A Guide for Compliance Personnel, Auditors, Officers, and Directors
The Securities and Exchange Commission Whistleblower Program encourages employees and even outsiders to report fraudulent behavior that breaches the securities laws. For those who may be curious about their own eligibility for these awards, including compliance personnel, auditors, officers, and directors, this article will provide an overview of the guidelines established by the SEC.
Written By
KKC Staff
Reviewed By
Updated
March 27, 2024
The Securities and Exchange Commission Whistleblower Program plays a critical role in the battle against securities fraud and white-collar crime. It is a powerful tool for promoting transparency and accountability within organizations.
The Program encourages employees and even outsiders to report fraudulent behavior that breaches the securities laws. For those who may be curious about their own eligibility for these awards, including compliance personnel, auditors, officers, and directors, this article will provide an overview of the guidelines established by the SEC.
We’re thrilled to welcome ex-SEC Acting Chair, Allison Herren Lee, to our team.
Now serving as Of Counsel at Kohn, Kohn & Colapinto, is unwaveringly committed to advocating for compliance officials, auditors, and officers. She is prepared to leverage her extensive experience to protect whistleblowers and assist them in securing rewards under the Dodd-Frank Act and SEC Whistleblower Program.
Eligibility for the SEC Whistleblower Awards
The SEC Whistleblower Program offers significant financial rewards to eligible individuals who voluntarily provide original information leading to successful enforcement action resulting in monetary sanctions over $1 million. A whistleblower can receive an award between 10-30% of the money collected.
However, there are certain requirements and restrictions on who can be considered an “eligible whistleblower.” This leads us to the question: can compliance personnel, auditors, officers, or directors qualify for these awards?
Compliance Personnel and Auditors
In general, compliance personnel, internal auditors, or public accountants are not usually eligible for the whistleblower awards as they have professional obligations to address such concerns internally first. The SEC wants to encourage these individuals to address potential securities law violations within their organizations, rather than incentivizing them to bypass internal processes for a potential award.
However, there are certain exceptions. These individuals can become eligible for a whistleblower award if:
- They have a reasonable basis to believe that disclosure of the information to the Commission is necessary to prevent the entity from engaging in conduct that is likely to cause substantial injury to the financial interest or property of the entity or investors.
- They have a reasonable basis to believe that the entity is engaging in conduct that will impede an investigation of the misconduct.
- At least 120 days have elapsed since they reported the information to their supervisor or the entity’s audit committee, chief legal officer, chief compliance officer – or at least 120 days have passed since they received the information, if they received it under circumstances indicating that these people are already aware of the information.
Officers and Directors
Officers and directors, like compliance personnel and auditors, have a duty to the company to address issues internally. They are also generally not eligible for SEC whistleblower awards for the same reasons. However, the same exceptions mentioned above also apply to officers and directors. They can qualify for a whistleblower award if the conditions concerning preventing substantial injury or impediment of investigation are met, or if they reported the issue internally and the company failed to address it within 120 days.
Seeking Legal Assistance
Remember, anyone considering blowing the whistle on potential securities law violations should consider consulting with an attorney who is familiar with the SEC’s Whistleblower Program and its rules. This will help ensure that they understand the rules and regulations, including the exceptions that may allow them to receive a reward.
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