SEC Awards Over $16 Million to Two Whistleblowers

On November 30, the Securities and Exchange Commission (SEC) announced two whistleblower awards of more than $8 million each for providing original information that led to a successful SEC enforcement action.

The SEC’s whistleblower program allows the SEC to pay monetary awards to individuals who voluntarily provide timely information that leads to a successful enforcement action. Awards are paid from the Congressionally-established investor protection fund financed through sanctions paid by violators after a successful enforcement action. When sanctions resulting from these actions exceed $1 million, the whistleblower may be awarded up to 30% of the money collected. Since the program’s first award in 2012, the SEC has awarded over $175 million to 49 whistleblowers. 

In yesterday’s decision, the SEC found that the two whistleblowers voluntarily provided timely, original information that led to the SEC’s successful enforcement action, and were therefore entitled to awards under the Securities Exchange Act § 21 and Rule 21F.

Claimant #1 initially provided information to another federal agency; upon learning the information, the SEC contacted Claimant #1 to arrange a meeting. Claimant #1 then communicated with SEC numerous time throughout the investigation, providing significant information including identification of relevant documents and witnesses, saving the SEC substantial time and resources. Claimant #2 initially submitted a tip through the SEC’s online Tips, Complaints, and Referrals (TCR) system. The SEC then met with Claimant #2 to obtain information in support of Claimant #2’s original TCR, and Claimant #2’s attorney continued to provide supplemental information over the next year. Due to Claimant #2 information and experience, Claimant #2 aided the SEC in “more fully and quickly understand[ing] the misconduct and to assess the legal consequences.”

Whistleblowers are essential to SEC securities fraud enforcement actions. As noted by the Chief of the SEC’s Office of the Whistleblower Jane Norberg, this impact can be seen in the “more than $671 in disgorgement of ill-gotten gains, much of which has been or is scheduled to be returned to harmed investors,” and recovered “based on actionable information from whistleblowers.” Overall, enforcement actions involving whistleblower awards have helped the SEC recover more than $1 billion in financial remedies.

Related links:

• SEC Order Determining Whistleblower Award Claims (Nov. 30, 2017)
• Securities Exchange Act § 21F, Securities whistleblower incentives and protection
• Resources for Securities Fraud Whistleblowers