SEC Awards $1.5 Million to Whistleblower for Independent Analysis

On March 17, the U.S. Securities and Exchange Commission (SEC) issued a whistleblower award of approximately $1.5 million to an individual who provided information based upon independent knowledge and analysis which contributed to the success of an SEC enforcement action and a related action by another agency. The award is based upon the current collections in the relevant enforcement actions and may grow if more monies are collected.

Qualified SEC whistleblowers, individuals who voluntarily provide original information that leads to a successful SEC enforcement action, are entitled to a monetary award of 10-30% of funds recouped by the government. Under the related-action provisions of the Dodd-Frank Act, the SEC pays whistleblower awards when other government agencies carry out enforcement actions based on information originally provided to the SEC. Related-action awards are also for 10-30% of the funds recouped in the actions.

According to the award order, the whistleblower provided the SEC with information based upon their “independent knowledge and independent analysis that alerted Enforcement staff to potential violations of the securities laws.” The whistleblower’s information in part led the SEC to open an investigation that resulted in an enforcement action. In the award order the SEC also notes that the whistleblower “provided ongoing assistance during the litigation phase of the Covered Action.”

The whistleblower’s information and assistance also contributed to the success of a related enforcement action by another agency.

In February 2022, the SEC proposed an amendment to its related action rules. The proposed amendment allows the SEC to pay related action awards for enforcement actions taken by other entities even when those agencies have their own whistleblower reward programs. According to SEC Chair Gary Gensler, this rule “is designed to ensure that a whistleblower is not disadvantaged by another whistleblower program that would not give them as high an award as the SEC would offer.”

Since issuing its first award in 2012, the has awarded approximately $1.2 billion to about 250 individuals. Individuals considering blowing the whistle to the SEC should first consult an experienced SEC whistleblower attorney.