The U.S. Securities and Exchange Commission (SEC) has awarded two whistleblowers a total of $12 million for providing information about an improper investment deal. The SEC announced the award on March 31, 2023, after whistleblower reports resulted in an enforcement action.
The two individuals filed qui tam whistleblower lawsuits reporting fraudulent activity involving investments and brokerage activities and then assisted in the investigation. The SEC announcement indicated that the information provided by the whistleblowers helped uncover a situation which would have remained hidden from authorities. Of the two whistleblowers, one received $9 million while the other received $3 million. The larger amount was given to the individual that had provided the earliest and most valuable information and assistance.
SEC Whistleblower Program
Whistleblowers are eligible for SEC awards when they voluntarily come forward with information that leads to a successful enforcement action. Whistleblower awards are generally set at 10 to 30 percent of the total amount of money collected from an action when sanctions or fines are over $1 million. The award is paid from a fund established by Congress and does not deprive financial victims from any money recovered.
Whistleblowers to the SEC are protected by the Dodd-Frank Act of 2010 which protects the identity of the individual reporting fraud and prevents retaliation against employees who provide information. It is considered the most successful whistleblower program in the federal government.
The SEC whistleblower program which focuses on securities fraud has also served as a blueprint for establishment and operation of similar programs in other federal agencies and governmental agencies outside of the U.S. Two other notable whistleblower programs include the False Claims Act which focuses on fraud against governmental agencies like Medicare and Medicaid and the Internal Revenue Service Whistleblower Program which addresses tax fraud.
Historic SEC Whistleblower Awards
Since the establishment of the SEC’s whistleblower program, beginning in 2012, the Commission has awarded an estimated $1.2 billion to more than 250 individuals. The largest awards occurred in 2020 with $114 million award and in 2021 with a $110 million award.
According to the Whistleblower Office’s Annual Report to Congress, in 2022 the SEC awarded 103 awards totaling about $229 million. This was the second highest year in both numbers of awards and total amounts. Since the program was started, over $6.3 billion have been ordered as fines or sanctions, about $1.5 billion of which has been ordered to be returned to investors that were harmed as a result of illegal activity.
