retaliation provision. The Dodd-Frank anti-retaliation rules only extend to corporate whistleblowers who report violations of securities laws directly to the SEC. 

Each month, the SEC Office of the Whistleblower publishes Notices of Covered Actionfor each SEC action where a final judgment or order results in monetary sanctions that exceed $1 million.  Individuals who believe they qualify for an SEC whistleblower award due to their information and assistance with an SEC enforcement action must apply for an SEC whistleblower award, subject to the SEC whistleblower rules, within 90 calendars from the date of the Notice of Covered Action.

If you have knowledge of Securities or Commodities Fraud and would like the assistance of experienced SEC whistleblower attorneys to help you claim anSEC whistleblower reward, contact Kohn, Kohn & Colapinto.

Resources for securities and commodities fraud whistleblowers:

• SEC Whistleblower Rewards Program
• Filing a whistleblower claim with the SEC